Is It Really Belt Tightening

[a completely inoffensive name]

It really makes me frustrated how people don't understand this.

[PanzerJaeger]

You are aware that the Bush tax cuts shifted even more of the tax burden away from the poor and onto the wealthy and actually created direct subsidies for the poorest Americans, correct? That means that the Bush tax cuts actually created a new source of revenue, in the form of a check from the IRS, for the poorest Americans that didn't exist before. In effect, millions of poor Americans not only pay no tax, but get paid by the government.

It amazes me how misunderstood that and mischaracterized the tax cuts have been. President Bush wanted them to help everyone, but it is kind of difficult to give a tax break to people who pay no taxes, so they actually went to the extraordinary length of subsidizing the poor. It was the most progressive (sympathetic to the poor) tax policy in American history and still got labeled "tax cuts for the rich". Rhetoric over reality, as usual.

[Strike For The South]

You are aware that the Bush tax cuts shifted even more of the tax burden away from the poor and onto the wealthy and actually created the direct subsidies for the poorest Americans, correct? That means that the Bush tax cuts actually created a new source of revenue, in the form of a check from the IRS, for the poorest Americans that didn't exist before. In effect, millions of poor Americans not only pay no tax, but get paid by the government.

Just as bad my friend, we need austerity measures

It amazes me how misunderstood that and mischaracterized the tax cuts have been.

It amazaes me how amazed everyone is

[Lord Winter]

Just as bad my friend, we need austerity measures

There's a strong case to be made that we should wait for austerity until the economy gets back on track.

[Ice]

You are aware that the Bush tax cuts shifted even more of the tax burden away from the poor and onto the wealthy and actually created direct subsidies for the poorest Americans, correct? That means that the Bush tax cuts actually created a new source of revenue, in the form of a check from the IRS, for the poorest Americans that didn't exist before. In effect, millions of poor Americans not only pay no tax, but get paid by the government.

It amazes me how misunderstood that and mischaracterized the tax cuts have been. President Bush wanted them to help everyone, but it is kind of difficult to give a tax break to people who pay no taxes, so they actually went to the extraordinary length of subsidizing the poor. It was the most progressive (sympathetic to the poor) tax policy in American history and still got labeled "tax cuts for the rich". Rhetoric over reality, as usual.

PJ, I don't understand. Bush cut the top bracket from 39.5% to 35% if IIRC. He also cut the dividend/long term gain tax to 10% from it's top rate of 39.5%. He drastically increased the estate tax exemption, and dropped the top rate of the gift tax to 35%. When you are pulling in a lot of money, these rate changes cut your overall tax burden substantially.

Now for the lower income earners, he eliminated the div/long term cap gains tax. That's great except most low income earners don't recieve stock dividends nor long term capital gains. When I worked in public accounting, I don't think I ever saw anyone taxed at this rate. The cuts did do some good and created the 10% tax bracket for the lowest earners, but honestly in relative terms, the top earners saw a substantial (hundreds of thousands and even millions) of dollars in tax savings.

As for strike's point, didn't Obama's budget contain a reversal of them for over 250k earners? It passed the house today which will mean it will become official.

[PanzerJaeger]

PJ, I don't understand. Bush cut the top bracket from 39.5% to 35% if IIRC. He also cut the dividend/long term gain tax to 10% from it's top rate of 39.5%. He drastically increased the estate tax exemption, and dropped the top rate of the gift tax to 35%. When you are pulling in a lot of money, these rate changes cut your overall tax burden substantially.

Now for the lower income earners, he eliminated the div/long term cap gains tax. That's great except most low income earners don't recieve stock dividends nor long term capital gains. When I worked in public accounting, I don't think I ever saw anyone taxed at this rate. The cuts did do some good and created the 10% tax bracket for the lowest earners, but honestly in relative terms, the top earners saw a substantial (hundreds of thousands and even millions) of dollars in tax savings.

