Bush tax plan

Great Debates
1

Ok, I will outline the Bush tax plan, and give my thoughts. My professional opinion will be given 1st- followed by my personal opinion in <>.

  1. Change tax rates from a five rate to a 4 rate structure- 10, 15, 25 & 33 %. = I do not think they can afford this, with a possible recission coming up. <Again, helps the rich far more, in terms of both % and total $$ saved>

  2. Double the child tax credit to $1000- and expand it so higher income families can take advantage of it = easy to do, and likely has bi-partisan support. <However, where is the cut for us single wage-earners?, also, the expansion helps the weathly only, as it now begins to phase out at $110,000 of TAXABLE income>

  3. Reduce the so-called “marriage penalty” by restoring the 10% ded for 2 earner families. = Not a bad way to do it, since this was already on the tax laws prior to 1986. Can be a computational problem for some, tho. <Well, Reagan & Dubs Daddy thought this was an unnessesary complication, and got rid of it>

  4. Grant a deduction for charitable contibutions for taxpayers who do not itemize. =They tried this before, and it was subject to massive abuse- besides, that is what the std deduction is for.

  5. Etend the new charitable tax credit to corps by making them eleigable for a credit of 50% of the 1st $1000 donated. + Every tax credit has been abused- this one will be too. <Hell, why don’t they just say that “we are gonna cut $500 bucks off every corps tax bill- and thanks for the support”?>

  6. Permit families to make charitable contibutions from IRAs without being taxed on the withdrawel. = Ok, this one simply makes no tax sense at all. How the heck can you tell that the $$ was withdrawn to make a contribution? Will also reduce savings- a bad idea.

  7. raise the cap on corp charitable contibutions. < Is this needed? Can you say “corporate welfare”?>

  8. Eliminate the Estate tax.= Subject to abuses. Folks will start calling payments 'gifts" as they will no longer be taxed at all. <Again- help only for the very wealthy>

  9. Provide a tax credit of up to $2000/ys for health insurance for families making less than $30,000/yr. = Umm, Families under 30K already get about 19K in std ded, so the tax is some $1600, and then subtract the Child credit <$1K>, the Child care credit <$1K>, and there just is not much tax left (in fact- there will be 0 tax). And that’s at the max of 30K. <So, this is just to sound good, or doesn’t Bush have any one who can do the math?>

2

One suggestion, Danny-boy… maybe you should also outline exactly how the things that you accuse of “helping only the wealthy” actually do so. I mean, he doubles the child tax credit, and you claim that it ONLY helps the wealthy? What, “poor” people suddenly don’t have kids?

3

No, spoofers, the EXPANSION of the credit to allow folks who have more taxable income than about $120,000 to take the credit, which they now can’t- that is what helps only the “wealthy”.

4

Well I am for lower taxes and smaller govt.

Bush may not be great but he is closer to that goal than Gore:

Gore’s Tax Plan:

  1. If you are a teacher, and are taking care of an elderly parent suffering from a disease that begins with a vowel, you will get a tax cut.

  2. If you have a farm producing soybean, and agree not to plant soy on between 53-67% of that land, you will receive a tax credit.

If you have children and they spend at least 8 hours a week at a government sponsered Brainwash Facility… Ummm… errr… daycare center, you will receive a tax credit.

We need a good simple and fair system as follows

Here is a copy of a previous post by me in another tax related thread.

A relatively large non-taxable base, it can be any number but let’s say $30,000 for a couple. (plus $5K per kid). This income is not taxed and is considered the earners 100%. Now anything over $30,000 is taxed a certain amount… for ease lets say 20%. Absolutely positively no loopholes. Now what is the result:
For ease we will consider a couple no kids making:

$10,000 pays NO TAX
$20,000 pays NO TAX
$30,000 pays NO TAX (see the poor pay no tax)
$40,000 pays 5% TAX i.e. $2,000 (20% OF $10,000)
$50,000 pays 8% TAX i.e. $4,000 (20% of $20,000)
$75,000 pays 12%TAX i.e. $9,000 (20% of $45,000)
$100,000 pays 14%TAX i.e. $14,000 (20% OF $70,000)
$200,000 pays 17%TAX i.e. $34,000 (20% of $170,000)
$400,000 pays 18.5%TAX i.e. $74,000 (20% of $370,000)
$1,000,000 pays 19.4%TAX i.e.$194,000 (20% of $970,000)

Such a smooth curve of tax rates get rid of potential problems associated with the tax bracket system…for example : taking home less money when you make more money because you made it into the next bracket.

This is basically the flat tax system with a large tax free base. Unfortunately when you call it a flat tax it gets demonized. I think we should call it the Graduated Tax or the Perfectly fair tax.

I would love to here comments on this tax system:)

5

Which is to say, it gets rid of a problem that doesn’t even currently exist…That’s impressive!!! I will say again what I have said before: You don’t take home less money when you earn more under the current income tax brackets. The money you take home is a monotonic, continuous increasing function of your gross income. It is only the slope of this function that changes at the tax bracket boundaries.

