Funny, seems to me that was one of Bush’s first actions after taking power - remember hearing anything about those $300 checks up there?
Better select a different ideological rant from the RW boilerplate menu.
I also have enjoyed, to a point, Scylla’s pious assertion that Republican tax policy proposals must obviously be utterly, cleanly innocent of any consideration as to who benefits and by how much, and therefore that anyone who dares bring up the subject is crassly partisan and self-serving. You’re only fooling yourself with that, and probably not that well, either.
There are so many holes and falsehoods in your argument, that I don’t know where to begin.
No. I know what you’re talking about. It’s just that you’re wrong from start to finish, and pretty much everywhere in the middle. You are wrong because you’re basic assumptions are falsehoods. More on this at the end of this post.
I have no idea what point you are trying to attribute to me here. I said simply that the government has no mandate to redistribute income, and you’re trying to play games with that. Redistribution is simply taking from one person and giving to another.
Some redistribution may occur as a side effect of government actions, but the government has no mandate to do it on purpose. Clear?
Wow, that’s a relief.
You’re making this up. It’s blatantly false. You’re not going to find any economist willing to make such an egregiously false blanket statement unless he’s a total idiot. Spending patterns are more properly demographics than economics, and they shift dramatically depending on circumstances.
All other things being equal, it is axiomatic that more highly compensated individuals taken as a group will spend more than poorly compensated individuals.
You are trying to argue that black is white, or up is down. I can’t beleive you’re trying to tell me with a straight face that poor people spend more than rich people, and that economists agree on this. Can you at least see how flat out wrong this is?
Again, I’d love to see a cite for this Newton’s 2nd law of yours.
Surely a poor person is forced to spend a larger portion of their income on necessities, but again these things shift. Spending and saving trends are malleable. Again, I doubt what you are saying is actually true, because highly compensated individuals are more likely to be engaged in significant leverage, multiplying their spending several times.
But, I eagerly await the cite.
I beleive you’re badly in error, but we’ll see.
I just address the rest of your argument here.
You claim to identify a disparity in recent years with the top earners growing faster than the bottom. Ok?
I accept that.
What you have failed to do, is explain why this short term trend represents a problem, that the government has the ability to fix it if it is a problem, that the government should in fact try to fix it if we assume it can, and that it is even the rightful goal of government to fix it.
You seem to think that pointing a finger and saying “This guy has a lot of money, and this other guy doesn’t,” is all the argument you need to merit your arguments. It is not.
Finally, you keep ignoring the fact that the poor pay token taxes. Unemployment and social security are not tax.
Cutting taxes means cutting taxes for the wealthy, simply because they are the ones paying the bulk of income taxes.
A tax cut for the poor is an inherently contradictory proposition.
Well, sure- a “across the the board tax cut” will favour the wealthy more than the poor. If everyone gets a 1% cut in their taxes, that 1% will be a lot for for Gates than me. BUT- I’ll still get a 1% cut. Under the idea of getting rid of taxes on “dividends”- most of us will get NO tax cut, and the way upper brackets will get a nice reduction. That’s not fair.
And to be totally fair- when we are talking about “taxes”- it is true the lower 30% or so pay little or no INCOME Taxes. But they still pay taxes (FICA, FUTA, Medicare, etc). So- even if we cut INCOME taxes “across the board” by 1%- everyone does not even get a 1% tax cut. Several times here some of you dudes have in effect lied by stating the lower % don’t pay any taxes. They pay lots of taxes- just not that much in the way of INCOME taxes. (And note there is still State & Local taxes- some of which rely heavily on Sales taxes, which the lower incomes pay a disportionally higher amount of net income)
If we want to be fair- and stimulate the economy- let’s cut everyone’s tax by that %. All the Federal taxes. Thus- Bill & I will both get the same % tax cut- but his will still be worth a shitload more. They use that stupid “restaurant bill” story- where the dude who gets paid the pays 40% of the bill. Well in this case- the 10$ discount will just go to him. Heck- I’m not one of those who think all 10 diners should get a $1 cut- but that the $10 cut should be proportional to the amount paid… in this case, the “big spender”, who pays 40% of the bill would get $4 of the discount.
