Truth About Bush Tax Cuts

I do find it curious that in spite of tax cuts for the wealthy (and other groups), the trend in recent years shows that the wealthy are accounting for a higher percentage of the income tax revenue. That trend appears not only in the U.S. but in Canada and Britain.

One explanation is that the income of the wealthy is increasing at a faster rate than that of lower income groups. In that scenario, the amount of taxes collected from the wealthy will increase at a greater rate than other lower income groups, and the wealthy will account for an increasing portion of the tax revenue pie. Also, as people near the top bracket become more wealthy, more of them will enter the top bracket which has a higher rate in a progressive tax system. Inflation can have a similar effect.

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Here's an article about the rich and poor gap in Canada. The article mentions after-tax income, which is important to consider when trying to assess 'tax burden' or which groups are 'hit the hardest'.

http://www.thestar.com/News/article/211141

Excerpts:

"In the first two decades, the widening income gap between rich and poor in Ontario generally reflected a pattern across the country.

But the past decade saw something different. Income figures show the growing gap between the richest and poorest hit a record high across the country, with Ontario outpacing the national trend.

The Ontario numbers show that the richest 10 per cent of families raising children – those with earnings of more than $146,000 in 2004 (not including investments and other assets) – earned 75 times the amount of the poorest 10 per cent. In 1976, the richest earned 27 times as much.

As the richest break away from the pack, those households with incomes less than $56,000 in 2004, earned less or stayed the same, in inflation-adjusted terms, compared to a generation ago, the report states.

The gap narrows considerably in after-tax income, which takes into consideration income tax deductions and any government programs that prop up families with low-incomes. But the report shows even that gap has grown in the last decade. The after-tax income of the richest 10 per cent of families grew from eight to 10 times greater than the poorest 10 per cent nationally since 1998. In Ontario, the income of the richest families grew from eight to 11 times greater than the poorest."

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The CBPP has provided some figures on the change in after-tax income in 2004 as a result of the Bush tax cuts. The higher income groups had a larger increase in after-tax income after the tax cuts compared with lower income groups. The wealthy seem to be doing ok.

http://www.cbpp.org/8-25-04tax.htm



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Interesting chart Shaggie, thanks for sharing.

 

Since we're on the topic of the wealthy, we might as well look at how the very wealthy have been doing in recent years.

Here are the number of billionaires worldwide and their combined worth.


1992: 233 (Forbes richest list worldwide)

1996: 135 (in the U.S.)

1997: 170 (in the U.S.)

1998 350 (Forbes list worldwide)

2003: 476 ($1.4 trillion)

2006: 586 ($1.9 trillion)

2007: 946 ($3.5 trillion)

2008: 1125 in world; 472 in U.S. ($4.4 trillion combined worth of all)


The very wealthy have done very well in the past decade. Since the 90s, billionaires in the U.S. have accounted for about 40% to 50% of the number of billionaires worldwide.

Their combined worth is now at $4.4 trillion

The data comes from various sources on the web such as the Forbes richest people list which is published in the spring of each year.

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The worth of billionaires in the U.S. is staggering. Estimate the worth of U.S. billionaires in 2008 at about 40% of the worth of billionaires worldwide. That amounts to

$4.4 trillion x 0.40 = $1.76 trillion (worth of U.S. billionaires)

Take the salaries or wages of 150 million workers earning 40K per year.

40K x 150 million = $6 trillion (worth of 150 million average workers)

Compare the worth of the billionaires with that of 150 million average workers:

1.76 / 6 = 0.29 = 29% (!!!)

For that high of a percentage, and one that has been growing in recent years, the wealthy are naturally going to account for an increasing portion of the tax revenue pie.

