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-- The Effects of Bush's Tax Cuts
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What the hell has been wrong with the forums? Anyway here's my second part:

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quote: The decline in state revenue would have been even worse had not a majority of states raised taxes. Since late 2001, about 30 states have expanded their tax bases or increased tax rates to lessen the decline in revenues. Such tax increases have been enacted in states with Republican leadership, Democratic leadership, and bipartisan leadership. When fully implemented, these tax increases will raise some $18.4 billion per year, about 3.4 percent of total state tax collections. Nevertheless, the tax increases enacted during this downturn are far fewer and smaller than the tax cuts enacted during the economic expansion of the 1990s. From 1994 to 2001, some 44 states enacted significant tax cuts. The economic boom of the late 1990s, and in particular the large increase in capital gains during those years, temporarily offset the revenue loss resulting from those tax cuts. Those temporary economic conditions have ended. Yet most of the tax cuts of the 1990s remain in place and are costing states some $40 billion or more per year. It also is worth noting that while most of the tax cuts of the 1990s were in progressive taxes (taxes that fall most heavily on higher-income households), most of the recent tax increases have been in regressive taxes. In other words, lower-income households benefited less from the tax cuts of the 1990s and now are being hurt more by the tax hikes of 2002-2003. http://www.cbpp.org/10-22-03sfp4.htm Emphasis mine. So the first emphasis mentions tax cuts across some 41 states, but not so much as a result of the Bush tax cuts, but from the tax cuts during the late �90�s economic boom. Guess they did actually think good times would last forever, who knows. The second emphasis, though it�s a side note, I felt was interesting in that again we see a shifting of the tax problems onto the lower-income, because the cut in the progressive taxes in the 90�s benefited the upper-income much more, and now the tax hikes recently are regressive (sales taxes, for ex.), which effects lower-income folks much greater.

Once again I think it is misleading to only compare the applicable federal and state tax statistics in isolation while leaving off the tax changes that don�t quite flow with the argument that the poor are being unfairly subjected to unwarranted taxes. While it may be true that state taxes were lowered in the 90�s to primarily benefit the wealthy, federal taxes, on the other hand, were increased and were VERY progressive all throughout the 90�s starting with the Clinton tax reform act of 1993. As a matter of fact, if one were to look at federal taxes over the past few decades, one would notice that there has been a general trend in progressive taxation that has extended far beyond the 90�s:

http://www.ipi.org/ipi%5CIPIPublica...256B4D0073A594/$File/QS-Hartman-Redistribution.pdf?OpenElement

So despite the fact that the latest tax cuts may have primarily benefited the wealthy (which goes in line with arguments that it would make sense for tax cuts to benefit those who actually pay the majority of taxes), I don�t see that as being unduly unfair particularly since they do little to redress the historical trend in progressive tax growth.

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A second point I had from this study here: www.itepnet.org/wp2000/pr.pdf or http://216.239.51.104/search?q=cach...t+poor%22&hl=en which concurs somewhat with the very first study I posted on this thread, saying that: quote: Nationwide, middle-income families pay almost 10 percent on their earnings in state and local taxes and poor families pay more than 11 percent. But the richest people effectively pay only 5.2 percent of their income in state and local taxes. Since 1989, state and local taxes have risen on low- and middle-income taxpayers, but have fallen on the very wealthy. But according to the factcheck.org article you gave as well as the CTJ figure, yes, much of the rise in state taxes (if any were made) does not offset the fed. tax cuts. That much is definitely true, and that changes my original stance on state/local tax increases. However, given the information on how much state/local taxes vs. federal taxes are effecting the lower-income folks verses the upper income, I believe the stance is still valid as to who�s benefiting more and who�s hurting more from these tax cuts (and not just from Bush). Finally, from your CTJ article: quote: Combined federal, state and local taxes in 2004 will take only a slightly higher share of the income of the very richest Americans than the average for all other income groups. So the taxes OVERALL are coming further down for the rich as a % of income, and are becoming closer and closer to the % of income paid from the lower-wage workers. I know this is ideal for Bush and the conservatives, essentially having a flat-tax overall for everyone, but again decreasing the progressive tax benefits one group much more substantially than everyone else (the rich), and that in no way helps our overall economy.