What is even more unfair about it is that the cut doesn’t even help those middle class dudes who do invest- most of us do our investing through our retirement accounts. Here, the dividends paid into the funds will still be taxed when we retire. How is that fair?
Even worse is the large potential for tax abuse. Say you control the stock of a Corp. You & family own 90% of the stock. You currently draw a large salary- and the Corp pays a small dividend. Simple- drop the salary to 0, and increase the 'dividends" massively. Viola! A huge tax savings- but where will be the “increase” in real income? That’s where abusive tax shelters come into play- where you tax one dollar of income differenetly than another- and dudes can control how they pay out that dollar.
Nor does this “cut” nessesarily promise to “stimulate spending”- it seems more like drilling ANOTHER hole in the bottom of the boat to “drain the water out”- while it’s still in the water.
Yes- they are. They (FICA & FUTA) are taxes under Title 26, USC. Same as Income taxes. In fact- “medicare tax” is even withheld as a “tax” in name- and same if you are Self Employed- you pay “SE Tax”. Sorry, but here you are wrong. Jeez- just because your pay stub says “FICA” instead of “Social Security Tax”…
Perhaps in error I don’t consider medicare, medicaid, and Social Security taxes. They are more like really crappy insurance policies.
Again, this is not a case of somebody being given something or getting something. It is simply something that will no longer be taken unfairly from them anymore.
Good point. Several times I’ve said “income taxes” but several times not. That is what I am specifically speaking of. insurance type taxes are another thing altogether.
The burden of sales taxes is certainly more onerous on the poor than the wealthy, but I’m not sure it’s factual that they pay a higher portion of their incomes out in sales taxes than the wealthy do.
I believe you are mistaken. Tax free dividends will likely be treated as tax-free interest would for purposes of retirement plans, and not be taxable upon distribution, and it won’t matter in Roth IRAs anyway.
Again, you have it wrong. If they own 90% of the corporation for all intents and purposes they own the corporation. The money still gets taxes as it’s earned, it simply doesn’t get taxed again as it’s distributed. The owners are only taxed once, which is as it should be.
You assume the Corp pays corp income taxes at all- a pretty large assumption.
And an analysis of the proposed law in my local paper made it clear that the dividend tax cut would not effect the taxability of retirement payouts.
Many dividends are not “double taxed” as the Corp didn’t pay any Corp Income tax in the first place. A tax credit could fix this, if this was the actual purpose of the Law. It’s not.
That whole bit about “double taxes” & “fairness” is a smokescreen & doublespeak. Lots of money is double taxed, triple taxed, and taxed again. Just because you pay income tax on your wages doesn’t mean your purchases should be free of sales tax, now does it? Remember your Scd A from many years ago? …it had a line to deduct sales taxes to prevent “double taxation”? Don’t see the “double taxes are evil” Republicans asking to put that line back on the old 1040… gosh darn, that would… <gasp, choke>- give the WORKING MIDDLE CLASS a …a… tax cut! :rolleyes:
Ok, I just did some checking. In a tradittional IRA or 401k, you are taxed on the growth of the account upon withdrawal, as well as any pretax contributions.
So, yes. The dividends would be taxed in a 401k at this point.
How they’re going to handle this, I’m not sure yet. They may simply have you account for your dividends. This part of the plan does not appear to have been made clear yet.
I’m also not sure where you get the idea that corporations don’t pay taxes on earnings. It’s also not completely clear how this alleviation will work. I imagine what they’ll do is something like a reverse reit, where the dividend will reduce earnings.
Good points, but we can’t bitch about these things until it becomes clear how it gets done, and it’s not, yet.
You bring up good points. This is a shame though:
Sales taxes are a different entity from income taxes.
Absolutely not. What really happens is that money is taken from people and put into a big pool and then out of that pool, money goes to various programs. Every decision made about who puts how much into the pool and what things are funded out of the pool have distributive effects.
I still don’t understand if your definition of not redistributive is that everyone pays in the same fraction of their income in taxes, everyone pays the same dollar amount in taxes, everyone pays according to how much benefit they get (which is, of course, impossible to calculate), or something else.
