My husband, Bob U., wrote a series of articles, which I think are really insightful. This is Part 14. I invite your comments.You can visit Bob at http://bobuhlar.gather.com/
Another problem with the Bush tax cuts is that they shift the tax burden from the wealthiest to the middle class. Let's take a look at the tax rates for the 2004 tax year.
Our Income Tax is a progressive tax system. Essentially, the more you make, the more you are taxed.
For a married couple filing jointly in the 2004 tax year, the first $9,700 was tax-free because of the "standard deduction." Everything above that was taxable income.
Here were the rates for taxable income in the 2004 tax year:
$0 to $14,300 was taxed at 10%
$14,300 to 58,100 was taxed at 15%
58,100 to 117,250 was taxed at 25%
117,250 to 178,650 was taxed at 28%
178,650 to 319,100 was taxed at 33%
319,100 and above was taxed at 35%
But these tax rates apply only to paychecks. What if you are making your money through investments?
The wealthiest taxpayers pay lower taxes on capital gains - the profits made off rents, royalties, dividends, stocks and bonds.
Here were the tax rates in the 2004 tax year for capital gains:
Capital Gains held less than one year - 28%
Capital Gains held longer than one year - 15%
As billionaire Warren Buffet noted, he pays a lower percentage on his earnings than his secretaries do on their wages. Buffet says that is not fair.
Less than five percent of taxpayers who earned less than $100,000 earned any capital gains. In fact, 75-percent of all stocks are owned by those earning more than $100,000 - the wealthiest ten-percent of American taxpayers.[i]
Yet, Republicans insist that capital gains be taxed at lower rates than wages.
Oddly, our economy was stronger and less volatile when the wealthy paid a higher percentage.
In 1954, all earnings above $200,000 per year (equal to $1.5 million in 2006 dollars) were taxed at 91 percent.[ii] By the way, when the 1954 tax law was passed, both houses of Congress had a Republican majority and we had a Republican President.
In 1964, following through on a JFK campaign promise, Congress eliminated many tax loopholes and the top tax bracket was lowered to 70 percent. It remained there until Ronald Reagan took office in January 1981 and Congress lowered it to 50 percent and, a few years later, to 28 percent.
Under President Clinton, the top bracket was raised to 39 percent. But under George W. Bush, the top bracket was lowered to 35 percent.
Any time the tax rates on the wealthiest Americans are lowered, taxes on all other Americans need to rise to make up the difference.[iii] The median family is spending 38 percent more on taxes than it did 30 years ago.
Tomorrow - Part 15: The Rich Get Richer
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[i] Paul Krugman, "The Great Wealth Transfer." Rolling Stone, November 30, 2006. http://www.rollingstone.com/politics/story/12699486/paul_krugman_on_the_great_wealth_transfer
[ii] See http://en.wikipedia.org/wiki/Internal_Revenue_Code_of_1954 . Then go to http://minneapolisfed.org/Research/data/us/calc/index.cfm to adjust the amount for inflation in 2006 dollars
[iii] Of course, this assumes that Congress won't raise taxes on corporations or raise tariffs or duties.
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Comments: 40
Who are the poor in this country? Children, the elderly, and the disabled make up the highest percentage. Most of them are unable to "earn" their way out of poverty. But by lumping all poor people together in a heap at the bottom of the ladder, and then calling them lazy, stupid (uneducated), and leeches, we can blame THEM for their impoverished situation. Even without a wage income, the poor pay taxes. Sales tax, for example, which would be an unusually high percentage of their small income.
Social programs to help the poor are desparately needed. WIC, Medicare, Medicaid, Head Start, to name a few, make a huge difference in the quality of life for them. To define these programs as socialism is nonsense, but it is the way to reinforce the above premise, that only the rich "deserve" what they have. And as long as the middle class people see themselves as "well-off", they can pretend that they are among the wealthy few who will be hurt by taxes and social programs. How naive.
And capital gains tax rates apply equally to ALL investors...including retiree's IRA accounts. Sure rich people make more capital gains than anybody else, but they still get taxed plenty on everything else.
