In addition to death and taxes, there is another thing in life that is certain. When attempting to gain political power or hold on to it, the Democrats are going to ratchet up their class warfare rhetoric.
With the looming November elections and facing the prospect of losing control of the House and maybe the Senate also, Obama is crisscrossing the country spouting nonsense about the "rich" not paying their fair share of taxes. Obama accuses the Republicans of wanting to cut taxes for millionaires, regulations for special interests and basically let Americans fend for themselves. He then offers the standard Democrat talking points: Raise taxes on the rich, target tax cuts to the middle class ( which never seems to happen) and raise taxes on businesses (which is impossible).
The question is, are the Democrats on to something? The fact is that the top 1% of wage earners, those making more than $400,000 pay 40% of all federal income taxes collected and the top 5%, those making more than $160,000, pay 61% of all federal income taxes. The bottom 50% of wage earners, those making $33,000 or less, pay less than 3% of all federal income taxes collected. Forty percent of Americans pay no income tax at all. No wonder there is a constituency that doesn't mind how much the federal government goes into debt. They have no skin in the game.
Bill Freeze of "Real Clear Markets" has crunched the numbers on who pays what in taxes and the results will surprise a lot of people. It turns out that George Bush did not decrease taxes on the rich, he increased them. Both Clinton and Bush served eight years in the Presidency, but when Clinton was in office, Federal Revenue from individual income taxes was $5.66 trillion. When George Bush was in office, Federal Revenue from individual income taxes was $7.45 trillion. The "rich", the top %1 of taxpayers, not only forked over a trillion dollars more to the Federal Government under Bush, their share of the burden increased from 33% to 38%. In addition, the rich paid a blended rate of 20.6% under Clinton but paid income tax at a blended rate of 21.3% under Bush.
What is a "blended rate". Well, when one pays income tax, say on $500,000, one doesn't pay a flat rate of 35% on the entire amount. Rounded off, the first $8,000 is taxed at a rate of 15%, from 8001 to $34,000 is taxed at a rate of 15%, from $34,001 to %172,000 is taxed at a rate of 28%, from 172,001 to $374,000 is taxed at a rate of 33% and all over $374,001 is taxed at 35%. Hence the "rich" paid a "blended average" of 21.3% under Bush.
How did Bush cut taxes and have the "rich" paying not only more, but a greater effective rate?
Well, when taxes go down, the "rich" change their behavior. Those that work, work harder and longer. They expand their business, creating jobs. The "idle rich" change their investment behavior and instead of investing in low yield bonds, invest in higher yield taxable vehicles, the kind of investments that finance companies that create jobs. When marginal tax rate go up, the opposite happens. The rich cut back on work and contract instead of expand business and the "idle rich" alter their investments to vehicles that require less taxes. The "rich" are usually happy to pay more of a "blended" tax rate as long as they are taking home more after tax dollars.
If Bush had reigned in spending during his tenure as President, then he would have left Obama a surplus instead of a deficit because revenues to the treasury went up 30% percent under his watch. Now Obama is dead set on letting the Bush tax cuts expire in the middle of a recession. Tighten your belts folks, because we are in for some hard times until we get rid of this fellow.
For information on another tax subject, see Del Tackett's blog posting of August 24. Exerpt below:
ReplyDeleteWell, the “inheritance”, “estate” or “death tax” as some call it, works basically like this. When a couple dies, the federal government requires that the surviving children count up the dollar value of whatever their parents owned. They then assess a tax on anything over a certain deduction amount.
Now, under the old Bush tax cuts, the deduction had been growing and the tax rates dropping until this year, when the entire inheritance tax was repealed…BUT only for this year. So, in four months, it will return to a rate of 55% and a deduction of one million dollars.
Now, I know what some of you are thinking. “A million dollars! Well, that is just a tax on the rich. Only the wealthy are effected.” Unfortunately, that is misguided thinking.
First of all, we have bought the notion that there is something evil about the “rich” and if one person is rich, then someone else has lost or been taken advantage of. This thinking is propagated by those with devious agendas. Now it is true that some rich people have gotten rich at the expense of others, especially if they are involved in “zero sum” games, like gambling.