I present “Effects of the House-Senate Conference version of the Bush tax plan (Annual effects when fully in place, at 2001 income levels)”, courtesy of CTJ.
Income Group…Income Range…Ave Tax Cut…% of Total tax cut
Lowest 20%… Less than $15,000…$66… 0.9%
Second 20%… $15,000-27,000… $375… 5.3% Middle 20%… $27,000-44,000… $600… 8.5%
Fourth 20%… $44,000-72,000… $1,026… 14.5%
Next 15%… $72,000-147,000… $2,234… 23.7%
Next 4%… $147,000-373,000… $3,345… 9.5%
Top 1%… $373,000 or more… $53,123… 37.6%
Addendum:
Bottom 60%…Less than $44,000… $347…14.7%
Top 10%…$104,000 or more…$7981…65.5%
Thanks, Flowbark, for good definitions and the useful chart. Your two caveats are right on the mark.
I don’t have the numbers here, but IIRC Bush’s plan substantilly increases the amount of excluded income. As a result, many more people at the bottom will pay no tax at all, or will recieve EITC.
Folwbark’s example of % of tax cut by quintile would be more relevant if he included the amount of tax currently paid by each group. IIRC the lowest 20% pay about zero, or maybe a negative. As a result, I believe the new structure is actually more graduated. (However, we really need a definition of “more graduated”. I’m thinking about the standard deviation of the per cent of tax paid by quintile. Is there an agreed-upon measure of “graduatedness”?)
elucidator wrote
Of course, this is totally false. The people most in need don’t live in America. The bottom 20% of Americans are well up in the top half economically, looked at worldwide. One can make a moral case that all Americans should give our wealth to the poorest in the world. But, when poorer Americans demand that rich Americans share their wealth with them, that’s just greed and selfishness.
I didn’t understand this principle when I was in the bottom 20%, but it seems clear now
december: *In summary, I see 3 quite different concepts:
graduated income tax
redistritution of income
caps on wealth or caps on income *
I agree with you in thinking that #3, or actual confiscation of all wealth or income beyond a certain maximum, is needless and even counterproductive (though I think we could usefully boost the top marginal tax rates to be a lot closer to 100% than they are now), and I don’t know of anybody who seriously advocates it.
But I don’t think you can really separate out #1 from #2 in practical terms. Any disproportionality between the amount that people contribute to the common resources and the amount of benefits that they get from them is in some sense a “redistribution of income”. Of course, it is extremely hard to identify exactly how much benefit people are getting from the system; the rich are generally considered net donors and the poor net recipients, but that usually doesn’t take into account the fact that the rich benefit much more from expensive governmental goodies such as federal regulation of finance and trade agreements with other nations. (These things, of course, not only benefit the wealthy by increasing their wealth but allow them to pay more taxes, so they end up on the “donor” side of the ledger again. However, benefits like education and health care and supplementary food for the poor have a similar effect, allowing them to improve their economic status and thus contribute more in taxes.)
So I think that the combination of progressive taxation with universal or means-tested government programs of social benefits does count as “redistribution of income” in a general sense, and I’m very much for it. As I pointed out in my above list, there are lots of ways in which this redistribution is not simply a giveaway for the non-wealthy but a smart move for the health and prosperity of society as a whole. So it’s kind of exasperating to see from your last post that you still want to dismiss the arguments for it as mere “selfishness” and “greed”! (Although I appreciate your humorous acknowledgement that maybe your views on the subject have always been shaped by the question of your own personal advantage. :))
One caveat addressed: the tax cut, as a share of income, is lowest for the bottom 20%, all elements of teh tax plan included. It is highest for the top 1%. So taxes become flatter (more regressive) at the bottom, flatter (more regressive) at the top, remain mostly the same in the middle, and more progressive within the $150,000 - $373,000 dollar range. That last part is an oddity associated with the Alternative Minimum Tax, presumably.
ave income tax cut cut in ave taxes
lowest 20% $9,300 $66 **0.007**
2nd 20% 20600 375 0.018
middle 20% 34400 600 0.017
fourth 20% 56400 1026 0.018
next 15% 97400 2234 0.023
next 5% 210000 3345 0.016
top 1% 1117000 53123 **0.048**
Any changes to excluded income would be reflected in the figures above. The last column was calculated by me.
I’m not sure that’s right. Comparisons between countries have to be adjusted for purchasing power parity. I confess I have not looked into this point though.
I should also note that the plan contains an Alterative Minimum Tax timebomb which isn’t thought to be politically sustainable, starting around 2004. And all of the tax cuts are repealed in 2011, so that, among other oddities, the estate tax gets eliminated on 1/1/10 and put back on 1/1/11.
