I am so sick and tired of people trying to paint the tax cuts as "Tax cuts for the Rich."!

They are Tax cuts for people who have paid the majority of taxes! Simple.

I are by no means rich, however benefited greatly by the tax cuts. It put additional money in my pocket when I got my latest refund, which was promptly spend doing home improvements. Everyone benefits: The manufacturers of the products I bought, The employees at Home Depot, myself, etc.

Tax cuts work!

 

I started to respond but decided to repost something I posted in July:
The primary reason that we have a record deficit with no end in sight is that government revenue has plunged. Federal tax receipts as a share of national income are at their lowest level since 1950. Is this decline in revenue due to less taxes on working Americans? The decline in revenue has has come almost entirely from less taxes paid by the richest 5% - personal and corporate profits taxes. Ask yourself who makes the big contributions and who reaps the benefits. Some will argue that tax cuts have spurred the economy in the past so they must do so again. Our manufacturing sector is no longer the sleeping giant that will wake up and solve our problems. To survive, a businessman must make hard decisions - a politician must avoid them.

 

Thats totally wrong.

The decline in federal revenue is due to a decline in economic activity. (aka- a recession)

Think about it this way- less people working and less people buying = less things to tax.

Where did this imaginary tax cut for the rich happen (top 5% that you claim)? Give me changes in the tax code that benifit them directly.

 

Here's a good summary of the tax law changes:
http://www.turbotax.com/ts/t_and_r/a...ding2003TaxLaw

Notice how the changes are across the board, not just the "rich"

 

$100 of tax cut = $100 of government debt
100 of gross revenue to Home Depot
50 to manufacturer of products (keystone, probably import))
50 gross profit for home depot
15 net profit manufacturer/Home Depot (15% pre-tax each)
6 returned to government @ 40% corporate bracket

Portion paid in wages and other expenses will quickly disolve out of the economy in repeated transactions with tax bites on each transaction. Adds to the GDP, like consumer spending, but eventually vanishes.

Net - $94 of federal debt requiring debt service for endless years, $9 put back into the economy as investment return less federal tax, maybe $7.

Transaction is consumer, as are 75% of current GDP transactions, a sure way to eventual oblivion as the same dollar is beaten to nothing by repeated transactions or profit taken out of the country by importers with no positive trade to bring fresh profit into the country which provides real growth and jobs.

So we have $94 of additional federal debt to service and home improvements that will never make a real contribution to the GDP other than on paper in a real estate transaction or as an equity loan offset by additional debt.

Regan cut taxes when we still had an industrial engine that could respond with increased exports to bring fresh profits into the country resulting in increased tax revenues that offset the tax cuts (unfortunately offset by higher spending, but the principle worked). We no longer have that capability, resulting in the above example of incurring additional federal debt to buy votes. That's not what could be termed fiscal responsibility by any stretch of the imagination.

As a side note, the wealthy in this country who do pay the majority of personal income taxes, less than 10% of the population, generally don't receive tax refunds. They pay their taxes with quarterly deposits on estimated income, in many cases to supplement more frequent withholding on high salaries, but more often on investment income. If they file quarterly and get a refund, they fire the CPA who overestimated their income and let the feds have their money for what could be 3-9 months with no interest. Or take it from CPA fees if they want to retain the account.

 

Do you really believe that Home Depot gets the money and sets on it?

The money that Home Depot gets goes to suppliers and employees who then pay more taxes on it, then spend it and then more pay taxes on it.

Money that stays in the economy (by not going back to the government) has a statistic called "velocity" which is how fast it changes hands.

The more it changes hands (velocity)- the more taxes are paid at each step.

Think of the economy as a bath tub- the government puts money (water) in the bath tub in the form of spending & entitlements. The water level rises- and raises all rubber ducks on the water.

Taxes lower the water level- taking money out of the economy.

 

Velocity is a transaction term. I prefer to look at the multiplier effect. The Home Depot employees, the majority who pay little if any income tax, and the employer contribute to SS and Medicare, theoretically spent money. All operating costs are money passed down the line where taxation other than SS, Medicare and fuel taxes are state and municipal taxes, eventually ground into nothing through taxed transactions with little or no repayment of the debt. It (tax cut) only multiplies itself if it creates new employment to expand the economy and subsequent new tax revenue. Any economy dependent on internal consumer/government spending through personal and public debt will eventually be unable to service or expand the debt.

Greenspan's current concern with our deficits (for Greenspan to even mention political issues, which the deficits are, is a big red flag) is based on the lack of confidence our decreasing tax revenue and imbalance of trade are creating in foreign purchasers of our treasury issues, 45% of that total. Churning the same dollar over and over again until it disappears while injecting government debt into the economy to sustain carefully polished GDP numbers fools only the voters.