Yep...because welfare moms know the surest way to stay on the dole is to keep spitting out new unwanted babies that they won't raise properly.
And yes, you're right, there are plenty of people on assistance who have the right attitude and who use it temporarily while they're looking for work, as it's intended. But there are also PLENTY who abuse it too.
Government bureaucracies are largely incapable of distinguishing between the two, so abuses can, do, and will occur. This, combined with their gross inefficiency, is but one of innumerable reasons why these responsibilities would be better managed outside the state.
And as far as changing the name...they also changed the program and your mother knows that. Temporary assistance is limited to five years. That did not use to be the case.
AND retirement accounts are not subject to capital gains tax. That is why they are called TAX free! (except for Roth IRAs)
Regarding a 91 percent MARGINAL tax rate, please understand that it applied only to the amount above $1.5 million a year. All the lower income was taxed in the lower brackets. But I know. It must have been terribly hard to survive on $1.5 million dollars a year in 1960. Poor babies.
Please understand that a reasonable and compassionate society understands that it takes money to pay for all the basic living expenses. That is why anybody earning less than $9,700 was exempt from income tax, and the amount between 9,700 and 24,000 was taxed at 10 percent.
Monday’s Post (Part 16) will address fair tax rates.
By the way. We ARE NOT BROKE. We simply have $10 trillion in debt. And $7.5 trillion of that debt is due to Reagan, Bush and Bush. And suddenly neo-conservatives are screaming about a lack of money?!!!
If you still don’t understand, Please, Please, Please, paste these URLs into your browser and read the three articles:
1. http://www.alternet.org/story/106410/
2. http://www.alternet.org/story/106979/
3. http://www.alternet.org/workplace/119048/why_you_should_be_screaming_for_higher_taxes/
That's just it - it never changed hands there. The corporation pays tax before the owners get to take their profits (dividends and profits), at which time our esteemed government taxes them again.
It is very definitely "double taxation", it's not just something I'm making up. It's written into textbooks as part of the definition of the corporation. Advantages include: limited liability, survivability (doesn't cease to exist with death of owner like a sole proprietorship), etc. Disadvantages include: Double taxation. An owner knows that before he'll see the first penny of profits, he'll be taxed twice.
As for your "social worker" friend, that is indeed an ignorant position to take. But at the same time, while she may have worded it poorly, it is true that the poor in this country are in many cases better off than many of the better off people elsewhere. Poor people here are the ones with only 1 family vehicle, maybe 10 years old or more, and only a few tv's.
Our "poverty line" is a totally arbitrary number set by government agencies whose budgeting and funding rests on proving that there is a need for their services. I wonder whether they would feel pressure to make that number small or large?
And poverty is relative to location. While those in Calcutta may be bringing in less in income, the cost of living there is less as well. But to say that poor people here are the ones with "only 1 family vehicle" and a "few TVs", shows that you are really uninformed and also a bit of a bigot, in my opinion.
You are the one missing the point! Read carefully>>>virtually every time money changes hands in this country, there is a tax or fee levied<<<<br>
When money changes hands, it is taxed! Why single out capital gains? GREED!
That "arbitrary" poverty line is a well researched number that represents how much money it takes to survive!!!
I would counter-argue that you have a slanted view of the wealthy and think there's no reason they should mind having an exorbitant amount of THEIR hard earned money, taken from them BY FORCE, to subsidize failed behavior patterns.
>>And poverty is relative to location. While those in Calcutta may be bringing in less in income, the cost of living there is less as well. But to say that poor people here are the ones with "only 1 family vehicle" and a "few TVs", shows that you are really uninformed and also a bit of a bigot, in my opinion.<<
No bigotry intended, my point was only that "poverty" is a relative term.
>>You are the one missing the point! Read carefully>>>virtually every time money changes hands in this country, there is a tax or fee levied<<<<br>
When money changes hands, it is taxed! Why single out capital gains? GREED!<<
And my point is that there is no change of hands between a corporation and a stock holder. The stock holders ARE the corporation.