What this means (translated from the math jargon I used) is that if you fall in, say, the 31% tax bracket (which for single people meant a taxable income over $62,450 in 1999), then it is the amount of taxable income above $62,450 that gets taxed at the 31% rate. The first $25,750 of taxable income gets taxed at 15% and the part between $25,750 and $62,450 gets taxed at 28%. [If you don’t believe me, by the way, see p. 69 of the 1999 1040 forms and instruction booklet.]

As for your system in general, it is one possibility. I would have to compare it to the current system in terms of its distributive effects. Also, while it has the advantage of simplicity, there are good arguments for having a tax system that gives people incentives that tend to correct various positive and negative externalities.

6

The biggest problem I have with the plan (not to sound like a broken record, but…) is the fact that the lion’s share of the tax breaks go to the wealthiest individuals at a time when they are doing very well, thank you, and inequality is increasing at a fast rate. (Or at least it had been through the mid-90s; I believe the last few years have been better in this regard as the unemployment rate has finally dropped low enough to raise some of the boats at the bottom a bit too.)

An analysis of the distribution effects of the cut can be found at Citizens for Tax Justice, http://www.ctj.org/html/election.htm. I’m not sure which of 9 points that Daniel listed are included in the analysis, but apparently at least 1, 2, and 8 are. The summary is that 43% of the money goes to the top 1% in income (as you have no doubt heard ad nauseum already) whereas 4.3% of the money goes to the bottom 40%. In particular, the average tax cut for someone in the bottom 20% is about $42 per year whereas the average tax cut for someone in the top 1% is about $46,000 per year (the next 4% get an average of $2250 per year, so it really is weighted very heavily toward the very tippy-top).

Now, some will argue that the top are getting the biggest break because they pay most of the taxes. This is admittedly true to some degree, at least in absolute terms. However, as I pointed out above, the reason they pay such a large amount in taxes is that they are doing so incredibly well compared to the less well off. Also, while income tax rates are somewhat progressive, other taxes such as payroll [Social Security and Medicare] and sales taxes are not. (The former tax is a straight percentage applying only to earned income, and only up to a cap for the bulk of it…the SS part.) Also, capital gains is taxed at a lower rate and, of course, there are various tax deductions that the rich usually take fully advantage of than the less well off.

Personally, there are a few small things that I think might be okay about the Bush plan, like the possibility for people to deduct charitable contributions even if they don’t otherwise itemize deductions. This is how it works in Canada. Don’t know if there is massive abuse there or not as you claim there was here when that was tried…I think they might actually require you to submit receipts; I forget. [Any Canadians who can help us out here?]

7

Now, I will not use my personal opinions in this post regarding taxation, because if I did it would be a complete hijack.
Bush is correct in giving a larger tax break to the rich. If the goal of graduated tax is to balance inequality, tax deductions should acheive the same effect. Our current system leans heavily on being “nice” to the middle-lower class, as well as married couples. Any time a tax decrease is to be implimented, then, it should be no suprise that this saves the rich more money. It is a fair decrease, just as it was a fair increase (by the standards used; I am not defending the standards!).

However, I do not feel that given our current economic state that a tax cut is called for. This is not a realistic time to cut taxes. I don’t feel it is a good time to raise them, either. Our economy is very close to being in a swinging state, and tax changes might very well push it one way or the other (but they might not, economics is such a strange animal). If we stay away from principles of taxation I think maintaining the current system is probably in our best interest.

The “surplus” we see is a result of government investments across the board that are now largely completed. The age of the baby boomers is over, the infrastructure is built (at the expense of a huge deficit and inflation) and now is the time to either keep taxes the same or raise them. However, because of the recent and impressive boom on our economy, I think raising it might have undesreable consequences. Lowering taxes will effect our governments ability to continue infrastructure prgrams and/or quickly reduce the deficit.

I wonder if Bush Jr will find the same reasoning applied to him like Bush Sr did and end up not lowering taxes or, in fact, raising them…?

8

Wow…An objectivist saying we shouldn’t lower taxes…Hey, who am I to argue with that?!? :wink:

I will take issue with one thing though. I don’t think your characterization of the current tax structure and its history over the last, say, 40 years or so is correct. If you include all taxes and not just income tax, the tax structure is not very progressive. (By some measures, apparently, not at all.) Also, the history of this is that the income tax was made much less progressive in the '80s and then only a bit more progressive again in the '90s…So, it ain’t like we are back where we were before. Some of us would argue that further progressivity is strongly desirable.

9

I keep trying to get Dopers opinion of this site…

They have Tax calculators for Bush and Gores plans. Of course Gore is now out of the picture and Bush won by a squeaker so we probably won’t get his full plan.

Just thought I would throw it out threr ONE more time…:slight_smile:

10

Wow. What a confusing sentence. Lessee, I see “expansion” (it’s all-caps, it’s hard to miss), I see “$120,000” (also hard to miss), and I see the same old “only helps the wealthy” rubbish.