And, that is dealing only with the “tax” side not the “distribution” side.
It is completely disingenius to claim this distinction between redistributive and not particularly when you seem to be completely unwilling to define and defend it.
[I am also curious how you distinguish “side effects” from “on purpose”, although a good working definition that seems to be adopted by most conservatives on this issue is that “on purpose” is when the money is distributed downward and a “side effect” is when it is distributed upward.]
Let’s not be silly here, Scylla. In my posts above, I was talking about the fraction of their income that they spend or, in particular, how much of an additional dollar they get back would go into spending or into savings. I think I said that rather clearly. [And, by the way, if you want to figure out “as a group” how much each is spending, then you have to multiply the spending of each person by the number of people in the group.]
Of course, the each rich person spends more in dollar amounts than each poor person. But, that is not what has bearing on what will happen to each given dollar that you give in a tax break to a poor person or to a rich person.
Ture- but Corp Income taxes are not quite the same thing as Individual Income tax, either.
My point is- Corps do have an Income tax. Some do- but many don’t- pay significant taxes. You can pay no CIT and still issue dividends. Thus- dividends may be, but are not nessesarily “double taxed”, as there may not have been any CIT in the first place- got me? If that was the purpose, then there could be a calculated credit, where the Corp would issue a statement which shows the amount of taxes compared to dividends, so a credit could be calculated.
However, if the EVIL thing is the DOUBLE tax part- then of course paying sales taxes on taxable wages is indeed “double taxation” just like dividends are. Just more of a sure thing. And- there used to be a mechanism for correcting this “unfairness”- that is you were allowed to deduct the Sales Taxes paid as a itmeized FIT Deduction. But that deduction is long gone.
So IF “double taxation” is the point (and not just smokescreen & doublespeak)- then the very first thing Bush needs to do is re-introduce the Sales Tax Deduction. He hasn’t. Not even been mentioned, AFAIK.
Thus we can reasonably conclude that the whole idea of the tax cut’s main purpose being that of “getting rid of unfair double taxation” is indeed- doublespeak & smokescreen.
So the tax cut is: 1.Unfair. 2. Not actually designed to stop “double taxation”. 3. Might not even have the desired effect on the economy.
Just to clarify, perhaps “working definition” wasn’t quite what I meant in the above. My point was that, in practice, if you look at what conservatives seem to think of as purposeful redistribution, it tends to be monies that go to the poor and if you look at what they sem to think of as side effects, it turns out to be policies that effectively redistribute up…i.e., help the rich get richer. (Lower tax rate for capital gains, for example.)
Again, you keep acting as if lowering tax rates for the wealthy is redistributing wealth.
It’s not. It is in fact the opposite since you’re simply not taking it away from them.
Redistribution is when you take something from one person and give it to another (was that really that hard?)
You keep repeatedly asserting that not taking it in the first place, or taking less is somehow redistribution.
Now you’re repeatedly frothing at the mouth with this generalization of yours that I see now you’ve repeated:
Bullshit. Substantiate that generalization.
You accuse me of sophistry and then you pull this crap? You’re deliberately obfuscating the issues, and attempting to throw confusion on them with your rhetoric.
Get it through your head, lowering taxes is not giving anybody anything. It is not redistributing wealth. It is the opposite.
Stop pretending black is white, it’s getting ridiculous.
No. Deciding what and how much goes into the pool is not distributive, it is confiscatory.
What goes out may be distributive, but is not necesssarily so.
Whether or not an effect is distributive cannot be determined by what is paid in. You are reffering to the accumulative or the confiscatory side by itself.
Not at all. You’re deliberately attempting to confuse an extremely simple concept (or you’re generally at a loss.)
I’ll help you out. From a government taxation standpoint redistribution of wealth occurs when a government confiscates wealth from one party and gives it to another in order to alter the distribution itself.
No. You’re anything but clear. You’ve indicated that it’s axiomatic of economics that a lower income person is likelier to spend a windfall than a higher income person, and I eagerly await a cite.
