Re: [OT] Obama's tax cuts.


"Tera Daktl" <tera@xxxxxxxxxxx> wrote in message
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Paul M. Cook wrote:
"Ken Dixon" <nsvmiami@xxxxxxxxxxxxx> wrote in message
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Miss Elaine Eos wrote:


So bring it on, Mr. President -- let's cap personal and corporate taxes
at 19% or less. It would at least be a step in the right direction. Â As
The Tax Foundation says: "What's good for Ghana is good for the gander.

I can't seeing the federal e's settling for a less than 60/40 split. 60
for them, 40 to be split between you and your home state, county and
city.


Ah yes, I seem to recall this theory before. Something about how you
increasse revenue by decreasing taxes. We're 11 trillion in debt so it's
clearly woking out just fine. Here is a write up on what I have for years
described as the myth of lower taxes. It's actually not a new theory,
economists have been discussing it for more than 150 years now.


The Great Tax Con Job

Republicans are using the T-word - taxes - to attack the Obama healthcare
program. It's a strategy based in a lie.

A very small niche of America's uber-wealthy have pulled off what may well
be the biggest con job in the history of our republic, and they did it in
a startlingly brief 30 or so years. True, they spent over three billion
dollars to make it happen, but the reward to them was in the hundreds of
billions - and will continue to be.

As my friend and colleague Cenk Uygur of The Young Turks pointed out in a
Daily Kosblog recently, billionaire Rupert Murdoch loses $50 million a
year on the NY Post, billionaire Richard Mellon Scaife loses $2 to $3
million a year on the Pittsburgh Tribune-Review, billionaire Philip
Anschutz loses around $5 million a year on The Weekly Standard, and
billionaire Sun Myung Moon has lost $2 to $3 billion on The Washington
Times.

Why are these guys willing to lose so much money funding "conservative"
media? Why do they bulk-buy every right-wing book that comes out to throw
it to the top of the NY Times Bestseller list and then give away the
copies to "subscribers" to their websites and publications? Why do they
fund to the tune of hundreds of millions of dollars a year money-hole
"think tanks" like Heritage and Cato?
The answer is pretty straightforward. They do it because it buys them
respectability, and gets their con job out there. Even though William
Kristol's publication is a money-losing joke (with only 85,000
subscribers!), his association with the Standard was enough to get him on
TV talk shows whenever he wants, and a column with The New York Times. The
Washington Times catapulted Tony Blankley to stardom.

"Fellowships" and other forms of indirect sponsorship of right-wing talk
show hosts have made otherwise-marginal shows and their hosts ubiquitous,
and such sponsorships of groups like Norquist's anti-tax "Americans for
Tax Reform" regularly get people like him front-and-center in any debate
on taxation in the United States.

All so they could run a tax con on the American people, thus keeping Moon
and Murdoch and Scaife and Anschutz (and others) richer than you or I
could ever even imagine.

All of this money was spent - invested, really, since it's been more than
saved back in low income tax rates on millionaires and billionaires - to
convince Americans that up is down and black is white when it comes to
income taxes. Here's how it works:

Rich Person's Tax Effect

If a person earns so much money that he doesn't or can't spend it all each
year, then when his taxes go down your income after taxes goes up. This is
largely because there's little to no relationship between what he "needs
to live on" and what he's "earning."

Somebody living on a million dollars a year but earning five million after
taxes, can sock away four million in a Swiss bank. If his taxes go up
enough to drop his after-tax income to only three million a year, he's
still living on a million a year, and only socks away two million in the
Swiss bank. His "disposable" income goes down when his taxes go up, and
vice-versa. (Technically, the word is "discretionary" income for
after-tax, after-living-expenses income, but "disposable" income has
become so widely used as a phrase to describe discretionary income I'll
use it here.)
The Rich Person's Tax Effect is the one that virtually all Americans
understand - and, oddly, most working class people think applies to them,
too (this is the truly amazing part of the con job referred to earlier).

But it doesn't.

Working Person's Tax Effect - version one

Most working people spend pretty much all of what they earn - their
"disposable/discretionary" income is close to zero. Savings rates in the
US among working people typically are small - one to five percent - and
during the last few years of the W. Bush administration actually went
negative. So the take-home pay that people have after taxes - regardless
of what the taxes may be - is pretty much what they live on.

