For nearly ten years I’ve been living a lie. Ever since the first round of Bush tax cuts in 2001 I’ve been told that I was rich, because I got a tax cut. For someone living barely above subsistence level, I found it rather ennobling that all these anti-capitalists across the land thought I was rich. Now, all of a sudden, my bubble is burst as even Barack Obama is finally telling the truth that everyone, at every income level, got a tax cut from that despised former leader of the free world. All this time I thought it was among the “rich” that got those tax cuts.
Here’s a little primer for those who have been bitter clingers to the “tax cuts for the rich” nomenclature. President Bush in 2001 and 2003 led Congress to reduce tax rates for all taxpayers. The effect was record tax receipts starting in 2003 and a shifting of the tax burden increasingly to the wealthiest Americans. We can more easily see the effects by dividing taxpayers into five brackets. Those who benefited most were the lowest income, under $25,000 (a tax cut of 17.6%) per year, and those making about $60,000 per year (12.6%) according to IRS data. When the benefits of the second round of tax cuts are factored in, those in the $60,000 per year income level realized a total Federal tax savings of 24 percent. Those who made over $350,000 received a tax cut of 12.5%, while those who make over $1 million got about a 6% reduction.
The Wall Street Journal stated that the Bush tax cuts, in effect, triggered what may be the biggest increase in tax payments by the rich in American History. The top 1% of taxpayers, who earned $388,806 and higher, paid 40% of all income taxes with the Bush tax cuts, the highest percentage in at least 40 years. Taxpayers in the top 10% in income, those earning over $108,904, paid 71% of the total income taxes, again, the highest in at least 40 years.
When we look at the lowest income taxpayers, the figures are amazing. Those below median income levels paid a record low of 2.9% of all income taxes, while the top 50% paid 97.1% of federal income taxes.
Darn it, there goes another broken Obama campaign promise. Seems like I remember him saying, “No family making less than $250,000 a year will see any tax increase.” Looks to me like all of us will see our taxes go up if the Bush tax cuts are allowed to expire. Those who have decried the “tax cuts for the rich” for the past decade have been lying to you.
This week in Cleveland Obama said the tax-cuts for the wealthiest Americans must be allowed to expire, while extending the lower tiered income bracket tax cuts. He said, “This isn’t to punish folks who are better off — it’s because we can’t afford the $700 billion price tag.” Only in a Marxist world can individual assets be thought of as an entitlement for the government! If he truly believes he can do more job creation with that extra income to the government rather than those entrepreneurs and sole proprietors who fall into that tax bracket, his track record doesn’t support it. The stimulus bill “guaranteed” that unemployment wouldn’t exceed 8%. I say, let the “rich” keep it. They’re much more likely to put it to good use in economic expansion and job growth than the ruling class in Washington is.
In August of last year, Obama declared accurately, “You don’t raise taxes in a recession.” I don’t believe the economy is out of the doldrums yet, Mr. President. While technically we may be out of a recession, it surely doesn’t feel like it, as attested by the high unemployment rate, low consumer confidence, barely-positive GDP growth, and a housing market in the throes of depression.
According to the Investor’s Business Daily, two-thirds of small businesses fall into the top income tax bracket. They are also the ones we depend on most for job creation. IBD also points out, “Itemized deductions and personal exemptions will again phase out, which has the same mathematical effect as higher marginal tax rates. Of crucial importance to entrepreneurship and job creation, the top capital gains tax rate rises from 15% to 20% next year, while the top rate for taxation of dividends rises from 15% to 39.6%.”
A surefire way to reduce activity is to tax it, or increase the taxes on it. If you want less capital investment, tax the gains on it. If you want less income growth, tax it. If we want to ensure that the economy remains moribund for the foreseeable future, allow the tax cuts to expire on all income levels. But mostly, allow them to expire on the “rich.”
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