Friday, February 14, 2003

I know this is awful lazy of me, but I am going to post one more of my long missives that had previously sent by email. Honestly, I do promise original content on here. Pinkie swear, even!
This one deals with the Bush tax plan. I think I wrote it mainly to defend against my friends' claims that I was a Bushie. I will admit that I pulled the lever in 2000. But for me it was more a vote against Gore than for Bush. To those who don't know me (thank your lucky stars!) I have two photographs on my living room wall. One is of John McCain and the other is of Bill Clinton. So you might appropriately describe my politics a radically moderate. Hmmm.. I will have to do an intro via my political beliefs soon. But for now, here is my screed against the K Street Bush tax proposal. Enjoy!!

Let's begin with his most recent tax proposal (I would start with his initial tax cut two years ago, but its failure has been already well documented). I should say that I do agree with the President, and many economists, that the United States is in need of a stimulus package. From there, I part company with the Bushies. The current proposal provides (or costs, depends on how you spin it) just under $700 billion in tax relief, including the elimination of the dividend tax and lowering personal income tax burdens.

According to Bushie spin, the "average" taxpayer savings is $1,083. Well, that would depend on what your definition of average is. The spin put out by the administration makes it sound like the average taxpayer would receive this much tax relief. But this average refers to the amount of savings. Look more closely and you'll see that an average taxpayer would see about a $250 break; the top 1% of filers would have an average cut of about $24,100; and, those with incomes above $1 million would receive a tax break averaging $90,200. There you see, my friends, the law of averages.

But wait, there's more. The dividend tax is next up for elimination. The President claims that taxing dividends is double taxation because corporate profits are already taxed before they even become a dividend check to an investor. Sounds about right in theory, but it misses the fact that roughly half of the corporations in America pay NO corporate tax because of our loophole riddled tax code. But the problem here is larger than a fallacious premise. The real problem is the effect this would have on public borrowing. As it stands now, there is an incentive to invest in municipal, state and other tax exempt issues. But eliminating dividend taxes would make these vehicles much less attractive in the market and would therefore cause interest rates on public debt to rise in order to compete. And what does that mean to the average taxpayer? It means that s/he would have to pay higher taxes to cover the increased cost of public borrowing. So elimination of the dividend tax would be an indirect transfer of wealth from the public at large to the investor class.

One other small point. For years, the economic and budget forecasts provided by the OMB had looked at a ten year time horizon. Of course, people have noted the problems with projecting government spending behavior out over such a long time. Yet, the Bushies took full advantage when they rammed through their first tax cut. But now that the picture shows deficits as far as the eye can see, they have decided to look only at a five year horizon.

Are these the people you want in charge of the US economy?


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