Tax Cut Ouch

[acehistr8]

First of all keep in mind that while Warren Buffet knows more about investing than all of us put together, he is also a far left liberal Democrat, so I wouldnt expect him to say anything less than what he did.

That being said, I agree with Sixfive and more to the blunt point with Blazer:

"I have no pity for those who do not get money back. In the bigger picture they have not contributed enough to the pot to pull money out. "

If you arent paying enough or ANY taxes, why should the tax cut benefit you? So should a couple paying no income taxes get more of a tax break, or a couple that paid $42K in income tax last year? To me it doesnt matter how much you make, I'm sick of hearing "Yeah well he makes $200,000 a year he should pay more taxes." Chances are that person already pays more in taxes than we make in a year. If there's a rebate or cut to be had, it should go in direct proportion to those that paid taxes in the first place. Why should someone making $20K/yr who has paid appropriate taxes receive a bigger chunk than someone making $200K who has also paid appropriately?

Gephardts answer to everything is stop taxing people on the low and and jack up the high end. Why? Say some guy makes a million dollars a year personal salary, owns his own company, employs 40 people. He gives 40 people jobs and benefits, now Gephardt wants to tax his ass more because he's successful, even though hes already paying @$400,000 in income tax - to say nothing of his corporate tax. And sending checks to everyone is worthless. The Democrats even did a study where they found the checks would have to be over $2,500 per person to make an immediate impact. $300 was a freaking joke.

I wish we would stop trying to punish people for being financially succesful by increasing their tax burden.

 

[Waldo]

DJV, single people aren't getting screwed. Your example just has them getting less of a break. That is because they are doing away with the 'marriage penalty', which is when tax rates for couples increase dramatically quicker than for those of single people. Should have been changed years ago and I'm single.

Turfgrass said it well, writing somebody a check isn't a tax cut, its a handout. If they want to do that, fine, but to say that the 'wealthy' are not the ones who should be getting these tax breaks is ludicrous. Seems to me that tax rates for the middle class could be lowered a little bit more but thats about all I see wrong with it.

Agree with Ace as well, when tax rates get too high the incentive lessens for successful people to continue to grow their business. I'm a firm believer that the financial condition of almost all business owners does 'trickle down' (hate that phrase though) to their employees. If the owner is getting screwed they are less likely to give raises to their employees, really not even debateable.

 

[AR182]

dawgball wrote:

"I think this is a product directly resulting from the flaw of the bi-partisan system. Republicans (which I probably am) AND Democrats care more about undercutting the other more than working towards continuous improvement on the whole."


dawgball, my friend the above statement that you posted has hit the nail on the head about what is wrong with today's politics. i have said the same thing in a other discussions that we have had about our political system. we are witnessing the most partisan politics in the last 30 or 40 years. instead of choosing what is best for the american people, today's politicians instead will vote to pass a bill if they get something in exchange. in other words they are bought for their vote. if these people in washington wanted to help the economy they would look into the unnecessary pork barrel spending.

 

[StevieD]

ACE, it sure is nice of those guys to give us jobs! They pay more taxes because they make more money. They also are eligible for more tax breaks. I don't know too many working people who do not pay taxes.
You are not going to stimulate anything by giving a rich person more money. Chances are he has all ready exceeded his spending limit. By that I mean if he has a thousands of dollars invested then he sure as Hell isn't waiting for the Government check to come in so he can buy that new tv.
The rich like to cry poor mouth all the way to the bank. But the truth is that 10% of the money that I earn in a year is much more important to me that 10% of the money he earns is to him. Chances are he doesn't need that extra 10% and will not put it to good use. Where the middleclass working man will put it to use.
In truth my money is more valuble than his money. The less you have the more worth the dollar has.
The Politicians can play with the figures all they want but if you make $400 a week you need $100 more than a guy who makes 1,000,000 needs $250,000.

 

[AR182]

here is an article that some might find interesting.