Now don't get me wrong, I'm not saying capital gains should be eliminated, nor was I seriously proposing an end to corporate taxation either - I'm just pointing out that this is why they aren't taxed as heavily as top-bracket income taxes.
Blame the victim.
That's the way it will always be unless we can educate people to the realities of poverty in this country. What about the physically and mentally handicapped? What about the elderly, most of whom are women living on $600 to 800 a month. Who at 70+ work to make ends meet, if they are physically able. But then, I guess that's their fault, too. I wonder what they would think about discussions concerning capital gains, stocks, stock-holders and taxes. I bet they still have their paychecks taxed.
Watch the NBC Nightly News; Monday, March 9, 2009. It is the first story!!!
http://www.msnbc.msn.com/id/3032619/
See Part 16 in this series
There are ALSO people who abuse the system, and the answer is NOT more funding. This is why I said "in many cases" in my original post about people in poverty, not "in all cases". I totally understand I'm only talking about SOME of the nation's poor.
The problem is that government is not good at this sort of thing - it should be handled by private charities, and this would occur MUCH more often and more frequently if government got out of the way.
If I had 20% more income (aka didn't pay income taxes) then I'd be happy to give more to charity. As it is, with day care for two kids, a mortgage payment, etc etc I can barely break even. Additionally, there are plenty of people who feel like the fact that they pay for these services through their tax money removes any additional obligation they might otherwise feel to give... the whole "I gave at the office" mentality.
I honestly feel like the two of you, Bob and Carla, and getting upset because you're misunderstanding my position, and apparently I'm not as good at communicating it as I thought. I'm not a selfish evil guy, as you seem to think, I'm not against helping people who really need and deserve it.
My problems are simply that I don't feel government is the best vehicle for that, and because it's not an authority granted our country constitutionally. If states want to do this sort of thing, and their constitutions grant that authority, fine, but our federal government does not.
I'm also not wealthy, although I aspire to be so someday. I do not defend them because I am one, I defend them because the class warfare mentality in this country has gotten out of hand. Just as Castro blames the evil Americans for all that is wrong in Cuba (which SOME of it is, but of course MUCH is not), so also do many of our poor blame those evil greedy rich people for keeping them down.
I hope this helps.
By aspiring to be wealthy, we forget how many of the rich actually got their money. And I'm not sure you want to get it through deceit and dishonesty. Unless you've inherited a lot, win a tremendously large lottery (and you know your chances for that), or have the luck to come up with a great thought, like Bill Gates, you'll probably end up like the rest of us, struggling to maintain a decent living while the rich get richer and the poor get poorer.
Investing wisely can bring comfort and security, but most people aren't Warren Buffet. Education can get you more money, but again, it depends on jobs, opportunity, etc. I guess what I'm really saying here is, don't count on it. And don't buy into everything you hear and read. The government's job is to keep us safe. And in some ways it needs to keep us safe from ourselves. There is so much graff and cheating in all parts of our society, it's hard to separate the peacemakers from the warmongers.
Bob has done an excellent job outlining how we got where we are today. Too bad he can't see into the future and tell us where we're going. Right now, we have to accept what is here for us and have faith in those we elect to do the right thing. Obama is a special kind of person who, so far, is living up to his word. And in areas where it isn't working as he would like, he's being honest and letting us know. That's a big step forward. We have to give him a chance to settle in and we must not allow the other party to sabotage his good work. We need to stay optomistic and not let others beat us down, or we will lose faith. Listening to the news can be very depressing if you believe everything you hear. They want listeners and so overempathize everything to get us riled up.
I don't think anyone wants Government to run our lives, but as we've just seen, unless government is in there carefully watching, our lives will be run by far more dangerous people than the government. There really are very few people who are living off the till in comparison to those who you refer to as "deserving". We have lots of community charities, churches, and programs to help the poor but they just aren't enough. And things are going to get a lot worse before they get better with the job losses we're seeing.
I'm not sure a businessman, auto worker, retailer or anyone else just losing a job is any less or more deserving than a single parent with small children, a disabled veteran or mentally ill street person. We need to be ready to help them all if we have the good fortune to have a job, a roof over our heads, and food in our stomachs.