All in all, a very weird plan.
…INCOME…TAX…% OF INC…% OF TAX
TOP HALF…$200…$40…20%…100%
BOTTOM HALF…100.....0…0%…0%
TOTAL…$300…$40…13%…0%
**SCENARIO 1 -- HIGH TAX**
…INCOME…TAX…% OF INC…% OF TAX
TOP HALF…$200…$60…30%… 92%
BOTTOM HALF…100.....5…2%…8%
TOTAL…$300…$65…22%…100%
Here are two tax scenarios. In the first, scenario, the top half pay 100% of the income tax. In the second, the top half pay only 92% of the income tax. So, as a % of TAX, the first scenario is more progressive.
However, as a % of INCOME, in the first scenario, the top half pay 20% and the bottom half pay zero, so the difference is 20%. In the second (high tax) scenario, the difference in tax rates as a % of income is 28%.
Three comments:
The amount of progressiveness in a tax scheme is based on the total amount of tax, not the total amount of income.
The Bush tax plan moved in the direction from the second type to the first type. Income taxes were reduced for every group. The top group got a smaller reduction as a % of tax paid, so they will pay a higher % of total income tax.
The progressiveness of the income tax increased, even though (as Flowbark points out) the poor got a smaller income tax reduction as a % of income.
Reminder: Any talk of the change in the progressiveness of the income tax alone is really a bit strange. People pay other taxes; most of the taxes that poor people pay are other taxes. Because of this, nearly any scheme of tax cuts based on cuts to income taxes is likely going to be regressive when looked at in terms of the overall tax structure (except perhaps one that is very progressive in terms of income taxes). This tax cut, while not strongly progressive or regressive when looked at only in terms of income taxes is, in fact, quite regressive when looked at in terms of total taxes (or even total federal taxes). That’s even without throwing the estate tax into the loop.
Interesting point. Testing it would require a precise definition of regressiveness and some actual numbers.
If you ignore estate tax, the Bush tax cut does give bigger percentage tax reductions to lower income families. Many moderate income families have 30%, 50% or even 100% of their tax eliminated. In that sense, this is a progressive tax cut.
On the other hand, as jshore says, the income tax is the most progressive portion of total tax. Therefore any reduction in income tax is apt to result in a less progressive total tax system.
I’m a little confused by december’s post. Technically speaking, his 2nd scenario is more progressive: the curve that plots the share of tax paid against income is steeper.
I suppose once could argue that tax progressivity is not what we should care about, though. For example, a conservative might contend that while the tax burden should be lower for the bottom income group, the tax share should be equal for the middle and upper classes. Indeed some proponents of the flat tax argue exactly that. (I disagree with this outlook, in case that wasn’t clear.)
Appropos nothing, taxes on the middle 20% declined between 1995-1999 (as a share of income), while overall tax revenues rose. The higher overall revenues were due to jumps in capital gains income and bonuses paid to top executives.
See http://www.cbpp.org/4-10-00tax-rev.htm. The tax cut experienced by the middle 20% from 1995-99 is comparable to about half the amount that they are scheduled to receive from the W-plan through 2006.
If I may interpose a question, how exactly does the Alternative Minimum Tax work? I’ve seen a lot written lately that this would largely negate the effects of the cut for lots of people, and I went to the IRS website to see if they had the rules posted there, but I quickly threw up my hands at their usual convoluted way of explaining things. (see line x on your 1040 and use worksheet Y kind of thing, which doesn’t explain the rules at all.)
I’ve only read about half of this thread, so please forgive me if I’m repeating what someone else already said.
This appears to be a discussion about whether the tax cut is right or wrong or fair or evil etc. The OP was asking a different question. Given that the Dems campaigned against it, why did they roll over so quickly and let most of it pass?
Simplistic answer: Joe and Jane America understand very little of the arithmetic here, or the consequences. Tax cut = get your money back. While people don’t always vote on that one issue, historically it has been political stupidity to fight a tax cut. The only way to effectively block a huge tax cut is to prevent it from getting to the foor in the first place, which basically means keep the Republicans out of the White House. Once Bush was accidentally elected, with a Republican majority (however slim or ephemeral) in Congress, “tax relief” was a done deal. The only decision the Dems had to make was how badly they wanted to look like misers to their constituents.
Good grief…I’ve been lurking here for some time now and I just love how my psudo-socialist buddies like to split hairs…
I’m going to go from being Joe six-pack american, earning 40k a year to being a Dr. earning 250k+ per year…
So I should just bend over and grab my ancles and take giving up more than a third of my income to the feds?
