You mean Bush’s tax cuts were overwhelmingly slanted to help the rich?

April 5, 2006

I hesitate to even mention this because the revelation is painfully obvious, but the New York Times’ front-page piece on who benefited from [tag]Bush[/tag]’s [tag]tax cuts[/tag] on investment income was so good, it deserves all the attention it’s getting.

The first data to document the effect of President Bush’s tax cuts for investment income show that they have significantly lowered the tax burden on the richest Americans, reducing taxes on incomes of more than $10 million by an average of about $500,000. […]

When Congress cut investment taxes three years ago, it was clear that the highest-income Americans would gain the most, because they had the most money in investments. But the size of the cuts and what share goes to each income group have not been known.

As Congress debates whether to make the Bush tax cuts permanent, The Times analyzed I.R.S. figures for 2003, the latest year available and the first that reflected the tax cuts for income from dividends and from the sale of stock and other assets, known as capital gains.

The results were overwhelming — Americans with annual incomes of $1 million or more, about one-tenth of 1 percent all taxpayers, reaped 43% of all the savings on investment taxes in 2003.

At a certain level, this is not unexpected. With Bush in office, as Kevin noted, “It’s a good time to be super rich in America.”

But I think the other key angle here is noting just how much this story destroys Republican rhetoric, particularly the president’s. Dan Froomkin highlighted some of the rhetoric we heard before these cuts became law.

For example, here’s Bush in January 2003:

“Double taxation falls especially hard on retired people. About half of all dividend income goes to America’s seniors, and they often rely on those checks for a steady source of income in their retirement.”

True? Not even a little. The NYT explained that “few taxpayers with modest incomes benefited because most of them who own stocks held them in retirement accounts, which are not eligible for the investment income tax cuts.”

No wonder more Americans trust Dems to deal with taxes.

I remember trying to explain this to conservatives several years ago, when they were touting their $300 early refund checks, and how the real beneficiaries of the taxcuts were the ultra-rich, who would save more on taxes than most Republicans earn. But they just weren’t having it. They just kept going on about how they’d like to spend their tiny refund checks and how I must be against money because I didn’t like the taxcuts.

Thus said, for tax purposes, this really is a good time to have kids. I recommend it to all my tax clients, half-jokingly, but I really do like the tax savings that kids bring. I never like for my clients to have to owe money, and Bush’s child tax credits really help with that. Me and my wife make a decent income, but almost never pay taxes; thanks to Bush and my three kids. But I’d still prefer that we balance the budget.

  • Now let me get this straight. The Republicans control the House, the Senate, the White House, the Courts, the Press, most of the Churches, a huge number of School Boards and County Councils, most corporate Boards of Directors, small businesses, the NASCAR crowd, etc. and you’re telling me that their tax programs benefit the rich and hurt the poor?

    I find that hard to believe.

  • you should also point out that another NYT article on home ownership suggests that the housing “boom” has been driven in large part by the sale of second and vacation homes. that’s not the conclusion of the article, but when such a significant portion of housing sales fall into these two categories, it’s difficult to get away from it.

  • Tax cuts as an end unto itself is a stupid idea anyway. Sure, we nominally get to keep more of our money. But because we can afford more, and thus demand more goods and services, business now can charge more (unless they suddenly are able to bump up production). Tax savings thus wiped out. Or else that money goes to make a small ding in the credit card bill.

    What’s so revolting is that the superrich ought to know better than the typical ignorant GOP supporter that their tax cut will improve their lifestyle. There’s only so much prime real estate to be bought. Now the rich have on average $500k more to spend, guess what will happen to the price of that real estate? So what was it all in aid of?

  • So what was it all in aid of?

    It was all in aid of Republicants re-elections back in ’04. Now, even their glorious tax cuts can save them from their incompetence and corruption.

  • How is it that when the wealthy get a tax cut, they invest it and thus create jobs, but when the less fortunate get some green, they spend it and create, what — jobs?

  • Gridlock,
    My point was that it doesn’t help anyone–basic economics 101 (supply/demand). Of course, that would assume that the people getting the tax cut were economically literate…nevermind.

  • What’s missing from all these studies is the
    income that is NOT taxed from investments.
    Only realized capital gains are taxed. The
    rest goes accumulatin’ along, making a really
    big pile at the end, which, guess what, thanks
    to the elimination of the estate tax?

    So the super wealthy, and their progeny, pay
    no taxes at all on the lion’s share of their income
    and massive fortunes. ‘Course, they do pay
    taxes on their earned income, just like regular
    folks, so I guess it’s all right.

  • To put things in perspective….

    Republicans hate unearned income when it’s welfare queens on the public dole.

    Republicans LOVE unearned income when Daddy passes his tax-cut-fueled wealth to his kiddies after he croaks (Probably from boinking his third trophy wife, but I digress….)

    Republicans hate unearned income from welfare or food stamps because it encourages sloth and laziness.