As economist David Ricardo pointed out in 1817 in the "On Wages" chapter
of his book "On the Principles of Political Economy and Taxation," take
home pay is also generally "what a person will work for." Employers know
this: Ricardo's "Iron Law of Wages" is rooted in the notion that there is
a "market" for labor, driven in part by supply and demand. So if a worker
is earning, for example, a gross salary of $75,000, his 2008 federal
income tax would be about $15,000 ($802.50 on first $8,025 of
income;$3,687.75 on income from $8,025 to $32,550; $10,612.50 on income
from $32,550 to $75,000), leaving him a take-home pay of $60,000.

Both he and his employer know that he'll do the job he's doing for around
$60,000 a year in take-home pay.

So what happens if his taxes go up, cutting his take-home pay to $55,000 a
year (even though his gross is still $75,000)? Over time (typically one to
three years) his wages will rise enough to compensate for the lost income.

Alan Greenspan used to be hysterical about this effect - he called it
"wage inflation" - and The Wall Street Journal and other publications
would often reference it, although the average working person has no idea
that if his taxes go up, his wages will eventually go up. Similarly, when
working-class people's taxes go down, their gross wages will, over time,
go down so their inflation-adjusted take-home pay remains the same. We've
seen both happen over the past eighty years, over and over again.
When I was in Denmark last year doing my radio show from the Danish Radio
offices for a week and interviewing many of that nation's leading
politicians, economists, energy experts, and newspaper publishers, one of
my guests made a comment that dropped the scales from my own eyes.

We'd been discussing taxes on the air, what the Danes get for their
average 52% tax rate (free college education, free health care, 4 weeks of
vacation, being the world's "happiest" country according to research
reported on CBS's "60 Minutes" TV show, etc.). I asked him why people
didn't revolt at such high tax rates, and he smiled and just pointed out
to me that the average Dane is very well paid with a minimum wage that
equals about $18 US (depending on the exchange rate from day to day).
Off the air, he made the comment to me that was so enlightening. "You
Americans are such suckers," he said, as I recall. "You think that the
rules for taxes that apply to rich people also apply to working people.
But they don't. When working peoples' taxes go up, their pay goes up. When
their taxes go down, their pay goes down. It may take a year or two or
three to all even out, but it always works this way - look at any country
in Europe. And it's the opposite of how it works for rich people!"

Working Person's Tax Effect - Version Two

The other point about taxes - which Obama leveraged with his "no tax
increases on people earning under $250,000 a year" pledge - has to do with
the fact that our tax structure in the US is progressive.

Here's how it breaks out for a single person from the 2008 federal tax
tables:

10% on income between $0 and $8,025
15% on the income between $8,025 and $32,550;
25% on the income between $32,550 and $78,850;
28% on the income between $78,850 and $164,550;
33% on the income between $164,550 and $357,700;
35% on the income over $357,700.

Note that our $75,000/year worker has two full tax brackets above him,
which, if they go up, will not affect him at all. (This is also true, of
course, for the median-wage and average-wage American workers who earn in
the low to mid-$40,000/year range.)

The top tax rate that a person pays is referred to as their "marginal tax
rate" (in our worker's case 28%). So what happens if the top marginal tax
rate on people making over $357,700 goes up from its current 35% to, for
example, the Eisenhower-era 91%?

For over 120 million American workers who don't earn over $357,700/year,
it won't mean a thing. But for the tiny handful of millionaires and
billionaires who have promoted The Great Tax Con, it will bite hard. And
that's why they spend millions to make average working people freak out
about increases in the top tax rates.

Income taxes as the "Great Stabilizer"

Beyond fairness and holding back the Landed Gentry the Founders worried
about (America had no billionaires in today's money until after the Civil
War, with John D. Rockefeller being our first), there's an important
reason to increase to top marginal tax rate, and to do so now.

Novelist Larry Beinhart was the first to bring this to my attention. He
looked over the history of tax cuts and economic bubbles, and found a
clear relationship between the two. High top marginal tax rates (generally
well above 60%) on rich people actually stabilize the economy, prevent
economic bubbles from forming, prevent economic crashes, and lead to
steady and sustained economic growth (and steady and sustained wage growth
for working people).