Well, as I said, it is very difficult to realize substantial tax reductions for the quintiles that already pay very little or nothing in taxes. However, they engineered the policy in a way that despite the fact that the rich realized larger monetary savings, they also took on an even larger share of the overall burden - and the very poor were given subsidies to make up for the fact that a 5, 10 or 95% tax cut had no impact on them.

Popular mythology also suggests that the 2001 and 2003 tax cuts shifted more of the tax burden toward the poor. While high-income households did save more in actual dollars than low-income households, they did so because low-income households pay so little in income taxes in the first place. The same 1 percent tax cut will save more dollars for a millionaire than it will for a middle-class worker simply because the millionaire paid more taxes before the tax cut.

In 2000, the top 60 percent of taxpayers paid 100 percent of all income taxes. The bottom 40 percent collectively paid no income taxes. Lawmakers writing the 2001 tax cuts faced quite a challenge in giving the bulk of the income tax savings to a population that was already paying no income taxes.

Rather than exclude these Americans, lawmakers used the tax code to subsidize them. (Some economists would say this made that group's collective tax burden negative.)First, lawmakers lowered the initial tax brackets from 15 percent to 10 percent and then expanded the refundable child tax credit, which, along with the refundable earned income tax credit (EITC), reduced the typical low-income tax burden to well below zero. As a result, the U.S. Treasury now mails tax "refunds" to a large proportion of these Americans that exceed the amounts of tax that they actually paid. All in all, the number of tax filers with zero or negative income tax liability rose from 30 million to 40 million, or about 30 percent of all tax filers.[17] The remaining 70 percent of tax filers received lower income tax rates, lower investment taxes, and lower estate taxes from the 2001 legislation.

Consequently, from 2000 to 2004, the share of all individual income taxes paid by the bottom 40 percent dropped from zero percent to –4 percent, meaning that the average family in those quintiles received a subsidy from the IRS. (See Chart 6.) By contrast, the share paid by the top quintile of households (by income) increased from 81 percent to 85 percent.

Expanding the data to include all federal taxes, the share paid by the top quintile edged up from 66.6 percent in 2000 to 67.1 percent in 2004, while the bottom 40 percent's share dipped from 5.9 percent to 5.4 percent. Clearly, the tax cuts have led to the rich shouldering more of the income tax burden and the poor shouldering less.[18]

[Jaguara]

despite the fact that the rich realized larger monetary savings, they also took on an even larger share of the overall burden

How does that make sense...you are paying less but you are paying more at the same time...(I know, I know, there are less overall taxes being collected...but I wonder if that has less to do with the tax cuts and more to do with the fact that nobody can find a job...and you can't tax what you can't earn).

From what I can see, it is the middle class that got screwed once again. I noticed some interesting divisions in the statistics in the page you referenced.

The rich got the great tax savings, the poor got the subsidies, but the middle class - not rich enough to get the tax savings and not poor enough to get the subsidies, they get the shaft.

Even though the report shows that the top quintile moves up very slightly in it's portion of the tax burden, they make the division there (top 20%) so as to be able to make that point. If you changed it to the top 10%, or worse, the top 1% then you would see a reduction in their share of the tax burden.

[Ice]

Well, as I said, it is very difficult to realize substantial tax reductions for the quintiles that already pay very little or nothing in taxes. However, they engineered the policy in a way that despite the fact that the rich realized larger monetary savings, they also took on an even larger share of the overall burden - and the very poor were given subsidies to make up for the fact that a 5, 10 or 95% tax cut had no impact on them.

Sigh... I just spent half an hour doing analysis comparing 2001 to 2003 numbers for a variety of taxpayers but my browser crashed and nothing saved. Thus I will keep this brief because I don't feel like retyping everything.

