Platypus
09-16-2004, 11:59 PM
I found an interesting article at the Center on Budget and Policy Priorities (http://www.cbpp.org/8-25-04tax.htm) about the effect of Bush's tax cuts. Let's see what it says about helping the middle class.
To date, the tax cuts have been financed through bigger deficits. This postpones but does not eliminate the need to pay for the tax cuts. The situation is analogous to a consumer charging a major purchase to a credit card. The charge postpones, but does not eliminate, the need for the ultimate payment. Because there is uncertainty about how the tax cuts will ultimately be financed, the Tax Policy Center/CBPP report examined two hypothetical scenarios. In both scenarios, the annual cost of the tax cuts from the 2001 and 2003 tax legislation (when fully phased in) would be paid for fully, so the net effect of the tax cuts on the budget would be zero.
...
n the first scenario, every household would pay the same dollar amount to finance the tax cuts. Something close to this scenario could occur if the tax cuts were financed largely or entirely through spending cuts. If this were to occur:
Households in the middle quintile would, on net, lose an average of about $870 per household per year from the tax cuts.
In contrast, the top one percent of households would still benefit handsomely from the tax cuts. Even after taking into account the financing measures, the top one percent of households would end up ahead by an average of $38,780 per year.
In the study’s second scenario, households would pay for the tax cuts in proportion to their incomes. This would be more akin to funding the tax cuts by some combination of spending cuts and tax increases. Even under this scenario, low- and middle-income Americans would lose out — while those at the top gained. Under this scenario:
Households in the middle quintile would lose an average of $230 per year.
Those in the top one percent would still gain an average of $14,790 per year.
Hmmm. Let's try the old "stimulate the economy" excuse, then.
Zandi examined the average “bang for the buck” of provisions in the enacted tax cuts. He finds that the significant majority of these tax cuts consist of policies that return little bang for the buck, yielding less than $1 of short-term economic demand for each $1 of cost. Altogether, Zandi’s study indicates that the average bang for the buck from the tax cuts has been 74 cents. (In other words, each dollar of tax cuts has produced only 74 cents of added economic demand the next year.)
OK, that didn't work. Desperation time: let's claim that the cuts will stimulate charitable giving.
In another new study, CBO finds that charitable causes are likely to suffer due to the gradual elimination of the estate tax enacted in the 2001 tax bill. The study examines the effect of the estate tax on charitable giving and finds that its elimination — which benefits only the wealthiest Americans — would cause charitable contributions to fall by large amounts.
According to CBO estimates, if estate-tax repeal had been in effect in 2000, charitable donations would likely have been reduced by $13 billion to $25 billion that year. The drop in donations would come entirely from reduced giving by the wealthiest Americans, who would no longer be encouraged by the estate tax to donate more in order to reduce the size of their estate and, thus, their estate tax liability.
Looks like three strikes and out, folks. A net loss for the middle class, no economic stimulus, and a significant reduction in charitable giving. You'll have to read the article to see the bit about the effect these cuts have had on jobs. As always, don't be fooled by rhetoric. Do pay attention to the man behind the curtain. Look at actual results, as compiled by reputable economists who identify their sources properly, and you'll see just how contrary these cuts are either to sound economic policy or this nation's cherished ideals.
To date, the tax cuts have been financed through bigger deficits. This postpones but does not eliminate the need to pay for the tax cuts. The situation is analogous to a consumer charging a major purchase to a credit card. The charge postpones, but does not eliminate, the need for the ultimate payment. Because there is uncertainty about how the tax cuts will ultimately be financed, the Tax Policy Center/CBPP report examined two hypothetical scenarios. In both scenarios, the annual cost of the tax cuts from the 2001 and 2003 tax legislation (when fully phased in) would be paid for fully, so the net effect of the tax cuts on the budget would be zero.
...
n the first scenario, every household would pay the same dollar amount to finance the tax cuts. Something close to this scenario could occur if the tax cuts were financed largely or entirely through spending cuts. If this were to occur:
Households in the middle quintile would, on net, lose an average of about $870 per household per year from the tax cuts.
In contrast, the top one percent of households would still benefit handsomely from the tax cuts. Even after taking into account the financing measures, the top one percent of households would end up ahead by an average of $38,780 per year.
In the study’s second scenario, households would pay for the tax cuts in proportion to their incomes. This would be more akin to funding the tax cuts by some combination of spending cuts and tax increases. Even under this scenario, low- and middle-income Americans would lose out — while those at the top gained. Under this scenario:
Households in the middle quintile would lose an average of $230 per year.
Those in the top one percent would still gain an average of $14,790 per year.
Hmmm. Let's try the old "stimulate the economy" excuse, then.
Zandi examined the average “bang for the buck” of provisions in the enacted tax cuts. He finds that the significant majority of these tax cuts consist of policies that return little bang for the buck, yielding less than $1 of short-term economic demand for each $1 of cost. Altogether, Zandi’s study indicates that the average bang for the buck from the tax cuts has been 74 cents. (In other words, each dollar of tax cuts has produced only 74 cents of added economic demand the next year.)
OK, that didn't work. Desperation time: let's claim that the cuts will stimulate charitable giving.
In another new study, CBO finds that charitable causes are likely to suffer due to the gradual elimination of the estate tax enacted in the 2001 tax bill. The study examines the effect of the estate tax on charitable giving and finds that its elimination — which benefits only the wealthiest Americans — would cause charitable contributions to fall by large amounts.
According to CBO estimates, if estate-tax repeal had been in effect in 2000, charitable donations would likely have been reduced by $13 billion to $25 billion that year. The drop in donations would come entirely from reduced giving by the wealthiest Americans, who would no longer be encouraged by the estate tax to donate more in order to reduce the size of their estate and, thus, their estate tax liability.
Looks like three strikes and out, folks. A net loss for the middle class, no economic stimulus, and a significant reduction in charitable giving. You'll have to read the article to see the bit about the effect these cuts have had on jobs. As always, don't be fooled by rhetoric. Do pay attention to the man behind the curtain. Look at actual results, as compiled by reputable economists who identify their sources properly, and you'll see just how contrary these cuts are either to sound economic policy or this nation's cherished ideals.