To take it another step, how will we be able to redeem our own treasury bonds, now being issued for SS money going into the general fund to avoid tax increases, to pay baby boomer retirement? None of those Home Depot 941 'deposits' will ever be SS payments to retirees, they're being spent right now. As is the future.

 

...........It happened in the White House in 2001 when Bush signed his tax cuts.There is nothing imaginary about the cuts, who benefits the most and how they are funded. Just before he signed the tax cut, he signed a bill to raise the debt limit by $948 billion (tax cuts are not free money), raising the Fed debt limit to $7.4 TRILLION. While most have received and spent their money (bottom 60% of earners received $304, median for all Americans $470, average for earners over $1 million $112, 925), benefits will continue to grow for high earners (the richest 1%) until 2010 when they will receive a whopping 52% of the cuts. As for the tax cuts being a significant part of the revenue shortfall and the resultant deficits, that is well documented. One source is a New York Times article, "the decline in revenue has come almost entirely from the taxes that are paid by the richest 5% of families".

I am not against tax cuts funded by spending cuts. I am against lop-sided , unfunded cuts - "robbing Peter to pay Paul".

 

The richest 1% pay something like 60% of the taxes anyway, any tax cut will effect them the most because they are paying most of the taxes to begin with.

My family of four got $800 last summer from the FED as a prepayment on our tax cut.

Are you saying we are rich?

I just know that we needed the money and your attempt to create class warfare with the rich doesn't affect the fact that the $800 helped pay bills.

Secondly- we have to deficit spend right now or the economy will tank from deflation. It's the only cure for the years of Clinton economic policies.

 

It wasn't Clinton's economic policies, or Bush's economic policies that created our current economic crisis. It started in the late '70s and isn't attributable to any particular administration. After WWII we dominated world trade to a point where our standard of living rose so fast that once nations devastated by WWII regained their industrial capabilites, we were an easy target with our inflated wages and benefits.

Our decline started in the '70s and by the '90s was well on its way with a brief pause for the dot.com bubble. We're now experiencing the full impact of no longer being competitive in world trade due to our high standard of living.

The thread topic is is just another piece of the overall question regarding the direction of our current fiscal policies. Lowering taxes in a time of economic crisis is a good move if you have an industrial sector that can respond to that stimulation with expansion that replaces the eliminated revenue and creates addtional tax revenue. In a service economy such as ours that depends on consumer and government spending that just isn't going to happen.

When deficit spending, expansion of government, trade imbalance and reduced tax revenues, all at record levels, are combined, the situation we're now experiencing with our declining industrial base becomes very volatile. Something has to give and its just a question of what and when. We're not going to have a smooth transformation to our forthcoming two-tiered society, the haves and the have-nots, by reducing taxes. That'll just get the have-nots in place a lot quicker. But put a few bucks in their hands and they'll forgive anything until that's gone.

 

jpsartre12

Your right- with Kerry you would have increased spending, increased taxes and a even more messed up economy.

 

I just want it to be Fair to everyone, the rich the poor, the in the middle guy like me. Equate it out.. Im not sure what the numbers are, who should pay what. BUT I just want to pay my fair share, not Over.

 

Quote: Are you saying we are rich?

........ Your refund would indicate that you are not.

I just know that we needed the money and your attempt to create class warfare with the rich doesn't affect the fact that the $800 helped pay bills.

......... I "attempt" nothing of the sort - I stated facts and if the shoe fits....

Secondly- we have to deficit spend right now or the economy will tank from deflation. It's the only cure for the years of Clinton economic policies.

......... I have problems with deficit spending being described as a "cure", and pointing fingers at Clinton ignores much.

 

How could spending possibly increase beyond what we're currently experiencing with the largest increase in government in decades and enormous spending programs that aren't even funded? Does this mean (no tax increases) record deficits with future, unknown levels of interest service are preferable to spending cuts? If the public buys that, I suggest we skip right to a major depression and eliminate the middle class without the political rhetoric. That way they'd be happy with minimum wage jobs (or less), we could avoid the immense social costs of cushioning their fall and get back to manufacturing at competitive rates.

Presidents aren't responsible for economic trends; how they react to economic conditions during their term of office dictates their historical epitaph.

 

JP and Jeff - We share a quandary. I voted for Dubya and I am very disappointed with his performance, but when I look at his opponents I don't see the vision and strength needed to lead us in a difficult time. Voting in November is not going to an easy decision for me.