A Progressive Tax Cut

[RLN]

Have you ever wondered on how one can spot a Progressive Tax Cut?

The Economic Policy Institute (http://www.epi.org/content.cfm/webfeatures_snapshots_20060531) will show you how to notice a George Bush progressive tax cut.

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How to spot a progressive tax cut

The new head of President Bush's Council of Economic Advisers, Edward Lazear of Stanford University, recently wrote in the Wall Street Journal that the president's tax cuts have made the tax code more progressive. This statement caps a long-standing campaign by conservative ideologues to muddle the concept of "progressive taxation." Economists disagree about many things, but there is a long-standing consensus that a "progressive" tax is one in which the average rate—i.e., tax liability divided by income—rises as income increases. The tax code may be dubbed "more progressive" under a spurious White House definition of progressivity, but not according to any valid, commonly accepted one.

Taxes are a "burden" because, obviously enough, they reduce the income available for personal use. (Taxes also finance public programs that provide benefits to households that are not necessarily counted as income, but that side of the government's accounting ledger is not considered here.) Advocates justify a progressive tax burden, defined in terms of a rising average effective rate of tax (ERT) because it reduces the inequality of after-tax income, compared to a flat, proportional tax or one with a falling ERT. Most sales or consumption taxes have a falling ERT because saving tends to rise with income.

So, can we say that the president's tax cuts have reduced the inequality of after-tax income? The two major tax cuts since 2000 are the Economic Growth and Tax Relief Reconciliation Act (EGTRRA) of 2001, and the Jobs and Growth Tax Relief Reconciliation Act (JGTRRA) of 2003. Their impact, estimated by William Gale and Peter Orszag of the Brookings Institution, is shown in the chart below.

http://www.epi.org/images/snap20060531.gif

The impact of the cuts is clearly uneven across the income scale. In fact, the results are also uneven within the top quintile (see the chart's three right-hand bars). As shown, the gains of the top one percent are well above even the rest of the top 20% of the population, let alone the other 80%.

When the Bush Administration claims that it has improved the progressivity of taxes, it points to the percentage changes in shares of income taxes paid as evidence. But as the chart shows, reaping large percentage cuts in taxes for those who pay little to begin with does little to boost the after-tax income of those at the bottom of the scale. In other words, what matters most is not the change in what you pay in taxes, but the change in what you have left afterward. In reality, the distribution of the after-tax gains was stacked heavily in favor of the highest-income taxpayers.

Source: William G. Gale and Peter R. Orszag, "Bush Administration Tax Policy: Distributional Effects," Tax Notes, September 27, 2004, pp. 1559-1566.

This week's Snapshot was written by EPI economist Max B. Sawicky.

[longjonsilver]

I see no problem with the rich benefiting from the tax cuts more than the poor do. The reason for this is that the wealthy pay the bulk of the taxes in the first place, and to ease the tax burden on anyone other than those who contribute the most, would be a joke. The top bracket as of now still pays 23% more tax on income than the lowest bracket. As I see it, a inversely directed progressive tax cut is only suitable for a descriminatory progressive tax system.

[longjonsilver]

Of course the tax cut was directed toward the top brackets. It only makes sence to ease the tax burden on those who cary the bulk of weight. Even after the tax cuts the top bracket still pays 23% more tax on income than the lowest bracket. To me it only makes sence to initiate a inverserly directed progressive tax break on a descriminatory progressive tax system.

[longjonsilver]

Of course the rich are going to get a larger tax cut. It would make absolutly no sence to cut the taxes for anyone other than those who pay the bulk. The top bracket still pays 23% more tax on income than the lowest bracket, making an inversely directed progressive tax cut only suitable for a descriminatory progressive tax system. The real problem is that everyones taxes were cut atleast fractionaly when the true action that should have taken place was to commensurate everyones percentages to a flat tax. But hey, as I see it, an iversely directed progressive tax cut is only adequate for a descriminatory progressive tax system.