I bust my ass for 8+ years investing in myself. Then I’ll be giving back to my countymen in the way of providing a skilled medical service, granted a for profit service And I ought to just accept the socialistic minded views of so many enlightened people…I don’t think so!
IMNSHO We have all been duped by “Big Brother”…
I will admit that Democrats and Republicans are part of the same hypocracy. However, the Republicans at least want to allow me to have as much of MY hard earned money as I can keep…
Again IMNSHO you folks that think the wealthy ought to pay more are miserable jealous people…
BTW all you Dems…Your beloved JFK proposed a monsterous tax relief package for the wealthy who were paying at the time about 70% of their income to the public dole…
It is a shame that there is so much envy in this fine country of ours and we have to be so devisive on issues concerning monies earned…
That being said I am fully in favor of any tax relief to any person in any form…If you ask me this Gov’t spends to damn much on frivolous garbage…
B
[QUOTE]
*Originally posted by aubries *
The OP was asking a different question. Given that the Dems campaigned against it, why did they roll over so quickly and let most of it pass?
[QUOTE]
Oh yeah, the OP. Hehehe. I do agree that it was bribing the voters (or “playing politics” if you prefer). But there may be more to it than that (Speculation alert!).
The Dems may have campaigned against it, not just because the GOP was nominally for it, but because they thought it was irresponsible to get away from running surpluses, paying down the debt, and relieving inflationary pressures. Greenspan testified to the same thing, btw. So, the OP asks, why did they roll over unless it was simply voter-bribing?
How about this? The tax bill makes the economy Bush’s instead of Clinton’s. Anything that is going or will go wrong for the next few years will stick to Bush, and most would say things have soured somewhat already since the election. The Dems calculate that this bill will hurt the economy enough to get Bush and the GOP blamed and voted out, but not so badly that it can’t be fixed by basically reversing it later. All it takes is comparing the outstanding Clinton-era economy to the already-shaky Bush-era economy and they’ll look like the adults stepping in when the kids screw up.
In 2004, what will be the answer to the question “Are you better off now than you were 4 years ago?” If the answer is “No”, as it may well be for most people, the next question will be “Whose fault is it?” The answer, for most, will be Bush and the GOP House.
Don’t bother getting into who really has responsibility for the economy, if anyone. That’s several other threads. The OP in this one is about political perceptions. The Dem strategy, if it’s a conscious one and this is it, has risks but the odds are good.
I think it’s just hilarious that the Democrats have discovered ‘fiscal responsibility’. To a Democrat, ‘fiscal responsibility’ only involves keeping more of your money. When it comes to spending it, the Democrats are the worst offenders around. Clinton’s last budget flew through both houses with an 8% spending increase. It doesn’t take a rocket scientist to discover that spending increases that are double the size of growth will bust the budget.
The Democrats claim to be oh-so-worried about the 10-year projections, but they’ve never had a problem spending money based on those same projections. Only when Bush wanted to take the money away from them did they get all concerned about fiscal responsibility.
When Bush announced that he wanted to grow spending at 4% (at a time when growth is flat, and inflation is about 3%), the Democrats went bananas. Gephardt and Daschle declared that that budget was DOA. I still don’t know how Bush managed to get it through relatively intact. The Democrats were calling for a budget increase close to last year’s. How responsible is THAT?
And BTW, I’m aware that Republicans are almost as bad. But at least they seem to be aware of it. A number of them are on record as saying that they supported the tax cut specifically to starve the government, because if the money was left in their hands they knew they’d spend it frivolously.
On a world-wide basis (OECD countries), US taxes are low.
You knew the general level of taxes when you started your medical education. So you shouldn’t act so surprised.
Some consider medicine to be a calling. Others don’t. Perhaps you are part of the latter group. If so, that’s a shame.
We both know that, loans notwithstanding, your education has been heavily subsidized by the US taxpayer. (Hm. Perhaps you went to a Caribean medical school though.)
The amount that you are sending to the Feds is over a third of your $250,000 only if you include your social security payments. And the marginal taxes on those cap out at about $90,000. So, under the old system, your average tax rate would have increased from about 27.9% to 34.4%, approx, a difference of 6.5%. That doesn’t seem too bad to me. [sub]Very rough calculations based on a 1999 1040, and an 8 1/2 % social security tax.[/sub]
Splitting hairs/ fighting ignorance: Welcome to the Straight Dope Message Board.
Sam:
Federal spending as a share of GDP declined during the Clinton era.
The 8% increase was passed when both houses were wholly controlled by the Republicans. The question is what sort of spending increases did Clinton propose to Congress. (Sorry, I don’t know the answer to that.)