Popular mythology also suggests that the 2001 and 2003 tax cuts shifted more of the tax burden toward the poor. While high-income households did save more in actual dollars than low-income households, they did so because low-income households pay so little in income taxes in the first place. The same 1 percent tax cut will save more dollars for a millionaire than it will for a middle-class worker simply because the millionaire paid more taxes before the tax cut.

I don't quite understand why you posted this link as I never implied that poor people were paying more of a tax burden after the cuts. I basically said the rich benefited greatly while most people got the less attractive end of the stick.

You are correct that the poor do not much in taxes... I guess I should have used the words "extra money" instead of tax savings. You are also correct that lower earners received more in subsidies.

First, the subsides you speak of were only helpful if you had a child. The child tax credit was increased $500 per child and the EI credit increased a few thousand or two at its maximum amount which you pretty much would have to live under a bridge to qualify for. The extreme poor saw a 2,000 to 3,000 in extra money IF they had children AND were married. Without kids they do not qualify for any of the credits. The rich, and I mean rich (I used anywhere from 500,000 to 5 million in my analysis) saw thousands upon thousands of dollars in extra money. The middle class basically got screwed and received a few thousand in tax savings.

Sorry PJ, giving high income earners anywhere from $50,000 to $200,000 (Based off $500,000 and $5,000,000 in income) in extra money while giving middle and lower class earners only a few thousand more is simply ludicrous. I really don't care if lower earners pay a negative tax because they are poor and need the money. Can you imagine try to feed a family of 4 on 12,000 to 20,000 per year in most areas? It really is common sense to expand the funds these people receive to ensure they have a basic standard of living. There is absolutely no need to give people who are already very well off and have everything they need, such a large chunk of extra money simply because they pay the most in taxes. There is a reason they pay the most in taxes... its because they can easily afford it. Poor people can't and need every cent we give them to survive.

If Bush really wanted to "help everyone out", he would have cut the top tax rates by a 1% and doubled the subsidy increases he gave for the lower earners.

[PanzerJaeger]

I don't quite understand why you posted this link as I never implied that poor people were paying more of a tax burden after the cuts. I basically said the rich benefited greatly while most people got the less attractive end of the stick.

I thought that you didn't understand the way in which I was explaining it.

Sorry PJ, giving high income earners anywhere from $50,000 to $200,000 (Based off $500,000 and $5,000,000 in income) in extra money while giving middle and lower class earners only a few thousand more is simply ludicrous. I really don't care if lower earners pay a negative tax because they are poor and need the money. Can you imagine try to feed a family of 4 on 12,000 to 20,000 per year in most areas? It really is common sense to expand the funds these people receive to ensure they have a basic standard of living. There is absolutely no need to give people who are already very well off and have everything they need, such a large chunk of extra money simply because they pay the most in taxes. There is a reason they pay the most in taxes... its because they can easily afford it. Poor people can't and need every cent we give them to survive.

If Bush really wanted to "help everyone out", he would have cut the top tax rates by a 1% and doubled the subsidy increases he gave for the lower earners.

There is a lot of ideology in this. One could also point out that the poor, who use by far the most public services, pay absolutely nothing for them. Should 'we' be paying them for the privilege through direct subsidies in the tax system? Would it really be a smart precedent to set to give the poor not a few thousand but tens of thousands of dollars simply for existing? I suspect we have differing views on that subject, as I don't even agree with the current subsidies.

In any event, it is obvious that those who pay taxes are going to be more sensitive to changes in tax policy than those who pay no taxes, and it is nearly impossible to make said changes in an equitable manner. Nevertheless, the Bush tax cuts were more favorable to the poor than the Clinton tax system both on a macro level, by moving more of the total burden away from the poor, and on an individual level, through the direct subsidies and the reclassification of millions of people 'on the edge' down to a quintile that pays no taxes.

[jabarto]

One could also point out that the poor, who use by far the most public services, pay absolutely nothing for them.

As long as we're saying things that aren't true, one could further point out that I am the Federal Chancellor of Germany.