[Mayberry]

All the more reason to implement a "Fair Tax" type system. Then it is up to each individual how much tax they are going to contribute. One could buy everything second hand and avoid taxation alltogether. Of course "progression" is built in by way of the rebate system to keep everyone happy, but all in all, I believe this is the most equitable system there can be, and it blows away the current taxation scheme.

[Nathan Brazil]

Economists disagree about many things, but there is a long-standing consensus that a "progressive" tax is one in which the average rate—i.e., tax liability divided by income—rises as income increases.

That's not "progress", hence it can't be "progressive". "Progressive" is a proganda term coined by socialists to describe stealing money from people in a crowd pleasing mindless kind of way.

The impact of the cuts is clearly uneven across the income scale.Â*Â*In fact, the results are also uneven within the top quintile (see the chart's three right-hand bars).Â*Â*As shown, the gains of the top one percent are well above even the rest of the top 20% of the population, let alone the other 80%.

More socialist double-speak here. By "gains", the socialist really means that the taxpayer is keeping more of his own money. That's it. He's not getting something for nothing, it just means the government is stealing less.

In socialist-think, the individuals "gain" is government's "loss", thus there must be something wrong with it. Meanwhile, no one can give a coherent reason why a person who has more should pay disproportionately more.

Always, always, when reading socialist literature, try to figure out what the words they use really mean. Then you can figure out how they're trying to screw you.

[longjonsilver]

My appologies for the 3 almost identical posts. My computer was screwing up and acting like they weren't getting threw.
But anyway.
Thats a nice break down Nathan, "gains" is clearly a biased word. A progressive tax system is completely inverse to the fundamental theorem of capitalism where success is rewarded. Threw our system we provide tax deterrents for success, turning America into a pseudo-capitalistic society. Every time I talk to an advocate of progressive taxes they begin shouting "They have the extra money and they don't need it." It makes me sick to see this classist descrimination.

[Alonzo]

Long, do you agree that we could benefit as a nation by reducing poverty? Which, by doing so, increases the tax base, decreases the people in need of social programs, and increases their contributions to society?

Why does it make sense to penalize the poor, which will only serve to keep them poor, thereby reducing the chance that they'll actually be productive citizens?

Yes, the rich pay more. But, in real value to them, is the money they pay having a large effect on their lives? Someone making 30k pays less taxes, but the money they pay in taxes has a greater effect on them. It's a smaller percentage, but they have less to spare. The actual cash value is superficial, it's the effect that money has on the individuals ability to go about their life.

[Nathan Brazil]

Long, do you agree that we could benefit as a nation by reducing poverty? Which, by doing so, increases the tax base, decreases the people in need of social programs, and increases their contributions to society?

We benefit as a nation when poverty is reduced via the free market expansion of jobs, opportunity, and real wealth.

We do not benefit when people are robbed to provide a pseudo-prosperity to people not capable of earning it themselves.


Why does it make sense to penalize the poor, which will only serve to keep them poor, thereby reducing the chance that they'll actually be productive citizens?

Who's penalizing them? Why aren't they required to pay their fair share?

Oh, wait. If the socialists who own the dictionary, and they get to define "fair" as "if you have it, it's not fair".

Yes, the rich pay more. But, in real value to them, is the money they pay having a large effect on their lives? Someone making 30k pays less taxes, but the money they pay in taxes has a greater effect on them. It's a smaller percentage, but they have less to spare. The actual cash value is superficial, it's the effect that money has on the individuals ability to go about their life.

That's not for anyone to say. Fact is, you're now admitting that it's their money, and you're justification for taking it has been reduced to "well, they really won't notice it if we steal just a little bit", EXACTLY like the petty shopplifter stealing gum in Wal Mart and thinking about moving up to plasma TV's.

[penmyst]

Yes, the rich pay more. But, in real value to them, is the money they pay having a large effect on their lives? Someone making 30k pays less taxes, but the money they pay in taxes has a greater effect on them. It's a smaller percentage, but they have less to spare. The actual cash value is superficial, it's the effect that money has on the individuals ability to go about their life.