WASHINGTON, May 23 ? After weeks of hard bargaining, Congress has enacted a major tax cut measure that will return money to almost everyone who pays taxes. Following House approval overnight, the Senate on Friday passed the bill that will mean fatter paychecks for many workers as of July 1. Vice President Dick Cheney, who played a key role in negotiating a compromise between House and Senate leaders, cast the deciding vote after the Senate was deadlocked at 50-50.





THE PACKAGE ? the third major tax reduction measure passed since President Bush was elected in 2000? totals $350 billion, with $330 billion in tax cuts over the next decade and $20 billion in aid to financially strapped states.
Republicans scaled back the plan from Bush?s original $726 billion proposal, but Commerce Secretary Don Evans emphasized on NBC?s ?Today? show that the president supports it because smaller turns out to be ?a more robust package on the front end.?
The president?s proposal would have cut $191 billion in the first two years, but the plan passed by Congress cuts $226 billion in that period, Evans noted.
Evans defended the plan against opponents concerned about the federal deficit, saying the tax cuts tackle the president?s first priority: creating jobs by stimulating an economy with a 6 percent unemployment rate.
?The deficit problem is a jobs deficit,? he said. ?We are focused on jobs.?
The package is the third tax cut of Bush?s term, including the $1.35 trillion, 10-year reduction of 2001. The president, who is at his Texas ranch for Memorial Day weekend, has said he would sign it soon after passage.

TAX CHANGES
The bill includes many of the elements of Bush?s original plan.
Almost half of the $330 billion in tax cuts is devoted to accelerating income tax reductions enacted in the tax cut of 2001.


But the changes will make filing tax returns next year more complicated.
And while most taxpayers will see some reductions, low-income, single taxpayers with no children won?t benefit directly at all. Many of them do not earn enough to pay federal income tax.
For many families, the most important provision will be an increase in the tax credit for each child under age 17 from $600 to $1,000 for 2003 and 2004.
?Many families with moderate incomes will find that their federal tax obligation will shrink to zero, or a very modest amount, once all the provisions are added together, and a greater number of low-income families should receive a check, rather than a tax bill,? said Mark Luscombe, principal tax analyst with CCH Inc., a tax law advisory firm.
The Treasury will mail refund checks this summer to parents who would appear to be eligible to claim the credit on their 2003 taxes. The credit will shrink to $700 for 2005 through 2008, then will increase to $800 in 2009 and $1,000 in 2010.
The credit is gradually reduced for couples if their income rises above $110,000.


Other key provisions include:

Tax rates drop: The reduction that Congress enacted in 2001 will become effective this year, retroactive to Jan. 1. The top rate will fall from 38.6 percent to 35 percent. Other rates drop from 35 percent to 32 percent, from 30 percent to 28 percent and from 27 percent to 25 percent.
Those paying the new rates will see additional money in their paychecks during the second half of the year as companies make up for taxes overpaid in the first half. For example, an employee in the 27 percent bracket will see his top income tax rate fall to 25 percent, but for the next six months, only 23 percent will be withheld. The downside is that next year the withholding will jump back up to 25 percent.
?Marriage penalty? reduced: For married couples, their standard deduction will rise to twice that of single taxpayers. And the 15 percent bracket will widen for married couples filing jointly. As a result, some couples will pay less of the ?marriage penalty? ? a structure in the tax code that causes married couples to pay more tax than two single individuals.
Dividend, capital gains tax lowered: The top rate will be capped at 15 percent ? down from 38.6 percent on dividends and 20 percent on capital gains. Rates for low-income taxpayers will be 5 percent through 2007.
Alternative minimum tax narrowed: Fewer taxpayers will have to pay this in 2003 and 2004.
Business deductions widened: Small businesses can recoup some of their purchases immediately, and expense up to $100,000 until 2005, four times the amount now allowed. Other companies can write off half their investments this year.




SOME LAWMAKERS CROSS LINES



May 22 ? The stimulus package divided Congress deeply, largely along party lines. House Democratic leader Nancy Pelosi and House Republican Conference Chairwoman Deborah Pryce describe the battle.



