Quote from AAAintheBeltway:
tater,
You can keep repeating "tax cuts for the very rich" like James Carville but that doesn't change the facts. The "rich" that are the target of this class warfare start at about 70,000 a year, which puts one in the top 20% or so. In fact, the BUsh plan offers substantial tax savings for middle class wage earners. Some analysts fault the plan for offering too much relief there and not enough in areas that would actually improve the economy.
AAA - The only ones waging class-warfare are those at the top. I always find it amusing - these transparent Bush tactics to paint the opposition with the very brush they use to whitewash the truth - like disgracefully labeling all those who oppose their dubious arguments for war as "unpatriotic" and those actually fought for the homeland defense bill as "unconcerned with the security of the country: because they dared to oppose Bush's attempts to thwart it at first ( ironic as it is now a much promoted cornerstone of the very short list of Bush's accomplishments -though it remains largely unfunded). I am constantly amazed how this administration is able to mask it's true intention in such feeble disguise and NOT be called on it by the so-called "liberal media"?? REmember all those "made in China" boxes suddenly labeled over with phony "made in America stickers" or more recently - Bush requesting at a recent tax cut stump speech in Indiana that those standing behind him (in view of the TV cameras) remove their neck-ties and pocket squares to appear more working class (all hat, no cattle !). But I digress.....
Let's examine the deception:
"92 million Americans will keep an average of $1,083 more of their own money when this tax plan goes through..."
This statement is misleading because the average is skewed upward by the very large tax cuts that would go to a small number of high-income taxpayers.
For an example of how averages can be deceptive, consider a group of five individuals - four of whom each receive $100 tax cuts and one who receives a $4,600 tax cut. The average tax cut for the group is $1,000, but four of the five receive far less than this amount.
The Administration's use of averages suffers from a similar distortion. Data from the Urban Institute-Brookings Institution Tax Policy Center show that 80 percent of tax filers would receive less than the $1,083 "average" amount, while about half of tax filers would receive $100 or less. The White House produced the $1,083 average figure by averaging together high-income people who would get massive tax cuts - the average tax cut would be $90,000 for people who make more than $1 million per year - with the much larger number of Americans who would get small tax cuts.
Thus, while $1,083 may be the average tax cut amount, it does not accurately reflect what an "average" American would receive. The Tax Policy Center data show that the average tax cut for those in the middle fifth of the income spectrum would be $256.
(Fair Taxes For All)
So here's a few more for you - source credited:
The 226,000 Americans with an Adjusted Gross Income of over $1,000,000 would get an average tax cut of almost $90,000 from the Bush growth package alone --- while the middle 20% of the population would get a tax cut of only $256. (Urban-Brookings Tax Policy Center).
One half of the tax cuts derived from the Administration's proposal to eliminate the tax on dividends and reduce capital gains would go to the top 1% of taxpayers-three fourths to the top 5%. (Citizens for Tax Justice)
31% of the nation's taxpayers would get no benefit from the Bush Tax Cuts and almost half (48%) would receive less than $100 in tax cuts. (Citizens for Tax Justice). Under the Bush proposal to cut dividend taxes, Bill Gates will receive $38 million per year in dividends tax-free.
(Toronto Star, 2/9/03)
Tax cuts are a GREAT thing for the economy and for tax payers as a hard and fast rule. However in a time of dire economic uncertainty, massive trade and budget deficits, and the incredible financial burden of war, tax cuts are a decidedly different proposition! If they are to be introduced they MUST be precision guided to targets of maximum opportunity. In the current economic theatre - that means 2 things - Creating Jobs, and Stimulating Demand.
To say that dividend tax relief will go to only a small percentage misses the whole point of the exercise. The idea is to make it attractive to hold dividend paying stocks. If dividends are tax friendly, many more people will invest in solid companies that pay dividends. Create an incentive and thereby change behavior. Don't you think it's better for the economy for companies to be encouraged to pay dividends and attract a stable shareholder base than to do what they do now, which is to retain earnings and piss them away on ill-considered acquisitions and the like , all to avoid the double tax?
AND from your subsequent post:
I think there are three answers. One, double taxation is wrong and creates economic distortion. The burden of persuasion should be on those wanting to retain it. We want companies making decisions on investments versus dividen payouts for economic reasons, not to avoid double taxation. Creating incentives to buy and hold stock is a huge benefit for the economy.
Two, there are other elements in the President's plan that address investment, such as expanded writeoffs for cap investments.
Three, putting "money into the hands of those most likely to spend it" does nothing for the crucial element of the economy, which is incentives. It might bump up Walmart's sales for a month, at enormous cost, but we would still be stuck with a tax code that punishes savings and investment.
We are working off a state of massive Over-Capacity in our economy! Adding more money to the top is no way of solving the problems we face - in fact it is just as likely to exacerbate the problem. Companies - even ones in decimated industries like fibre-optics have cash on hand (JDSU has 12 years of cash on hand at it's current burn rate!) yet it's earnings are zilch it's stock in the toilet. It does not need more cash - or more incentive to pay-out dividends - it needs CUSTOMERS - it needs DEMAND. It needs real economic growth - from the bottom UP.
While I agree that dividend payments are a good thing as a barometer of corporate health (as is free cash flow) and the taxation of dividends a net negative - overall the price of a total abolition of dividend taxes at this time is highly suspect as economic stimulus - and almost absurd as a tool for job creation.
Bonus question - what revenue stream through a company to it's shareholders or employees is NOT double taxed - or even triple taxed? The point being - double taxation is not unique to dividend payments - nor is it as you suggest creating any aberration in the economy. It is a long standing and ubiquitous component of the tax code.