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As well they should.Does anyone really believe the poor and middle class should pay MORE than the rich(he asks rhetorically--Hint:republicans)

 

From Tax Prof Blog:

New data released by the IRS today offers interesting insights into the distributional spread of the federal income tax burden, new analysis by the Tax Foundation shows. The new data shows that the top-earning 25% of taxpayers (AGI over $62,068) earned 67.5% of the nation's income, but they paid more than four out of every five dollars collected by the federal income tax (86%). The top 1% of taxpayers (AGI over $364,657) earned approximately 21.2% of the nation's income (as defined by AGI), yet paid 39.4% of all federal income taxes. That means the top 1% of tax returns paid about the same amount of federal individual income taxes as the bottom 95% of tax returns.

 

That's why they are top 1%, they know how spread spin, that's positive for them, if no one bothers to consider what their statistics are actually based on. Numbers can back up anything if you use the right formula and don't ask the right questions.

 

Personally,I'd rather make a huge amount of money and pay a huge amount of taxes than make a little amount of money and pay a small amount of taxes.

 

That's essentially the same paragraph that Paul posted at the start of the thread. That paragraph has popped up on various conservative blogs the past year.

That distributional spread is partly a result of the tax rates being moderately progressive in the U.S., but it is much more a result of the disparity between the rich and poor.

The ratio of 39.4% (tax contribution of top1%) to 21.2% (income contribution of top 1%) is 1.8. That represents a moderately progressive tax system. It would be unity in a flat tax system (a group accounting for 21.2% of the income would account for 21.2% of the income tax revenue).

The ratio of 21.2% (income contribution of top 1%) to 1% (actual percentage of taxpayers) is 21, which is much higher than 1.8. That's a result of a very large disparity between the wealthy and the lower income groups and the main reason why the wealthy account for such a large portion of the tax revenue pie relative to lower income groups.

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It's a separate question whether or not we believe a progressive tax structure to be a fair burden to all, which wasn't the topic of the original post. There are always some who will argue that a moderately progressive tax system is unfair to the rich no matter how high the disparity between the rich and poor.

Even in a flat tax system, a large disparity between the wealthy and poor will cause a large distributional spread in the income tax contribution of the wealthy and the poor.

The ratio of the percentage of the taxes paid by the wealthy compared with that paid by the very low income groups who pay essentially no taxes would be infinite. It would be a stilted argument to claim that the wealthy in that case were infinitely more burdened than the low income groups. They have the means to live comfortably after taxes, whereas those at the low end of the income scale wouldn't if they had been taxed at the same as the wealthy. That's why I brought up the point about using after-tax disposable income as a way of assessing tax burden.

The original post in the thread was a claim that the Bush tax cuts hit the wealthy harder than other groups. However, the percentage increase in after-tax income after the tax cuts was actually greater for the wealthy groups compared with that for lower income groups, as the data posted earlier show. In that respect, the wealthy weren't hit the hardest but actually did better than the lower income groups.

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When President Eisenhower (a republican by the way) was asked to lower the tax rate for the rich,he said NO.The wealthiest paid 90% in taxes.One advantage of many in taxing the rich is it discourages very high salaries,like those made by CEOs etc. etc.So many other advantages too.--Any good accountant will tell you that there are so many 'loopholes nowadays',that the ultra rich often wind up paying almost nothing.I say bring back very high taxes for the wealthy,close the loopholes and lower everyone elses taxes.Common sense.Stop feeling sorry for the rich!

 

The rate was much higher in the past compared with recent years. Yet the wealthy still complain about what they consider today to be a high rate.

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Looking at the chart above this post,in the 1970s the richest were taxed 70 percent.-----In the 1970s the average 1 income household(family) did BETTER financially than the average 2 income household does now or within the past 20 years.--This "welfare for the wealthy" started in the early 1980s but has gotten much worse.Whenever they try to raise taxes on the rich,the BS argument by some is it's anti-capitalism etc. etc.--Well,America was a capitalist country in the 1940s,50s,60s,70s too,when the rich were taxed to the max.

 

The worth of billionaires is now $4.4 trillion. That's mind boggling.

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