So, give me a cite showing how ignorant I am of this basic economic axiom, why don’t you?
Dr Deth:
Ok.
Yes, of course there is a potential problem. Seeing as we don’t have the full plan details but just a basic proposal I don’t see how we can complain about problems that may not occur.
If you simply did away with taxes on dividends than it would be possible to liquidate a closely held corporation to its shareholders through dividends on a tax free basis, and leave it an empty bankrupt shell with the creditors holding the bag.
Doubtless this and other potential problems will be addressed. I imagine it will work similar to the way a REIT works, or else dividends will simply reduce earnings like an old pass through.
So, there is a potential problem, but I have no doubt it will be addressed, and the solutions are not difficult, and have been used in practice for quite some time.
Untrue. A sales tax is not double taxation. It is a seperate tax.
For example, a party earns money and pays taxes on it. It is now theirs to do with as they see fit. Some ways that they spend it will incur seperate taxes, and some will not. The sales tax does not apply to all uses of money, but only to certain uses which are deigned to incur a seperate taxable liability. If I buy gasoline and pay taxes for it, that is not an income tax, that goes for things roads and pollution that I will use and create.
How is it unfair? A shareholder has ownership in a corporation. He makes money by proxy. That money is then taxed at the proxy and again when it is given to him. That money has been double-taxed. There has been no ownership change. He has simply picked up a dollar that he already owned. Stock prices are automatically decreased by the value of the dividend on the ex-dividend date by the exact amount of the dividend to reflect this. There has been no sale, no change in ownership, no purchase, no earnings. All that has happened is that our shareholder has taken physical posession of a dollar that was already his. Why should this be taxed again.
The original double taxation was unfair. The system is wrong in the way it handles these transactions. That is now being corrected. That’s all.
Also false. You are assuming potential problems are actual ones. I seriously doubt that it’s going to be an issue, and I have no doubt they’ll address the problem as they have for REITS and Pass througs.
Myself, I would choose whichever doctor was closer to my home. Or whichever had a better bedside manner. The point being, I couldn’t care less why he wanted to be a doctor, so long as it wasn’t for a reason such as: “Because I like poking people with sharp instruments.”
As to the OP, assuming that the administration is being deliberately deceitful (a premise that I don’t buy, but I’ll go along with it for the sake of discussion), I feel that it is an unfortunate but potentially necessary evil in order to combat the deceit on the other side of the isle. Those opposed to tax cuts go on about how the first round of cuts was single-handedly responsible for the evaporation of the surplus (completely ignoring those War on Terrorism and recession things we’ve got going). They talk about how this is simply a handout for GWB’s close buddies. They speak of concerted efforts on the part of the Republican party to oppress The Little Guy. In short, they lie out of their collective ass. Now, it’d be wonderful if the Administration opted for the all-important Moral High Ground, and simply gave a nice treatise on basic economics, and how the tax cuts will effect the economy, and so on. I would love that. Except nobody would listen. The average Joe would look to the Administration and hear, “Now, the effects on the economy are numerous, so let’s look at them in great detail blah blah blah zzzzzzzzzzzzzzzzzz…” They look to the blathering of the left, and hear, “Bush wants to make off with all your hard-won earnings! This tax cut will bankrupt our economy!” It’s obvious what will stick with him.
Political rhetoric is a regrettable given. But if you’re going to criticize one side for its embellishments, make sure you criticize the other, as well. Sometimes, sadly, people feel that the best way to fight lies is with more lies. Even more sadly, they may be right.
Jeff
Come on, Scylla. You keep avoiding defining your terms. There are certain functions that government does and it collects taxes to do them. You refuse to define for me how this can be done in a way that can be proven not to redistribute.
I’m not claiming that lowering taxes on the wealthy leaves things less redistributive than before or that it leaves them more redistributive than before. I don’t pretend to know for sure…I think that argument is essentially a hopeless one to solve because it is impossible to ascertain who derives what benefits from government.