Holy cow, who elected you or anyone else for that matter, to determine how much of an individual's money he "needs"?

See, this is the base problem with socialists- and it rears it's ugly head in this statement by zo.

I don't believe the majority of socialists have evil intentions, rather it's elitist intentions. That they believe the best choices for an individual's monies/properties are not made by the individual himself but rather should be made by elitists that are smarter than everyone else.

That's why they see nothing wrong with progressively punishing taxpayers more and more as the taxpayer earns (and brings real value to the society) more and more.

[PittsburghAfterDark]

I suggest any socialist, liberal or progressive here start their own business.

I'm being serious here.

Then, when they realize that they're paying 2 sides of SSI for a combined 15.3% of their gross, 30%+ on their Federal income tax, 3.5% on their state tax (Pennsylvania rate.) plus health insurance and disability insurance oh, and then paying 7% on sales tax, then realize they're about left with 46 cents on the dollar that we're being taxed to death.

Until that time STFU and enjoy your priviledged life where you can bitch without consequence because you're not paying for the beliefs you hold so dear.

[Buck Laser]

I suggest any socialist, liberal or progressive here start their own business.

I'm being serious here.

Then, when they realize that they're paying 2 sides of SSI for a combined 15.3% of their gross, 30%+ on their Federal income tax, 3.5% on their state tax (Pennsylvania rate.) plus health insurance and disability insurance oh, and then paying 7% on sales tax, then realize they're about left with 46 cents on the dollar that we're being taxed to death.

Until that time STFU and enjoy your priviledged life where you can bitch without consequence because you're not paying for the beliefs you hold so dear.

Pittsburgh, I've been there and done that. It wasn't the Social Security payments that did me in. It was the interest that I had to pay to the bank. But I did it from 1980 until 1987. And I got out with my life savings spent, but my credit intact.

My son has been self employed since early 1992, and he's had to meet payrolls as large as a hundred people. The bottom line here is that he and I are both progressives/liberals, and we can live with the taxes better than we can live with an economy that's being pissed away to Chinese debt and transnationonal corporations who give a rat's ass about the US. I used to be an internationalist until I began to see what's happened as international business interests gain more control over the US economy than the American people themselves have.

I'll gladly pay more taxes to help fund a fairer America.

[Alonzo]

Nathan, if you want to explain to me why my ideas create a worse society for everyone then go ahead. If you want to argue that somehow certain taxation is moral while the rest is immoral, and make your whole argument some twisted morallity trip, then forget it. Neither one of us can make an effective point against the others morality in this case. It's just like abortion, if you have someone who believes the mother is always more important, or that the baby is always a complete equal, there's no leeway there without changing the basic moral principle that the entire opinion is founded on.


I suggest any socialist, liberal or progressive here start their own business.

I'm being serious here.

Then, when they realize that they're paying 2 sides of SSI for a combined 15.3% of their gross, 30%+ on their Federal income tax, 3.5% on their state tax (Pennsylvania rate.) plus health insurance and disability insurance oh, and then paying 7% on sales tax, then realize they're about left with 46 cents on the dollar that we're being taxed to death.

Until that time STFU and enjoy your priviledged life where you can bitch without consequence because you're not paying for the beliefs you hold so dear.

I worked alongside my families business. Lasted about 7 years and then put my family deep in debt. We also followed that up with my father spending years in and out of a hospital, lost multiple jobs because doctors can't diagnose what problem he has (ie. you can no longer even do the simplest version of a job you used to excel at, and we have no idea why, so we can't do anything for you) and therefore he can't even claim disability, and quickly used up his unemployment benefits(losing multiple jobs, then finding no one will hire you, will do that) and almost losing his house multiple times. Then there's being kicked out of rehab because the private insurance company decided you've reached the maximum they want to spend and unless the doctor demands you stay in rehab (not just highly recommend) then there's nothing they'll do.