Well I would respond to this by stating that there is still a significant progressive trend in taxes with respect to the federal taxation system. The argument that the federal government should not transfer taxation to the states because the state and local taxation system is flawed is not really a valid argument to me. If citizens of a state do not like how their state is taxing their citizens and desire a more progressive tax system than they should lobby the state to make changes to their tax structure. If, for whatever reason, citizens do NOT want to change their state tax system, even if few may perceive it as an undue burden on the poor (despite the fact that in aggregate they are still better off as was everyone else in the tax cuts), than what can you do? The people don�t want it.

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Originally posted by MisterOpus1 And the last part: Of course it is. Can you name me two completely different taxes that fund the same purpose? The comparison is noteworthy, however, because it is a comparison on how our govt. is treating progressive vs. regressive taxes (esp. with Bush�s tax cuts). I�ll explain more below.

Perhaps, I should have elaborated on what I meant. I'm not saying that we shouldn't compare the two taxes because they are different, I'm saying that we shouldn't compare the two taxes because their intent is different. One is a tax on income that will be used by the government for discretionary spending (and should be progressive), and the other is a tax on income with the sole purpose of contributing to that individual's Old-Age and Survivors and Disability Insurance (OASDI) program (which should be reggressive as I'll elaborate more on later). The fact that one is being lowered whereas the other is not, is to me, completely irrelevant because the two are funding two things that are worlds apart. If perhaps, the payroll tax was to fund discretionary spending, than perhaps I would agree with your argument, but the payroll tax is a fixed investment in the sense that workers are paying x amount of money now in order to get an assured y amount of money later. The government isn't taking that money to fund whatever looney spending package it wants to, it's essentially money out of government hands.

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I disagree, not just with your analogy but with your reasoning here. The internet access tax is a flat tax fee. Similar to a sales tax, this type of tax has a more cumulative effect on the low-pay worker�s income vs. the higher-paid individual. If this tax is removed, in essence it would not necessarily benefit one income group over the other. Though a progressive tax on everything, including an item such as the internet, would be ideal in its overall effects on everyone�s income, of course that�s terribly unrealistic, so the next best thing to me would to get rid of it altogether. So in truth, I really don�t mind this cut that Bush proposes. (Side note: that CNN article talks about Bush�s hydrogen fuel initiatives. If we�re not suspicious of Bush�s plan, I think we should be: http://www.motherjones.com/news/out.../ma_375_01.html) So to compare this type of tax to another regressive tax, such as the payroll, would not be the correct comparison to make. But I want to continue on with the payroll tax and comparing regressive to progressive taxation. As I stated earlier, I�m not crazy for the regressive payroll tax, which puts more hurt on the lower income worker (and I do think we at least agree on that point). Considering that the payroll tax ceases at $87,900 and above (for 2004), that�s a ridiculous regression on the tax scale IMO. Perhaps a more progressive tax increase should be in order for payroll should be implemented as well, but I know that likely wouldn�t fly. However, I still think it is noteworthy for the following reason � we are examining how corporations have saved lotsa $ as a result of the tax cuts. The author of the study is comparing how the regressive payroll tax has a disproportionate effect on the lower income workers, thus effecting lower income workers more. So we have corporations making more money as a result of the tax cut (and hourly wages haven�t increased, I might add), yet lower wage workers are still getting the shaft. I don�t believe this is an argument against payroll taxes (though one can be created), but rather it�s an argument showing the disproportionate giving to the upper elite and big businesses without the same proportional effects seen onto the lower wage worker in any way, shape, or form. In fact, with this comparison, it�s showing the lower wage worker is still getting the shaft.

