What a Beautiful Sunset?!?!?!
It is five years away. But, you will start to hear about it more often. I hear President Bush comment on it every once in a while. And, I hear the left beat him up for it from time to time. I am referring to Bush’s tax cuts being made permanent.First, let me provide a little background. A substantial series of tax cuts were passed into law in 2001 as part of the Economic Growth and Tax Relief Reconciliation Act of 2001 (hereinafter referred to by its more commonly used acronym EGTRRA). As a part of this legislation, the tax brackets were lowered and an new 10% tax bracket was added. The lowering of the brackets was originally supposed to take place incrementally over a six year period. This was later sped up as a part of additional legislation. Probably the most memorable part of this legislation was the retroactive implementation of the 10% bracket, which resulted in taxpayers receiving a tax refund check. This legislation contained an odd provision in that it was only effective until December 31, 2010. After that date, everything is to revert back to the way it was before 2001.
I support the idea of removing the “sunset” provision and making the 2001 changes permanent. To not do so would be a major plow to both individuals and businesses. My rational is not completely altruistic. I’ll be honest. I don’t want to end up paying higher taxes.
The President is correct in calling this “sunset” provision a tax increase. Because if the provisions of EGTRRA are not made permanent, the 10% bracket will go away, all the lowered brackets will be raised, and the marriage penalty will be reinstated. So, in order to avoid a tax hike, the provisions will have to be made permanent.
Of course, all you hear from the left is how the President wants to make his tax cuts for the rich permanent. What you don’t hear is that in the same way this was an across the board tax cut, the “sunset” provisions are across the board too. So, that “sunset” provision will affect everyone regardless of their income level.
There is another aspect that is never brought up, which I suspect is either because the topic is too boring for most people or because it doesn’t support the misconception that President Bush only cares about tax cuts for the rich. If the provisions of EGTRRA are not made permanent individual retirement plans will take a beating. Not only did EGTRRA lower income tax brackets, it also raised contribution rates to retirement plans. It also created the “catch-up” contribution, which is meant to assist those older Americans who need to sock a little more away for their retirement. There are also numerous provisions that help make retirement plans run more effectively and help individuals save for their retirement. All of these provisions will go away if action is not taken.
Between the income tax increase that would result from not making the provisions of EGTRRA permanent and the effects on retirement plans, the results to our economy and our economic well-being would be devastating.
So, let us all join hands and sing with Elton John …. “Don’t let the sun go down on me yet ….”
posted by Squirrel @ 7:28 AM
5 Comments:
OK Squirrel, lets look at some Congressional Budget Office numbers
All dollar numbers are adjusted for 2003 dollars:
The bottom 20% of households had incomes of $14,700 in 1979 and $14,800 in 2003. The top 20% of households had incomes of $123,700 in 1979 and $184,500 in 2003. The top 1% of households had incomes of $485,100 in 1979 and $1,022,400 in 2003.
There were 17.9 million household in the bottom 20% of incomes in 1979 and 23 million in 2003. There were 16.7 million households in the highest 20% of income in 1979 and 22.8 million in 2003. The number of households in the top 1% went from .9 million to 1.1 million.
The share of total pretax income for the bottom 20% of households in 1979 was 5.8% and down to 4.2% in 2003. For the highest 20% - their share of pretax income went from 45.5% to 52.2% of the total. The top 1% of households’ share grew from 9.3% to 14.3%
So what do we see? The poor have been losing ground to the rich and to the fabulously rich since at least 1979. Income for the bottom 20% is stagnant and the number of households in that category are increasing in real numbers, while their share of total income is falling. The number of rich households is growing in real numbers and grabbing a greater share of the wealth. Bottom line - the rich are getting richer and the poor are getting poorer.
According to the new tax brackets the lowest quintile will save 5% on their income tax since it is moving from 15% to 10%. Woo Hoo what a break on $14,000. Those in the highest quintile would see anything from a 3%-6% tax cut. Those in the top 1% will see about a 3.5% cut or let’s say $35,000. Tax cut for the rich? You bet it is.
So you don’t want to pay taxes? I hope you wake up every morning seething about the more than $220,000,000,000 spent so far on the little expedition to rid ourselves of a straw-man threat. Never before has a country cut taxes and simultaneously gone to war, and the real costs will multiply over the years. There are a lot of vets coming home who are permanently disabled and must be taken care of, a nice little hidden cost of war. Or is it that deficits don’t matter to you or to any future generations of Squirrels?
This wholesale belief in supply-side economics is what is going to be devastating to the country. The rising tide is not lifting all boats, 20% of the country is stranded in sinking rowboat while watching some awfully big yachts sail away. Would you rather live in a Russia, Guatemala or Brazil where the income disparities (and corruption) are great, or the “socialistic” countries of Europe.