During the Reagan administration, the Democratic Congress would reshuffle Ron’s priorities, but typically sent him back a budget with a roughly similar deficit to the one that he proposed.
Fiscal responsibility: Over the past 25 years, Democratic adminstrations have pared the deficit with more enthusiasm than Republican Adminsitrations.
date Budget surplus (deficit) as share of GDP
1977 -2.6%
1978 -2.6%
1979 -1.6% Last non-recessionary Carter year.
1980 -2.6%
1981 -2.5%
1982 -3.9%
1983 -5.9% Peak Reagan deficit: Non-recessionary year
1984 -4.7%
1985 -5.0%
1986 -5.0%
1987 -3.2%
1988 -3.0%
1989 -2.8% Last non-recessionary Bush year (Greater than 1.6%)
1990 -3.8%
1991 -4.5%
1992 -4.6% Peak Bush deficits, following recession
1993 -3.8%
1994 -2.9% Last Year with Democratic House
1995 -2.2%
1996 -1.4%
1997 -0.3%
1998 0.8% Jan 1998: “Save social security first”
1999 0.9% 2nd to last non-recessionary Clinton year.
Sorry I don’t have 2000 data.
Just to update flowbark’s numbers from the historical tables in the FY2002 budget (which is Bush’s first budget submission):
The surplus was actually 1.4% of the GDP in 1999 and an estimated 2.4% in 2000.
The federal government outlays as a percentage of GDP were 18.2% in 2000, which makes them the lowest since 1966. This is down from >22% in 1991 and 1992. So much for the myth of current bloated government spending. [By the way, Bush’s plan is to take it down to 16.6% by 2006, which would be the lowest since 1956…In fact, you’d have to go back to the period 1947-1951 to find an extended period of below 17%.]
“Your beloved JFK proposed a monsterous tax relief package…”
Talking about the Kennedy tax cuts does anyone have any numbers on who got what. I would think it was a “Keynesian” cut designed to stimulate aggregate demand and was therefore focussed on lower-income and middle-class taxpayers. I doubt that his advisers,which included Samuelson,Tobin and Solow a virtual who’s who of American Keynesians would have been very enthusiastic about a big cut focussed on the wealthy.
I don’t care about (OECD countries) I don’t live there
touche`
I am a Dental Technician and have been for 15 years…The reason I’m going to Dental School is because I have worked behind shitty Dentists this whole time and I know I can better serve my fellow man providing a better dental care…Granted the $$ I will make because of my aquired skills is very appealing…BTW I run a small Lab paying for my education and my LOANS are minimal and will be paid back by me. Plus the pro bono work I will do for the different needy people will be very rewarding…
I still want to keep as much of the money I earn as possible…Is this wrong?? Am I greedy?? I think not…I earned it…you didn’t!
When will anyone learn that beating the Reagan horse is dead…Like it or not he did more for this country than a vast majority of Presidents did…He wanted a better America for everyone and it wasn’t just lips service…
No one likes the defficits that came out of the 80’s but Reagan got this country moving again after and in spite of stiffling Democratic control…
Dubya is trying to do the same…Clinton and his gang tinkered with things and tinkered with things and what have we got…A world that dislikes us, and a real turndown in confidence…The economy which was set up by Reagan and his policies survived 8 years of Clinton…Go figure…
Here’s what gets me…The economy cycles in and out of bear and bull markets…The only thing that keeps it going is confidence…Why punish those that have the confidence to be entrepreneurs and arm chair investors by taxing them to death…Joe six-pack suffers and doesn’t even realise it plus he resents the wealthy…If he only had the gumption to try something on his own he would understand as I do…
CyberPundit,
If I can remember correctly and I’m certain you have the figures at your finger tips…JFK was wanting to cut the cut the top 1% earners tax rate from 70 some percent to around 50 some percent…
If you people like giving your hard earned my to the federalist monster against your will, why not become a citizen in one of those countries that allows you to only keep 20% of your earnings…Hey they also have fewer of us extremist conservatives there
As far as the title of this thread goes…Thank God the Dems couldn’t stop the tax cut!!
Whatever makes you think that you earn every dollar that you are paid? I know quite a few people who are paid more than they earn. I probably fit into that category myself. Then there’s also the liklihood that all of our salaries are effectively inflated by the amount of expected taxation.
Corporations pay what they have to in order to get people to work for them. (That is especially true in this tight labor market). The cost of taxes is implicitly figured into the equation.
So, while you would be correct in saying that I didn’t earn any part of your income. You can’t say the same of your government.
