BookBlog

Adina, I think you're wrong about tax cuts on the wealthiest being irresponsible.

If you look for the best source of information, let's go to the House of Congress committee:

http://www.house.gov/jct/x-54-03.pdf

Read that and try to understand what that means.

1) They tried to give better breaks for a) married people and b) married people with kids. The higher deduction still favors people with lower income; the higher your income is, the lower the actual percentage and amount of benefit this is. That's sections A and B.

2) Section C gives a tax rate drop:
according to the IRS, you can read that they dropped it from:
http://www.irs.gov/pub/irs-pdf/i1040nr.pdf
27% to 25%
30% to 28%
35% to 33%
38.6% to 35%
(depending on tax bracket)

You can do the math; look up %/# of Americans in each tax bracket and weight that by the tax percentage, and the numbers definitely favor those in the lowest (below the 25%) tax bracket. The middle get less of a cut.

Section II is mostly growth for businesses, and then Section III -- reduction of Capital Gains Tax -- favors those who own stock. That's like uppermiddle class people and yuppies (people who worked in start-ups and so on). The question should not be "is it favoring these people to have a reduction in taxes" as much as the better question to ask is "was the original capital gains tax rate fair?" Originally, if you made money because of day-trading or having stock (realize that this is kind of like gambling -- you're using post-tax money) -- and you happened to do well in the stock market, you got slapped with a tax on whatever you made ("capital gains tax"). Of course, if you lost money, you wouldn't pay tax on that. Think of it this way. You went out and bought some Super Bowl tickets at the beginning of the season. And when the Superbowl came along, your team didn't make it, so you sold them (with the bonus of a large profit) to another guy because he really wanted the tickets.

Now if this was stocks, Uncle Sam says ya gotta pay -- 20% of the profit -- because it's a capital gain.

Give you another analogy. Your gratherfather collect stuffed animals because they're cute. He passes away one day, and your family decides they don't want the stuffed animals, so you have a yard sale, and a collector comes along. Well, just happens there were some good conditioned beanie babies with some of the junk. All in all, now, if these were stocks, you're expected to pay capital gains tax.

See this report of a Congressional Office Study that the tax cuts shift the tax burden to the middle class:

http://www.washingtonpost.com/wp-dyn/articles/A61178-2004Aug12.html

"Since 2001, President Bush's tax cuts have shifted federal tax payments from the richest Americans to a wide swath of middle-class families, the Congressional Budget Office has found, a conclusion likely to roil the presidential election campaign.

The CBO study, due to be released today, found that the wealthiest 20 percent, whose incomes averaged $182,700 in 2001, saw their share of federal taxes drop from 64.4 percent of total tax payments in 2001 to 63.5 percent this year. The top 1 percent, earning $1.1 million, saw their share fall to 20.1 percent of the total, from 22.2 percent.

Over that same period, taxpayers with incomes from around $51,500 to around $75,600 saw their share of federal tax payments increase. Households earning around $75,600 saw their tax burden jump the most, from 18.7 percent of all taxes to 19.5 percent.