On the other hand, when top marginal rates drop below 50 percent, the
opposite happens. As Beinhart noted in a November 17, 2008 post on the
Huffington Post, the massive Republican tax cuts of the 1920s (from 73% to
25%) led directly to the Roaring '20s stock market bubble, temporary boom,
and then the crash and Republican Great Depression of 1929.

Rates on the very rich went back up into the 70-90% range from the 1930s
to the 1980s. As a result, the economy grew steadily; for the first time
in the history of our nation we went 50 years without a crash or major
bank failure; and working people's wages increased enough to produce the
strongest middle class this nation has ever seen.

Then came Reaganomics.

Reagan cut top marginal rates on millionaires and billionaires from 74%
down to 38% and there was an immediate surge in the markets - followed by
the worst crash since the Great Depression and the failure of virtually
the entire nation's savings and loan banking system.

Bush I cut taxes, and the nation fell into a severe recession while debt
soared and wages for working people fell.

Things stabilized somewhat when Clinton slightly raised taxes on the very
rich, but W. Bush dropped them again - including taking taxes on unearned
income (interest and dividends - the "income" that people like W. born
with a trust fund "earn" as they sit around the pool waiting for the
dividend check to arrive in the mail) down to a top rate of 15%. (That's
right - trust fund babies like Bush and Scaife pay a MAXIMUM 15% federal
income tax on their dividend and interest income, thanks to the second
Bush tax cut.) The result of this surge in easy money for the wealthy,
combined with deregulation in the financial markets, was the "froth"
Greenspan worried about and led us straight into the Second Republican
Great Depression, ongoing today.

The math is really pretty simple. When the uber-rich are heavily taxed,
economies prosper and wages for working people steadily rise. When taxes
are cut for the rich, working people suffer and economies turn into
casinos.

Roll Back The Reagan Tax Cuts

While there's much discussion about letting the Bush tax cuts expire, if
we really want our country to recover its financial footing we must do
something altogether different. We need to roll back the Reagan tax cuts
that took the top marginal rate from above 70% down into the 30% range.
First, though, we have to help Americans realize that "no new taxes" is a
mantra that is meaningful to the very rich, but largely irrelevant to
average working people.

Only when the current generation re-learns the economic and tax lessons
well known by the generation (now dying off) that came of age in the 30s
through the 60s, will this become politically possible. Americans need to
learn what Europeans know about taxes - they only matter to the rich.
Thus today the uber-rich are spending hundreds of millions to make sure
words like "burden" are always associated with the word "tax," and to
convince average working people that they should throw out of office any
politicians who are willing to raise taxes on the rich.

We have a lot of education to do.and as long as the Right Wing Machine of
the uber-rich continues to "lose" (e.g. "invest") millions of dollars a
year in their ongoing disinformation campaign, it's going to require all
of us reciting the mantra, "Roll back the Reagan tax cuts!"

How do these people get away with it? Simple. Loopholes created by
congress who writes the tax code. What has Obama said about loophole?
------------------------------------------------------------------------

You missed the point. Loopholes have nothing to do with it. It is a myth
that lowering taxes increases income. That is unless you make considerably
more money than you need every year. Then it benefits you greatly. Wages
adjust to changes in taxes. Lower taxes, wages go down, raise taxes wages
go up. That is because everyone has a set amount they will work for, called
the "wage market", and when taxes are raised wages tend to increase to fill
in the gap created by the tax increase. When taxes are lowered , wages go
down to readjust to the market demand.

Let's put it this way: say tomorrow all income taxes ended. You are paid
60K a year at your job and you probably take home 48K of that roughly. Does
your employer keep paying you that 60K. No, they keep paying you the 48
grand you take home every year. That is how the wage market works - you put
yourself in the market and say you'll do work for 48K a year in take home
money. It's as if the other 12 never existed. That is how it works for
those of us who do not make so much money that we can save many more times
what we make. For them, it is the opposite. When their taxes go down,
their income goes up.

Which is why I stated in 2000 that Bush's tax cuts would in fact put most
people at a deficit and it did. Wages dropped every single year after that.

Paul


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