The bill was sent to the Senate after the House voted 231-200 along mostly party lines. That vote came just before 2 a.m. ET Friday.
In the Senate, Republicans Lincoln Chafee of Rhode Island, John McCain of Arizona and Olympia Snowe of Maine bucked their party to vote no.
Among Democrats, Sens. Ben Nelson of Nebraska and Zell Miller of Georgia joined Republicans in favor of the package.
Most Democrats fear the cuts will saddle future generations with debt. Even before the tax measure?s passage, this year?s federal shortfall was expected to rocket well beyond $300 billion.
?This is no victory for people who work every day because eventually this tax giveaway to the wealthy will have to be paid for,? said Rep. Charles Rangel of New York, the top Democrat on the House Ways and Means Committee.
?When the tab comes, it?s the working people of this country who will be stuck with it.?
In a trip to Capitol Hill on Thursday, the president claimed victory even though he once called a $350 billion tax-cutting plan ?itty bitty.?
?The principle of the bill is pretty simple ? that we believe the more money people have in their pockets, the more likely it is somebody is going to be able to find work in America,? Bush told reporters.

FINE PRINT
The president can also take comfort in that the scaled-down package was written to open the door for continued tax cuts.
Some of the bill?s cuts in personal income taxes would end after 2004 and the dividend and capital gains reductions would end after 2008 ? with levies then reverting to higher levels.
Politicians of both parties consider that unlikely to occur because accusations would fly about a tax increase.
?I certainly intend to enhance these improvements in coming years,? said Senate Finance Committee Chairman Charles Grassley, R-Iowa.
The liberal Center on Budget and Policy Priorities estimated that if the tax bill?s elements were left intact for the entire decade, its price tag would be at least $800 billion.

 

[Doughboy]

It bothers me that by over-taxing the wealthy of America, and saying they need to pay more in taxes, they are penalized for being successful and taking risks in business that many middle and lower class people will not take.

If the wealthy have more money in their pockets, then they will invest, or start more businesses. They don't just stuff the money under their mattresses. They like the challenge of being successful in new ventures.

Take Warren Buffet.. he could have retired 40 years ago, but enjoys making money, and thus continues to grow in business, hire more people, and helps in some small way to make the economy grow.

And I am not wealthy, but I plan to be.

 

[Chanman]

I tend to agree w/Ace, Doughboy, Blazer & 6'5". I think to solve the problem we should make Congress live by our rules, i.e., SSAN, HealthCare, etc.


ABC Pushes Liberal Spin: Top 5% Get More Than Half of Tax Cut

?The top five percent of taxpayers would get more than half of the benefits from the tax cut,? ABC's Linda Douglass complained on Thursday's World News Tonight as an on-screen graphic screamed, ?TAX CUT WINNERS: Top 5% taxpayers get more than half of benefits.? But in suggesting some kind of unfair skew toward the wealthy, Douglass didn't bother to inform viewers that the top five percent of income earners also pay more than half of the income taxes collected -- 56 percent to be exact.

So the tax cut distribution matches who pays the taxes. Sounds perfectly fair to all but liberals and journalists, assuming they are not synonymous.

Douglass began her May 22 World News Tonight story by looking at how a couple, both teachers, who earn a combined $50,000 to $70,000, and who have four kids under the age of 17, will get a $1,900 cut this year mainly because of how the tax cut rewards those with children. (That income, Douglass didn't point out, puts the couple in the top 25 percent.) Douglass ran through from which provisions the couple will benefit: Because they're married, a cut of $233, for each kids a credit of $400, for a total of $1,600, and a $100 cut in their income tax payment.