You and I are operating from different perspectives. In your 35 years, you have never seen a federal government that worked well.
In 1980, Ronald Reagan ran on the platform, “Government can not solve our problems, Government IS the problem.”
He got elected. He slashed funding for government agencies. Therefore, the government agencies cut staff and operated poorly.
Then, Republicans said, “See! Government agencies operate poorly! We need to privatize these agencies.”
This is all you have been taught and can find little evidence to change your mind. That is why Libertarianism appeals to you.
I’m going on 53, and have seen Federal, State and City governments that worked well. So, I believe government can help and will do so.
Just because there are some who abuse the system does not mean that we should punish those who don't by getting rid of welfare. And the majority of people do not abuse the system.
As Elsie said, there are charities that help the poor. I work for one, but we can't do it all. We have been seeing 300 more people a month since October.
Bob finishes this post with this: "Any time the tax rates on the wealthiest Americans are lowered, taxes on all other Americans need to rise to make up the difference. The median family is spending 38 percent more on taxes than it did 30 years ago."
That is a flat out lie.....regardless of the tax rates going up or down, government spending is the difference. Either they have a balanced budget or they have deficit spending (which has been the norm for decades). As for median family tax burden going up,you need to take into account state and local taxes going thru the roof. I live in Connecticut,where we didn't have a state income tax,the governor [Lowell weicker] imposed a state income tax that was supposed to sunset after Connecticut's tax revenue shortfall is resolved. But the legislature kept pushing that date up until they just made it permanent. After the state got fat on all the added revenue we soon needed more tax increases and this year we will be $1.5 billion under budget. Next year it will be over $4 billion. So explain to me how sinces taxes keep going up,there just never seems to be enough ???? The "Great Money Launderer" aka the US government takes in more every year but it is never enough.......Democrats are always worse then Republicans,I would like to get rid of them both. They have done almost nothing to make my life better. I'd rather do business with those you denigrate thru class envy...a rich guy.
Obama campaigned on a promise to spend $6 billion on "urban poverty". Impressive !!!
But since we already spend more than $600 billion/yr. on programs from Medicaid, food-stamps, housing assistance,temporary assistance.....assitance,assistance. When do we get to the point where we can agree that not spending enough isn't the problem ?
As for the wealth envy debate. You want the rich to pay infinitely more than you.
If I pay $10,000/yr. in taxes Another guy pays $100,000/yr. If the government drops our payment 10%.....I keep $1,000 while the 'rich guy' gets to keep $10,000.....to those on the left that would be unfair. I just have to understand liberal thinking and how it works. It's all about taking power from the individual and giving it to the government.
To our own detriment ,we will find out that liberalism is a bankrupt philosophy and now that they have more than enough rope (control of the White House and Congress)they will certainly hang themselves.
That is almost funny....read it out again, outloud ! In your words the government is getting stiffed. That money is actually theirs,they just let you keep some of it. The government doesn't earn anything,they don't create anything without first taking from someone else, but they are entitled to a percentage of every single penny earned by every citizen. If you dare to be successful, liberals will punish you and make you an enemy of the people.
Liberalism breaks the law of unintended consequences and gives us mediocrity or worse.
One of Quinn's Laws states "liberalism always generates the exact opposite of its stated intent"
set at 20% a wealthy man buys a new Mercedes s600 for $90k. I buy a new Ford F-150 for $20k........the tax to the gov. would be $18k vs. $4k.....is that fair enough ???
No,liberals would outlaw Mercedes because of fairness and we would all be made to buy the same Ford model...the wealthy man would pay a higher tax than me,then the "poor" man would pay no tax and get it at a lower price if not free......there's your fairness.
I'm not against assistance. I'm against the gross social engineering and the loss of freedom so the likes of Obama ,Reid and Pelosi can gain power.
Every time I see Obama and his ever present tele-prompter,I see a socialist puppet. An empty suit that is in over his head.
So I can see hwy you don't understand things ,you wait for your government to tell you what you to understand. Like a good little sheeple of the nanny state.
Sadly, so are the Eisenhower/Taft Republicans.