Also most of my family has been on social programs at some point. Without going into specific details, it's been varying combinations of cousins needing government assistance for housing, be it after fleeing abusive boyfriends with their kids (this happened 3 time), have psychological issues, children who are sometimes violent (due to bipolar) and need special schooling paid for (one has been bounced between 4 different special schools), required medicaid for poverty, bipolar disorder, children with bipolar disorder (one side of the family is well over 50% bipolar), free job training and education etc.

Also one of my closest friends has been on government assistance most of his life. Only a few years ago 7 people lived in an apartment smaller than my basement. They recieved housing assistance, and in college, after recieivng significant amounts of both government grants and a scholarship from the school, he was paying about 1,500 a year for a 25k a year school.

My families not rich. While I don't know anyone who's actually been homeless (my father was the closest, he spent about a year staying with various friends), or a serious drug addict, my family has had everything else. And the vast majority of it has used government programs (not just unemployment) in their life.

Holy cow, who elected you or anyone else for that matter, to determine how much of an individual's money he "needs"?

I want you to tell me why, as a general rule, that someone making 30k a year will not be effected more by losing 7k (bringing them to 23k) of that than someone making 300k and losing 70k of that. Why should we take equal or more out of the poor when, on average, that money plays a much more significant role in their life? Or do you disagree that it does?

[PittsburghAfterDark]

Zo, you're so full of shit.

At least have a grasp of effective taxation rates before you start spewing your gobbledygook around like a porn actor giving his starlet a pearl necklace.

[Alonzo]

PAD, get a clue and realize I wasn't trying to give actual taxation rates. If you read my post my point was clearly that equal percentage does not result in equal impact, the point that was being argued against.

[longjonsilver]

Of course a flat tax doesn't cause an identical effect on all families, however it does cause a proportionally equal effect on all families. If everyone pays 15% percent of there income, then no matter who you are 15% of what you make will not be in your wallet. The fact that the person who makes 30k rather than 300k lives a less lavish life style, is the way life in a nonclassist tax system should operate. Its not the job of the government to redistribute wealth. On top of this taxes are something to which you pay to the government so that you, as a part of society, can benefit. However, those in the top brackets, paying the bulk, are the ones who recieve only the lowest common denominator of support, while those in the lowest brackets parisite from society through medicaid, welfare, and food stamps.

Alonzo, you spoke of a flat tax as harming the poor. You have clearly chosen to examine an apparatus as complex as a tax code in a skin deep fashion. Maybe I am a slight trickle down advocate but no one I know has ever been employed by a poor person. All those who make a salery do so from someone in a bracket other than the lowest. By taking a high percentage amount from the wealthy you transend the duty of funding the poor to government. Thats a place that no country should be in. Through a flat tax we allow for business to provide higher salaries to employees, along with increasing the capabilities of employing more individuals. The best part is that all this is done with our heads held high because our tax system would be a classist free operation, absent of any deterrent to succeed.

[Nathan Brazil]

I'll gladly pay more taxes to help fund a fairer America.

And have you contributed anything to your local Tax Me More Fund? (http://www.cbsnews.com/stories/2003/04/08/politics/main548369.shtml)

I bet not.

[Nathan Brazil]

Nathan, if you want to explain to me why my ideas create a worse society for everyone then go ahead.

1) Everyone it everyone else's slave, except for the useless maggots consuming the goods. That's a worse society for everyone, since it destroys iniative.

2) It ain't your money, you've no right to steal it. Socialism creates a culture of theft.

3) The defining philosphy of this country is freedom, not free rides. People that want a free ride can move to Cuba.

If you want to argue that somehow certain taxation is moral while the rest is immoral, and make your whole argument some twisted morallity trip, then forget it. Neither one of us can make an effective point against the others morality in this case.

Sure I can. Practically no taxation is moral. The only ones that come even close are taxes that support the commons, ie like user fees. Make people going to national parks pay a proportionate share of the costs of them, and let the people that don't use the parks keep their own money. Taxing the fuel vehicles use to pay for road construction and maintenance is a practical way of ensuring the people pay a share of the expense proportional to their use of the system.