I want you to define redistribution and I want you to define it in a real world context. Saying that “taking money from someone and giving it to another” may sound like a cute definition to you but it is completely impractical to calculate how much benefit each person is getting from the government. And it completely begs the question on issues that affect how much money is taken from who like what the marginal income tax rates should be, what the rates on capital gains should be, what the rates on dividend income should be, what deductions should be allowed. If you know what constitutes lack of redistribution, I presume that you must know what each of these rates / policies must be in order for there to be no redistribution.
Well, then government is necessarily confiscatory by this bizarre definition since the decision has to be made if we are to have any government at all. Where do you propose the money comes from?
As for the cite about the poor tending to spend a larger fraction of their income and of their last dollar received than the rich, I am waiting til I got home to waste my time looking for a cite about that. [Is there anyone else of any political stripe out there besides Scylla who actually believes that the poor spend more and save/invest less of their income than the rich?]
Maybe for the purposes of helping us understand your frame of mind here, please tell me which of these policies is “redistributing wealth” and which is “the opposite” (and at least briefly explain why):
(1) cutting marginal income tax rates in a roughly proportional manner from where they are now.
(2) cutting marginal income tax rates only of the highest brackets.
(3) cutting marginal income tax rates only of the bottom bracket.
I gave the example of lowering capital gains rates. Cutting the tax on dividends is another. Cutting estate taxes is another. All of these have distributive impacts because they change how much gets collected from the rich relative to the poor…and both do so in a way that leave the rich with more and the poor with less. So, they shift the funding of government somewhat from the rich to the poor from where it was in the absence of these changes.
Now, you may think this is justified because you may think that there are distributive impacts from other taxation policies that shift it the other way. But, that is just my point. Some shift it one way, some shift it the other.
I think (hope) that you meant to ask “is there anyone… who actually believes that the poor [ don’t ] spend more and save/invest less of their income than the rich?”
I’d hate to be in the uncomfortable situation of appearing, however fleetingly, to agree with your opponent.
Well here is a link to a recent Krugman column where he implicitly assumes that those who are worst off are most likely to spend the money (although he doesn’t even find it necessary to really justify this probably because to him, like most people, it is a fairly obvious and well-known fact):
Here is a link to an opinion column in The Washington Post that gives some statistics:
(This brings into play a somewhat different point that I must admit I was not so aware of which is that in addition to the poor not saving a lot, they also spend their money differently than the rich so even what they do spend on tends to be more heavily subject to sales taxes than what the rich spend on.)
By way of a segway into other unfinished business, this last cite also provides some of my facts about the growth of income inequality:
Here is another source, giving essentially the same data, and letting you know what the original source for these numbers is (which is the Congressional Budget Office).
The data showing the rise in both income (AGI) shares and income tax shares for the top 1% are given here. Note, in particular, the tables headed "Adjusted Gross Income (High to Low AGI) " and “Total Income Tax Share (percentage of federal income tax collections paid by each group)”. You can see that between 1980 and 2000, the share of AGI earned by the top 1% rose from 8.46% to 20.81% (a factor of 2.46) while the share of income tax paid rose from 19.05% to 37.42% (a factor of 1.96). [Yes, the fact that they still pay a higher share in tax than their share of the AGI shows that the federal income tax is progressive, although as noted in the CBPP cite above, this progressivity is considerably less once all federal taxes are factored into the equation. State and local taxes tend to be less progressive still or even regressive (e.g., the sales taxes).]
By the way, here is a source on expenditure and income data, the Bureau of Labor Statistic’s Consumer Expenditure Survey. This one is actually a little bizarre in that it shows that low income folks are spending way, way more than they earn…This is presumably due to people who are living off savings (e.g., retired), going into debt, or the like! (I thought that maybe they were leaving out things like S.S. and public assistance, food stamps, etc. from income, but the glossary indicates that those are in fact included.)
Ideally, it would be nice to see some data that was a little easier to interpret. (This data seems to illustrate my point with too much of a vengence for me to understand!) It would also be nice if they divided up high incomes more so that one could better see how they start to save and invest, rather than spend, a higher proportion of their income.
Finally tracked down what I really wanted! The key seems to be to phrase it like an economist would. In other words to type the phrase “marginal propensity to spend” into google. (“Marginal propensity to consume” may have been even better.)