Douglass then asserted: ?Big winners are rich people and families with children? while ?more than half of all taxpayers will get only $100 or less.?
Peter Orszag of the Brookings Institution then explained: ?You're talking about single people, you're talking about single moms with children, you're talking about some elderly couples or single elderly people who don't have dividends and capital gains income.?
Douglass proceeded to endorse the accuracy of liberal, class warfare arguments against the tax cut: ?The other tax cut winners are the rich. The top five percent of taxpayers would get more than half of the benefits from the tax cut. Those who make between $100,000 and $200,000 would get a tax cut of more than $2,500 on their income alone. Those between $500,000 and a million dollars would get an average income tax cut of $17,324. And that's not all.?
Mark Garay, Deloitte & Douche: ?Those people that have significant investment income -- meaning dividends and capital gains -- those are the big winners clearly in this bill.?

On screen as Douglass began that paragraph, ABC made sure viewers realized the tilt to the wealthy:
?TAX CUT
WINNERS
Top 5%
taxpayers
get more
than half
of benefits?

According to 2000 IRS data provided by the Tax Foundation, earning above $128,336 annually puts you in the top five percent. Though the top five percent earn 35.3 percent of the total Adjusted Gross Income in the U.S., they pay far more than their share: 56.5 percent of the income taxes collected.

Those numbers by income classification are online at: www.taxfoundation.org

The rich keep paying more and more. Go to the above link and scroll down to the historic table titled, ?Total Income Tax Share (percentage of federal income tax collections paid by each group),? and you'll see the income tax burden has steadily shifted toward the higher income earners. In 1980, the top five percent paid 36.94 percent of federal income taxes. By 2000 that had soared to the above-cited 56.47 percent.

A Tax Foundation summary of its report provides an overview of how a very small number of Americans pay the overwhelming majority of income taxes while the bottom 50 percent pay barely anything and far less than the percent of the income they earn:

According to preliminary data released by the Internal Revenue Service and a new Tax Foundation Special Report, the top-earning 25 percent of taxpayers earned more than two-thirds of the nation's income (67.3%) and paid more than five out of every six dollars collected by the federal income tax (84%) in 2000. There were 32 million tax returns in the top 25 percent, all with adjusted gross incomes (AGI) over $55,225.

The top one percent of U.S. taxpayers (annual income over $313,469) made 20.8 percent of the income earned in 2000 and paid 37.4 percent of the total federal individual income taxes collected that year. This fraction of the tax burden paid by the top one percent -- well over a third of the total -- is up from 25.1 percent ten years earlier in tax year 1990.

At the other end of the income spectrum, the bottom 50 percent of the nation's taxpayers earned only 13.0 percent of all income in 2000, but they paid an even smaller fraction of the federal individual income taxes collected -- 3.9 percent....

END of Excerpt

For the summary of that report: www.taxfoundation.org

For the PDF of the full report: www.taxfoundation.org

 

[StevieD]

So... besides terrorism the biggest problem facing our country, as Bush and the congress see it, is that the rich simply do not have enough money? :shrug:

 

[big joe]

Unfortunately, this will always be about economic status. Well, I've been at the low-end and now I make good income, and I can tell you I don't understand why the RATE% goes up wnen the income levels go up!!
IMO, anyone who thinks higher incomes don't spend money like low incomes, have their head in the sand.
The rate% should either be the same, or even provide incentive to earn more.
Who do you think hires contractors and employees? Who buys big houses and cars. Slow this down and we'll see the low income earners hurting.
This is never a popular end of an argument, but it's clear to me, and I grew up with nothing and now I'm trying to increase my earnings,,why penalize this pursuit??

 

[StevieD]

It didn't seem to slow things down in the 90's. In fact, before Greespan pulled the rug out from under it, he said it was growing to fast.
You cannot make the argument that the value of a dollar to a person who has $100 is the same as the value of a dollar to a person who has $1,000.
With these tax cuts come service cuts and when we have to pay for these services then the middleclass will pay with a higher percentage of their income then the rich will.

 

[Doughboy]

Value is irrelevent here I think. Since this is a stimulus package I think we have to look at it this way. If the wealthy person will spend or invest that same dollar that the lower incomes will, then why not give them some back to do it with.