Taxing people to support maggots is immoral.
Taxing people to support someone else's grandmother is immoral.
Taxing people to keep the price of milk high is doubly immoral.
Taxing people to finance research only select individuals will profit from is immoral.

In general, a tax would be required to finance police departments, but fire departments should be paid for by subscribers to insurance companies. That's because enforcement of the law is a proper function of government, but the people should be responsible for their own property. (Disagree? Explain why the government doesn't subsidize auto insurance.)

The courts and interpretation of the law is a proper function of government, and taxes should be levied to finance that. The military is an extension of the police, in that it protects the nation from the worst possible violations of freedom.

Again, a tax to support the military is reasonable and necessary. One can certainly argue about roles and functions of the military, though. One cannot argue against the basic need for one, and thus cannot argue against the basic need of a tax to support one.

It's just like abortion, if you have someone who believes the mother is always more important, or that the baby is always a complete equal, there's no leeway there without changing the basic moral principle that the entire opinion is founded on.

True enough. People that think women have a right to murder babies don't have the faintest clue about morality and it's a total waste of time trying to discuss it with them. Anyone that thinks a baby is an object to be disposed of on whim most likely doesn't have the moral sense to realize that one person's needs don't justify enslaving another.

And no, that argument doesn't exist between the mother and the child because the mother agreed to perform an act that created the child, and thus entered an obligation to care for it. Murder isn't the proper way to escape voluntary obligations.

I worked alongside my families business. Lasted about 7 years and then put my family deep in debt. We also followed that up with my father spending years in and out of a hospital, lost multiple jobs because doctors can't diagnose what problem he has (ie. you can no longer even do the simplest version of a job you used to excel at, and we have no idea why, so we can't do anything for you) and therefore he can't even claim disability, and quickly used up his unemployment benefits(losing multiple jobs, then finding no one will hire you, will do that) and almost losing his house multiple times. Then there's being kicked out of rehab because the private insurance company decided you've reached the maximum they want to spend and unless the doctor demands you stay in rehab (not just highly recommend) then there's nothing they'll do.

Hate to sound callous...well, not really I don't...but it ain't my father, it ain't my family, and it ain't my responsibility. Is that clear?

Holy cow, who elected you or anyone else for that matter, to determine how much of an individual's money he "needs"?

I want you to tell me why, as a general rule, that someone making 30k a year will not be effected more by losing 7k (bringing them to 23k) of that than someone making 300k and losing 70k of that. Why should we take equal or more out of the poor when, on average, that money plays a much more significant role in their life? Or do you disagree that it does?


Who cares if it "affects" him more? Hint: If the middle class was taxed proportionately to the services rendered to them and to the lower level maggots, they'de be far less likely to accept higher taxes and they'd be far more likely to demand that the lower levels get by with less. They'd also be more likely to start putting limits on governent subsidies to businesses.

There's nothing wrong with a pay-as-you-go system. Again, and it can't be stated enough...my family is my responsibility. That's it. No one else's family, no one else is my concern, and I shouldn't be robbed to support them.

[Buck Laser]

I'll gladly pay more taxes to help fund a fairer America.

And have you contributed anything to your local Tax Me More Fund? (http://www.cbsnews.com/stories/2003/04/08/politics/main548369.shtml)

I bet not.

Nope. But I did return the 2001 tax rebate check to the treasury. Got the receipt to show for it. After 5 years of watching this administration piss away our reputation and our credit rating, I kinda wish I'd buried it in the back yard.

[PittsburghAfterDark]

Guess what, our credit rating and reputation in the world financial markets is identical today as the past 200+ years.

Full faith and credit of the United States Government?Â*Â*Means the same thing today that it has for the four centuries in which America has existed.

Of course you wouldn't want to believe that.Â*Â*Doesn't mix with your world view.