The reason why the payroll tax is regressive instead of progressive is because the intent of social security was not designed to be a redistribution of wealth program from the wealthy to the poor. We have regular income taxes for that . It's a redistribution of wealth program from the young to the elderly while maintaining a system of individual equity such that benefits are clearly related to contributions. When drafting up the social security system in 1935, the founders explicitly stated that:

Contributions by the employees represent a self-respecting method through which workers make their own provision for old age. (Report of the Committee on Economic Security 1935: 33)

That being said, the actual ratio of benefits to costs of the social security program is anything but equitable. While it is true that workers in the lower income bracket have the highest payroll tax rate (10.3% circa 1999) and workers in the highest income groups have a lower tax rate (6.7% circa 1999), the fact of the matter is that individuals in lower income brackets receive FAR more in terms of benefits than those in upper income brackets. Using share as a measure, families in the lowest pre-OASDI decile pay less than .1% fo all OADSI taxes, whereas families in the highest income decile pay 28.2% of all OADSI taxes. Yet in 1997, families with incomes of $29,000 or more paid $261.9 billion more in payroll taxes than they received in benefits. Conversely, families with incomes below that amount received $201.1 billion more in benefits than they paid in taxes.

If one were to look at the distribution of income in relation to benefits, we can clearly see that benefits compared to taxes paid decreases as income rises:



Therefore with respect to the relative amount that of taxes that poorer workers are taxed with, despite the "regressive" nature of social security, they still receive far more than they put into the program.

http://www.heritage.org/Research/So...fm#pgfId=999500

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I understand how it seems like this is an apples to oranges comparison, but I still believe it�s a noteworthy comparison that demonstrates how one group (corporations) are benefiting hugely from a progressive income tax rate that�s continually decreasing, while the other group (low wage workers) benefits zilch have to deal with an increasing regressive tax rate. As the United for Fair Economy study points out(from which my first post was derived): Again, I don�t think this is an argument for cutting payroll taxes, but rather an argument to stop the monumental cutting of income taxes, esp. for the corporate and the financially elite, whom are clearly benefiting a great deal more from it than the bottom group. But what�s more, because of the regressive payroll tax increase, the bottom dwellers are paying more while the corporates and the elites continue to benefit much more from the income tax cuts. I think the corporate tax breaks have to stop. According to the study: And considering that more than 60% of U.S. corporations didn't pay any federal taxes for 1996 through 2000, I find it a sham that we are not doing something that requires more from our corporations to foot the bill and pay their share: http://www.smartmoney.com/bn/ON/ind...406-000047-0158 But even more so, it seems that our gov�t is more or less willing to let it happen (and again, I�m not just referring to Bush here, obviously).

As for using the rise in the payroll tax as being an unfair burden on workers vs. comanies ... companies are required to to match worker contributions to social security:

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The Federal Insurance Contributions Act (FICA) provides for a federal system of old-age, survivors, disability, and hospital insurance. The first three are financed by the social security tax, while hospital insurance is financed by the Medicare tax. To learn more about the five major benefits covered by Social Security taxes (retirement, disability, family benefits, survivors and Medicare), please refer to the Social Security Administration�s Web site . Employers must withhold social security and Medicare taxes from employees� wages and pay a matching amount. These taxes have different rates and only the social security tax has a wage base limit. There is no wage base limit for Medicare tax; all covered wages are subject to Medicare tax. http://www.sba.gov/starting_business/taxes/payroll.html

Edit: I know that I didn't address all the points in your argument, but it seems that we're branching out from the original point of discussing the payroll tax in relation to all tax cuts, to discussing whether the company or the individual should get more tax relief. Unfortunately, while it would be an interesting discussion (which would be a thread in itself), I'm not entirely certain if I have enough time today to properly look into it. But on a side note, we should keep in mind what the goals of the tax cut were in discussing them.

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