Let’s do some comparison of numbers. Now I couldn’t find numbers for 1979 and 2003, but I did find population figures for 1980 and an estimated population figure for 2005. In 1980, the population of the U.S. was roughly 226.5 million in 2005 it is estimated that the population had risen to somewhere in the neighborhood of 295 million. So from 1980 to 2005, the population of the U.S. grew 30.24%.
Now let’s look at some of Mr. Scott’s numbers (a round of applause for Mr. Scott’s research efforts). In looking at the number of households in the bottom 20%, top 20% and top 1%, I see that the number of households in the bottom 20% grew 28.49% from 1979 to 2003, the number of households in the top 20% grew 36.53%, and the number of households in the top 1% grew 22.22% for the same time period. What do we see? We see that while the number of households grew in real numbers in each category, the increase in the number of households in the bottom 20% grew at a rate lower than the overall population growth rate. On the other hand, the number of households in the top 20% grew at a rate higher than the overall population growth rate. What does this say to me? It says that there is opportunity in this country to advance economically. A rising tide may not lift all boats, but it lifts a lot of them. Of course, your boat does have to be sea-worthy and in the water when the tide comes in.
Now, Mr. Scott is correct. The rich did receive a tax cut. Of course, so did everyone else. Now, Mr. Scott uses actual dollars to show just how big their tax cut was. But, I would like to see the inverse. Instead of showing us the dollar amounts of the tax cuts, let’s see the dollar amounts of the taxes actually paid. I did that about a year ago for some information that was released by the State of Minnesota. I’d would be interested to see that information on a national level (not so interested that I would actually calculate it myself … I do have a life). I think it puts just a little different perspective on it when you see just how much they are paying in dollars.
(As an aside, how come we never see figures for the bottom 1%? I know that there are certain statistical inaccuracies that occur in the lower ranges, so that information may be questionable. But, you never see any valid bottom 1% information. I sometimes think the top 1% is used more for shock effect. That is a discussion for another time, however.)
Now I would like to correct one thing that Mr. Scott said. Nowhere did I say in my comments that I don’t want to pay taxes. I pay my taxes and, surprisingly enough, I do it quite happily. I feel it is the duty of every citizen to pay taxes. I just don’t want to pay more taxes.
And, as to how I wake, I usually wake in a state of semi-consciousness until I’ve had my shower and a glass of O.J. I don’t seethe though. I let those on the left seethe. After all, they seem to be much better at it. And, by the way, I wake after sleeping very well knowing that every penny spent on the global war on terror was well worth it.
As for where I want to live, I’m perfectly happy living in the United States. A country that, while it does have economic disparities, provides its citizens with the opportunity for economic advancement, but does not penalize them for such advancement.
And, now that I have discussed everything from tax policy to foreign policy to my morning habits, I return to the comments of my original post and reiterate that the tax cuts (both income tax and other cuts) need to be made permanent and that failing to do so would be detrimental to the economy.
I got my info from CBO web site. From there go to Publications, Subject, Taxes, and under Historic Effective Federal Tax Rates 1979-2003. There you will find a downloadable spreadsheet that is a goldmine of information. There are a ton of tables and I think (hope) that I was using the numbers from total US households rather than childless ones etc. The whole site is a treasure trove of info and I suppose there is enough stuff there to keep any discussion going on from now until the apocalypse. What’s that quote about there being lies, damn lies and statistics?
I still stand by my point that the rich are getting richer and the poor are getting poorer, and the gap between them is growing and that is not a good thing. If there was a way to find the bottom 1% of earners, I think it would work in my favor pointing out the growing disparity in income in the country. That would be shocking.
As for not seething, well I’m sorry. If you’re not angry about an administration that admits to torture, wants to spy on citizens outside the bounds of the law of the land, brought the war on terror to the wrong country, embarked on a project of nation building when they said that is not what their foreign policy is about…oh forget about it.
If you want this particular war on terror, you gotta want to pay up. That will mean paying more taxes, not eliminating the sunsets to send this country further into debt.
Thanks for the info on the CBO web site. I will definitely have to go there. All though, I fear that if I do ever venture into their vaults of information, it may be some time before I wander back out. For I am one of those sad individuals who enjoys looking through various statistics. Growing up one of my favorite Christmas presents was an updated World Almanac. Sad, sad, sad ….
As to your comments regarding the current administration … forgotten … with the caveat that I reserve the right to recall them at a future date and quote them out of context. Not that I would ever do anything like that
This is what I love about blogging. Two bright, articulate people debating enough metrics to spin your head. If only all of America was so informed, public discourse would be more interested.
A little piece of tax reform I would like to see concerns the Alternative Minimum Tax (AMT). This little gem is becoming a bigger and bigger burden on the middle class. I certainly don't want to rehash what constitutes "reasonable taxation"; however, the AMT is eating more and more into the average Joe's pocketbook.
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