One area where I really geek out is tax equity and tax justice. Deb
, focusing on corporate tax policies, posted on it recently. Bush used tax cuts as a big part of his campaign message, and I was pleased to see that so few voters (5%) based their decision on taxes (and even more pleased that 43% of those who voted with taxes as their number one issue voted for Kerry).
I’m working on a post that discusses the misconceptions of the Bush voter (my last installment in the What Did We Learn series). While it focuses on Iraq, it serves as an apt example of how misinformation influences voting behavior. Tax Equity is another example.
Voters in the top quintile who supported Bush for tax reasons make the most sense. They are selfish and wrong, but at least they make sense. If you are in the top 20%, and you want a bigger cut than the middle class or the poor, hey, Bush is your guy. As you go down in quintiles, support for Bush makes less sense for tax voters.
Citizens for Tax Justice
, a great organization with a great web site, published, some time ago, an analysis of the 2003 Bush tax cuts
. By quintile, they found the estimated tax savings to be as follows:
Lowest quintile (average income $9900)
Tax savings = $6
2nd quintile (average income $22,000)
Tax savings = $99
3rd quintile (average income $36,600)
Tax savings = $289
4th quintile (average income $59,800)
Tax savings = $657
Next 15% (average income $103,000)
Tax savings = $1,841
Next 4% (average income $217,000)
Tax savings = $3,524
Top 1% (average income $1,082,000)
Tax savings = $30,127
Here’s the percentage of the overall tax cut divided by quintile:
Lowest quintile 0.1%
2nd quintile 2.1%
3rd quintile 6.2%
4th quintile 14.2%
5th quintile 77.3%
(next 15% = 29.7, next 4% = 15.2, top 1% = 32.4)
Here’s the percentage that each quintile’s taxes decreased:
Lowest quintile, = .00006% decrease
2nd quintile, = ½%
3rd quintile, = .007%
4th quintile, = 1%
Next 15%, = 1 and 3/4%
Next 4%, = 1 and ½ %
Top 1%, = 2%
What does all this mean?
First, Mrs. Duf and I have an extra $30,127 dollars each year to spend here
; creating jobs and growth like crazy.
Second, the middle class did not get as much relief as it could have. If you are in the 2nd, 3rd, or 4th quintile, bounce your tax savings against your increased health insurance costs, your passed-along costs for education, and your decrease in government services and see what happens.
Third, don’t kid yourself, somewhere your tax burden has grown. Either your state taxes, your property taxes, your sales tax or your sin tax has gone up.
Fourth, Bush essentially cut taxes on employment-based income moderately, but really (1) eliminated personal income taxes on dividends and (2) reduced capital gains taxes on sales of corporate stock. These policies disproportionately favor the wealthy.
Fifth, the dollar you get back is worth less because of a weakened dollar – softened up by the ever increasing deficit. All of it's happening faster than you can say raise the debt ceiling. Debt ceiling? What debt ceiling?
Sixth, the myth that these tax cuts will be reinvested by the very wealthy to the benefit of everyone is just that, a myth. What is really happening is that you are allowing them to keep more capital from investment income. In reality, dividends are typically reinvested; they are not spent on the goods and services that create jobs and growth. A good name for this legislation is “The Put My Financial Advisor in a Corner Office Act of 2003.”
To illustrate my point, here are two randomly chosen families:
The first family, GWB and LB, reported income in 2003 of $822,126
They paid $227,490 in taxes, or 27.7%
The President’s tax cuts lowered his own (oops) taxes by $30,858
Reduction of the top rate on dividends saved him $2,696 in taxes on $10,959 in reported dividends.
The second family, DC and LC, reported income in 2003 of $1,900,339
They paid $241,392 in taxes or 13.1% (not too shabby; to be nice I’ll volunteer to pay 13.2% from now on)
The Cheney’s (oops) total income excluded $627,005 in tax exempt interest, $279,012 in long-term capital gains, and $84,132 in dividends.
If you are in the lowest four quintiles, do the tax cuts really make a big difference in your life? If you make $60,000 a year, does an extra $55.00 per month change anything for you? At 37,000, what changes with your extra $25.00 per month? Even for the highest 1%, making $1.9 million a year, does having an extra $30,000 matter to us? Not really. We just bought Mrs. Duf some Sable fur sunglasses to match her Sable hat and her Sable purse.
So, to conclude…Besides a record-setting deficit and weak dollar (as to the weak dollar, listen to this
), what do the tax cuts really do for Americans? If tax cuts must be given, is it not better to return more money to the middle and lower classes?