You’re drawing conclusion from… well… confusion. At least, it seems like it. Maybe you want to clarify? The best way I can translate that is “the income limit for taking advantage of the tax credit has been increased slightly.”

Also, I think you don’t exactly know the definition of the word “only”. Since this doubled child tax break “only helps the rich” (as you say), am I to conclude that “poor” people either A: aren’t allowed to take advantage of it, or B: suddenly stop having kids? 'Cuz if the answer to those questions is “no”, then clearly this tax credit does NOT “only help the rich.”

Do you know why? 'Cuz the lion’s share of money is in the hands of the wealthiest individuals. The plan doesn’t call for “giving” anything… just “taking” less.

11

OK, one more time- the plan here is a 2-parter. Part one would RAISE the credit to $1000. Those under 110K would benefit from this- except the low income folks. Thus, this would NOT benefit “just the wealthy”. Part 2 would EXPAND the credit to allow those with TI over 110K (where it currently phases out)to take the credit (now doubled). This 'expansion" only helps those with taxable incomes over 110K, thus it only helps the “wealthy”.

12

Who, precisely, are “the wealthy?”

  • Rick
13

What are you asking exactly? I ran the numbers through and for myself I get a savings of $1446 under Bush’s plan and $0 under Gore’s. Since I had said before that I thought I would get ~$1500 under Bush and $0 under Gore, I haven’t really learned anything new…except that my previous estimates were more accurate than I thought. (The previous estimate I got about Bush’s came from his website which had a less clear precise version of that calculator…i.e., I don’t think it asked for your deductions and didn’t make sure what number you were to enter for “income”.)

14

I guess I was just curious if other Dopers thought the site was accurate and impartial. My tax returns are little complicated and I don’t think they stack up to the average tax return. I plugged in a bunch of different scenarios and could come out ahead on either plan depending on the numbers.
If it is impartial, then I guess it is a good tool in debates like this to see just who benifits and how, instead of just throwing around unsupported assertions.

That certainly seems relevant to me…:slight_smile:

15

[QUOTE]
*Originally posted by jshore *
**

Giving “people incentives that tend to correct positive and negative externalities” is not a good thing. You claim to have good arguments, and I am willing to bet your arguments have more foundation in theory than results.

This type of system allows politicians to encourage certain behavior in us to receive a tax break. SIT…Good Boy… Here is your treat! Even worse it encourages us to vote for the guy who will give us the most treats.

“A democracy cannot exist as a permanent form of government. It can only exist until the voters discover that they can vote themselves money from the public treasure. From that moment on the majority always votes for the candidates promising the most money from the public treasury, with the result that a democracy always collapses
over loose fiscal policy followed by a dictatorship. The average age of the world’s great civilizations has been two hundred years. These nations have progressed through the following sequence: from bondage to spiritual faith, from spiritual faith to great courage, from courage to liberty, from liberty to abundance, from abundance to selfishness, from selfishness to complacency from complacency to apathy, from apathy to dependency, from dependency back to bondage.”
–Lord Alexander Tytler on the fall of the Athenian republic

“The Firm encourages children”

16

Fair enough…although the study that I cited from CTJ, while admittedly being done by a group that has a certain point of view, apparently used a well-respected tax model. And, I don’t think the basic numbers were ever refuted by the Bush campaign. (The best I heard them do is to use numbers that didn’t include the estate tax in order to make the number going to the top 1% come down from like 43% to 25 or 30%.)

17

Well, yes, they do have their foundation in economic theory. After all, if you believe in “market economics” then you have to understand the assumptions that go into the theory. Saying you believe that a good is correctly priced in the face of large externalities is like saying you believe in the tooth fairy. (Sure, you could try some convoluted argument that says that any attempt by the government to correct these externalities will cause more problems than they will solve. And, while you may well be successful in arguing this for the case of goods where the externalities are rather small, I think the argument is pretty hopeless when the externalities are large and the price of the product bears little relation to what it would be if they were accounted for.)

A good example of this is the price of gasoline (or, more specifically, the marginal cost of using an automobile, SUV, etc.). Studies have argued that if the external costs were correctly accounted for, the price of gas would have to be a few dollars per gallon higher at least. The Europeans, who sometimes seem to be able to formulate public policy with more intelligence, understand this which is why gas there costs about $4 per gallon, thus incorporating at least some (although probably not all) of the external costs.

18

Freedom2,

Just tried running some numbers through the TaxClarity thing, and to the extent one can compare between them and the CTJ report (being that the latter does not attempt to break things down into number of dependents, filing status, what kind of deductions you take, etc), they seem to yield more-or-less comparable results. So, I think either one can be used as a tool in further debates here.

19

Oh, there are some Fed guidelines somewhere, but I would say that folks with a TI over 110K are 'wealthy", altho not “rich” or “filthy-stinken- rich”.