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Wednesday, September 28, 2005
The grand economic coalition
Tard Patch highlighted this from yesterday's Strib:
It is inexcusable, irresponsible, and I think even immoral, that the president should take the position that taxes should not be raised on people like him, and me, and the others who have been blessed by good fortune, to help this country pay for the costs of rebuilding after Katrina (not to mention paying for the misbegotten war in Iraq).
...Those of us who have benefited the most from the American experiment should be paying our part through an increase in taxes. I am ready to do my share; I hope the president and Congress -- including the members of the Minnesota delegation in the Senate and House, who also enjoy high incomes, and who benefited directly from the tax cuts -- will ensure that others will be compelled to join them, and me.
I don't know how wealthy the opinion writer is, but we can go a long way toward balancing the budget by rolling back tax breaks that go primarily to the extremely wealthy: those with millions in assets or over $250,000 in annual income. The tax cut on dividends and the proposed estate tax repeal primarily affect an invisible class of super wealthy Americans whose economic interests are wholly apart from the typical American experience. Not only is it a good revenue source, it's good policy. We can only erect so many fences to separate the have-somes from the have-nones before the have-nones utterly rebel. But until the have-somes are convinced to throw their lot wtih the have-nones rather than the have-mosts, we're doomed to pockets of like-minded gated communities teetering on the brink of economic ruin.
3 Comments:
I know you're feeling cranky, Captain Liberty, but do you feel like reading? Because you're mistaken on your facts. Tax receipts in 2004 were 1.7 trillion. Tax receipts in 2000 were 2.0 trillion. Both figures are in constant dollars.
What is true is that tax revenues under Bush have NEVER been as high as they were in 2000. As a percentage of GDP, the figures are actually more disparate. Federal tax revenues were 20.9% of GDP in 2000. That has decreased each year Bush has been in office to 16.3% in 2004. The 2005 projections show upticks in revenue, but still not enough to match the Clinton economic miracle.
Dividends used to be taxed like any other income. Now you pay lower taxes on unearned income than earned income. People who make less than $50,000 a year earn 13.6% of all dividends in the country and make up 63.7% of all taxpayers. In total, they receive 8.5 billion in dividends annually. .2% of all taxpayers earn more than $1,000,000 a year receive 21.8% of all dividends. In total, they receive $13.5 billion in dividends annually.
In other words, the top .2% of wage earners received a bigger benefit from the dividend tax cut that the bottom 63.7%.
First of all, these aren't my numbers. They're the numbers from the OMB. Second of all, the 2005 projection is 20% behind 2000. According to news reports, actual receipts would exceed projections by as much as $100 billion. Which, of course, would still be $100 billion less than tax receipts in 2000.
Yes, the federal income tax is progressive. If that was the only tax people paid, you would have a very strong point. Up until an annual income of $100,000, people pay more FICA tax than income tax. FICA is grossly regressive, which is why the top 1% pays very little in FICA taxes. How little? Well, taxpayers with over 1,000,000 in income pay 1.5% of their income in payroll taxes. Someone earning $50,000 a year pays 11.9% of their income in payroll taxes.
I'm sure you see the joke about whether FICA actually is used to fund government operations...
That aside, I don't see a distinction between FICA and income tax. Income taxes go toward any number of social insurance programs: welfare, food stamps, unemployment insurance, workers compensation, pension guaranty programs, etc. I suspect you disagree, but I think that's largely what government ought to do: provide for the general welfare.
That all said, I've always assumed that FICA should be considered alongside income taxes when comparing relative tax burdens. I'm willing to be persuaded, if you care to flesh out your argument.
