THE FALLACY OF TAX CUTS FOR THE WEALTHY

[xkenx]

The Right Wing noise machine has decried President Obama's proposal to allow tax breaks for the wealthiest 2% of Americans to expire. They say it will "Stifle economic growth because it harms small business owners who are the engine of employment growth." A little history and a few FACTS are in order.
The Social Security payroll tax is highly regressive by mostly ending upon reaching high income levels, while sales taxes and property taxes are neutral to regressive. The U.S. has had a system of progressive income taxation for a long time. The issue for debate is "just how progressive." Conservatives cry that high taxes on the wealthy stifle entrepreneurship. Well, the 1950s and 1960s, considered to be high growth periods, had marginal tax rates on high incomes of 70-92%. (see chart). The truth is that motivated creative people are not deterred by taxes; they work hard to operate and grow their businesses. Gradually those rates were lowered down into the 30s. When Bill Clinton took office, he pushed through a tax increase which was vitally needed to balance the budget and fund necessary programs. We entered a period of low inflation, solid growth, and eventually surpluses. By contrast George W. Bush not only failed to raise taxes to pay for his war in Iraq as other presidents had done in times of war, but he lowered taxes, mostly for the wealthiest among us. We can daily observe the mess that created. President Obama's proposal is to merely restore the tax rates on the wealthy to their levels before Bush, already low by historical standards.
The average small business owner only dreams of making $250K of taxable income. Currently only 1.5-2% of taxpayers are in that bracket.
Of those, most will be incorporated. To the extent that they wish to invest in their business, they do so. Their personal income taxes are separated from their business operations, and are dependent on what they pay themselves as employees of the corporation. In fact, if they wish to minimize their personal tax "hit" if their rates are raised, they can limit their personal income and plow the money into the business
(an argument FOR raising their rates as a plus for employment growth.) Bottom line: only the truly wealthy are affected by the expiration of Bush's gift. A bonus is Federal deficit reduction.
The real truth: the right wing have an agenda; it is called "Starve the Beast." Since they don't believe that government or government programs have a place, cripple them so that needed programs are starved, and "Laissez Faire" capitalism reigns again. We had a sample of that during the Bush years. It failed once again.

This is a link to the history of marginal tax rates. http://en.wikipedia.org/wiki/Income_tax_in_the_United_States

[alp227]

1. What the tax-cutter Bush said in 2000:`

www.nytimes.com/2000/11/01/politics/01BUSH.html?pagewanted=all

"My concern about the role of the federal government is that an intrusive government, a government that says, `Don't worry, we will solve your problems' is a government that tends to crowd compassion out of the marketplace, that too often in the past people said, `oh don't worry, somebody else will take care of the problem.' "

And then came along the deficit-inciting tax cuts and unpaid-for wars. Thanks for posting.

[RaleighNCDUer]

2. The fact is, those who say "don't worry, somebody else will take care

of the problem" will STILL say that whether it is the government or NGOs tackling the 'problem'. The reason that SS and food stamps and other governmental solutions were invented was that private charities were not up to the challenge and people were dying of starvation in the richest county in the world.

(edit for spelling)