    Republicans LOVE unearned income from inheritances or tax cuts, because that encourages investment, entrepreneurship, and economic growth.

    Republicans are like the Red Queen in Alice in Wonderland, who made it a practice to believe six impossible things before breakfast.

    Eeyore, who just happens to hold a Ph.D. in economics.

  • Eeyore, I find it hard to call investment returns “unearned.” I’m all for giving everyone a fighting chance in this world, and our minimum wage is way too low to do that (as well as the poverty line), but when people invest they are driving the country. And they’re risking their money, too, which they don’t have to do. So when some start-up needs capital to develop the next big thing (or go bust), they look to investors to fuel that vision. We’d all be a LOT worse off if we hadn’t developed such an open investment system. Perfect? Of course not. But better than anything we’ve had before.

  • eadie –
    I agree with what you say, but did the kids inheriting the wealth do anything besides being born into the “Lucky Sperm Club?”

    We were brought up to believe that th USA had shed it’s monarchy & aristocrat roots in the old countries. The Estate Tax (or Aristocrat Tax, as I like to call it) is a progressive tool intended to escape those roots.

    We need personal wealth & rich families, they provide all of what you referenced. We don’t need to increase their power over our system. And for them, extra money is extra power.

  • Speaking of “lucky sperm club”… do Kerry, Gore, and Kennedy pony up their fair share? Will the estate tax ever be implemented on the Compound?

    Sorry to even say this, but much as I despise Limbaugh (I only listen when Walter Williams sub-hosts), there is one Limbaugh line that I agree with:

    “You cannot tax a country into prosperity.”

    Well, you *could*… briefly. You could raise the tax rate to 99% on all income, and the country WOULD be prosperous – for about fifteen minutes, before the economy collapsed.

    FairTax, or even (gag) flat tax, repeal the 16th Amendment, we don’t need six thousand pages of tax law. Cut taxes AND the budget. Make the Almighty Federal Godvernment live within its means. We can’t raise OUR pay when we damned well feel like it, neither should Congress.

    End of pro-capitalism, small-government rant.

  • Tax Cuts — A Simple Lesson In Economics
    This is how the cookie crumbles. Please read it carefully.
    Let’s put tax cuts in terms everyone can understand. Suppose that every day, ten men go out for dinner. The bill for all ten comes to $100.
    If they paid their bill the way we pay our taxes, it would go something like this:
    The first four men (the poorest) would pay nothing.
    The fifth would pay $1
    The sixth would pay $3
    The seventh $7
    The eighth $12
    The ninth $18
    The tenth man (the richest) would pay $59
    So, that’s what they decided to do.
    The ten men ate dinner in the restaurant every day and seemed quite happy with the arrangement, until one day, the owner threw them a curve.
    “Since you are all such good customers,” he said, “I’m going to reduce the cost of your daily meal by $20.”
    So, now dinner for the ten only cost $80. The group still wanted to pay their bill the way we pay our taxes.
    So, the first four men were unaffected. They would still eat for free. But what about the other six, the paying customers? How could they divvy up the $20 windfall so that everyone would get his “fair share?”
    The six men realized that $20 divided by six is $3.33. But if they subtracted that from everybody’s share, then the fifth man and the sixth man would each end up being “PAID” to eat their meal.
    So, the restaurant owner suggested that it would be fair to reduce each man’s bill by roughly the same amount, and he proceeded to work out the amounts each should pay.
    And so:
    The fifth man, like the first four, now paid nothing (100% savings)
    The sixth now paid $2 instead of $3 (33% savings)
    The seventh now paid $5 instead of $7 (28% savings)
    The eighth now paid $9 instead of $12 (25% savings)
    The ninth now paid $14 instead of $18 (22% savings)
    The tenth now paid $49 instead of $59 (16% savings)
    Each of the six was better off than before. And the first four continued to eat for free. But once outside the restaurant, the men began to compare their savings.
    “I only got a dollar out of the $20,” declared the sixth man. He pointed to the tenth man “but he got $10!”
    “Yeah, that’s right,” exclaimed the fifth man. “I only saved a dollar, too. It’s unfair that he got ten times more than me!”
    “That’s true!!” shouted the seventh man. “Why should he get $10 back when I got only $2? The wealthy get all the breaks!”
    “Wait a minute,” yelled the first four men in unison. “We didn’t get anything at all. The system exploits the poor!” The nine men surrounded the tenth and beat him up.
    The next night the tenth man didn’t show up for dinner, so the nine sat down and ate without him. But when it came time to pay the bill, they discovered something important. They didn’t have enough money between all of them for even half of the bill!
    And that, boys and girls, journalists and college professors, is how our tax system works. The people who pay the highest taxes get the most benefit from a tax reduction.
    Tax them too much, attack them for being wealthy, and they just may not show up at the table anymore. There are lots of good restaurants in Europe and the Caribbean.

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