Posted by: al66888 | July 18, 2007

Another reason AGAINST raising the taxes on the rich

We have pointed out several times how wrong it is to think that we are not taxing the rich enough and we need to raise the top marginal rates.  This has actually been a rallying cry of the Democratic party in the upcoming Presidential nomination process, but it is one based on using fear and division instead of facts to base your tax plan.  First, let’s take a look at some facts on taxes:

  1. 84.6% of all taxes in the US are paid for by the top 25% of wage earners
  2. 96.7% of all taxes in the US are paid for by the top 50% of wage earners
  3. 36.89% of all taxes in the US are paid for by the top 1% of wage earners.  That is greater than 1/3 of the tax bill being paid for by 1% of Americans. 
  4. You can do the simple math to realize that lower income and poor in this country do not pay taxes.  In fact, all combined, the bottom 50% pays just over 3% of the tax bill. 
  5. Tax revenue into the US went UP after the Bush tax cuts

Remember these points next time someone is saying that the poor are tax burdened and the rich are not pulling their own.  Or you hear how we need to raise taxes to cut the federal defecit.   This is not true- we need our elected officials to stop spending out of control in order to cut the defecit.  It’s oh so typical.  I live in NJ, where Corzine ran on a platform to cut taxes (which he has not, he’s actually raised taxes including our sales tax).   What happened when Mr. Corzine proposed his budget?  The budget went up, not down.  It’s a spending issue, not a tax issue.  We’re getting crushed by taxes in the US because our politicians think the spending account comes from money that grows on trees.  Unfortunately, it actually comes from the sweat off our backs.

So, after our brief tax lesson, there was an article out a couple of days ago that I found interesting.  The general gist was that the global economy has grown at a record pace all while the global top marginal tax rate has been reduced overseas.

US News and World Report, July 13, 2007 11:21 AM ET |
Pethokoukis , James

“This is far and away the strongest global economy
I’ve seen in my business lifetime,” is how U.S.
Treasury Secretary Henry Paulson recently described
the current global boom. Hyperbole? Actually, that
dramatic declaration probably understates things.
Let’s refer back to this piece of analysis from
Paulson’s old firm, Goldman Sachs: “If we and the
consensus are correct, then the period 2003-2008 will
have been one of the most powerful periods of economic
growth globally since accurate data [have] been
collectible for much of the world.”

This is the story of globalization, of free trade, of
the Internet, of China, of India. Then there’s this:
The 21st century has also seen a global effort to
reduce tax rates. Since 2000, according to the Tax
Foundation, more than half the countries in the
Organization for Economic Cooperation and
Development—the group of 30 nations that includes most
of America’s major economic competitors—have lowered
their top marginal rates, reducing the OECD average
rate from 45.93 to 42.95 percent.

The group also goes on to examine the ramifications of allowing the Bush tax cuts to expire. Another thing that both Democratic Congressman and Presidential hopefuls have been saying needs to be done!

The group goes on to examine possible future trends,
including what happens if the Bush tax cuts are left
to expire at the end of 2010 or if a 4 percent tax
surcharge is imposed on wealthier Americans to pay for
reform of the alternative minimum tax:

The U.S. reduced its top rate by over 13 percent
between 2000 and 2006, dropping it from 15th to 21st
in the rankings. If no other country had reduced its
tax rates, the U.S. would stand at 26th highest, but
the strong tax-cutting trend in other OECD countries
blunted the impact of the 2001 rate cuts. . . . Full
repeal of the 2001 rate cuts after a surcharge to fix
AMT would move the U.S. from 21st to 9th highest in
the rankings—and that assumes the tax cutting abroad
comes to a halt. A repeal of the 2001 tax cuts with no
AMT surcharge would move the U.S. to 11th highest,
while an AMT surcharge alone would move the U.S. to
14th highest. In all three cases, the U.S. would rank
higher than it did in 2000 (15th), before the passage
of the 2001 tax cuts.

All cases showing that there has been tax cuts, have shown that the economy, as well as the overall dollar figures collected by the government, have increased.

Yet there seems little chance of that happening, given
the global competitive race, in which making your
country more attractive to financial and human capital
is critical. Examples like Ireland, where tax cutting
has accompanied a huge economic boom, are too powerful
to ignore.

So it looks as though the high-tax experiment might be
confined to America, which by the way already has the
second-highest corporate tax rate.

When you cut taxes, people have money in their pockets. When they have money, they buy things. When they buy things, the economy grows. When the economy grows, jobs are created. When jobs are created, people make money. When people make money, they get taxed. When you cut taxes, people have more money in their pockets………..and repeat

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Responses

  1. […] the kill in cold blood, always giving al Qaeda the benefit of the doubt.    Just this morning, I wrote a piece on taxes.  One point I wanted to hammer home was it’s not a tax issue, it’s actually a spending […]


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