I don't think services here will suffer either. Out of a multiple trillion dollar budget, we ar talking a miniscule amount percentage wise with this tax cut.

Also, when people start saying, "boo hoo, the rich have too much money", that is what our country and capitalism is about...going out, working hard, and making a lot of money. Why should we make it a dis-incentive to make a lot of money. Maybe the rich should quit work and stop creating businesses and jobs, and go on unemployment, and see how the economy does then.

Also, If one thinks that everyone should be brought to the same class, then move to China or some other communist country.

 

[Doughboy]

Here is a short take from a story I just read.

Tax cuts under JFK, Reagan, and Clinton (during his second term) all produced faster economic growth, more jobs, and higher tax revenues for Washington. Indeed, Clinton's 1997 capital-gains tax cut was the driving force for late-decade budget surpluses. Revenues in this period soared as profits accrued from stock market gains and stock options. It was a near-perfect illustration of the Laffer Curve, which says, in clear terms: Tax something more, get less of it; tax something less, get more of it. The less we penalize work and investment, the more work and investment there will be.

This is Economic Behaviorism 101 ? and it's a simple science that too many members of the U.S. Congress and most state governments fail to comprehend. Or do they get it?

The so-called sin taxes on alcohol, beer, and tobacco suggest that liberal lawmakers just might understand the behavioral basics of taxation. In recent years, legislatures on every level have poured taxes on these products ? especially tobacco, where the latest liberal mantra aims to save smokers from themselves. But doesn?t this assume a behavioral change by smokers in response to the higher tax-cost of cigarettes? Sure does.

So why wouldn?t the same logic apply to taxes on investment? Of course it applies. If we tax investment more, we will get less investment. But if we tax investment less ? including dividends, the centerpiece of the president's plan ? we'll certainly get more investment. And that's exactly what the American economy thirsts for today.

 

[StevieD]

You had huge growth in the stock market for years before Clintons tax cut. In fact the argument could be made that Clinton's tax cut of the late 90's was followed by the fall of the stock market in the early 2.000. So I fail to see where that act could be considered a stimulus.
You had the stock market going so well for a few reasons. One was because the middle class had excess money left to put in the stock market.
After the middle class got spooked by the fall of the market they took their money out. As mentioned here before savey investors know how to deal with a falling stock market and were not hurt by it as much.

 

[djv]

Im Mr good bar. I make example 500 grand a year. Everyone here says I should get big tax cut because I pay more. Im not going to tell you the truth about my Tax lawyer who sees that I pay about what some one makeing 60 grand does. Thank you all for being on my side. But I really got you all snookered.

 

[redsfann]

Interesting thoughts on this tax cut. Am quite happy that the "moderates" of both parties had enough clout in both the house and senate to hold this thing to "only" 330 billion.

I used to actually care when something like this got passed by Congress-- but I don't anymore. We are going to run the largest deficits ever seen--300 billion this year, probably close to 400 billion next. What does that mean to me? I don't know, and I don't worry about it.

This tax cut will give my wife and I approx. 2500--if I can trust the numbers in my local fishwrap. Want to know what I'll do with my 2500? Thats right--its going right my retirement accounts. The one thing about this tax cut that I'm liking is the cut in the dividend tax. Granted, almost all of my dividend paying stocks are in my tax defered Keough plan, but I do own a small amount(less than 5 figures) of dividend paying stocks outside of any tax sheltered account that earn me vacation money every year. The tax cut on dividends will let me take a more expensive vacation next year......

Oh, and if you think that Congress will actually let these tax cuts expire in a few years like this plan calls for, you have got some serious reality problems....

 

[djv]

Redsfann you are correct. Politicians use sun set clauses to make it sound good. This will not have it used. Unless the Deficit goes to high and chases interest rates up. Then maybe they will let it drop. There are many young guys here have no idea what killers interest rates from 1978 to 1986 did. Some as high as 16%. I remember house loans at 14% Try buying one at those rates.