Contrary to Popular Belief, the Wealthy Benefit from Extension of Middle-Class Tax Cuts
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There's this myth going around. It seems many people think the extension of Bush-era tax cuts on the first 250k in income per family exclude wealthy families. They do not. While policy makers are debating letting the Bush-era tax cuts exclusively targeting those with family incomes above 250k, these families would not be excluded from the Democratic proposal to extend these other tax cuts. Indeed, in dollar terms, the wealthy fair better under the so-called middle-class tax cuts, than the middle-class.
Further, the Obama administration has proposed a permanent reduction of dividend taxes to be included in the so-called middle-class tax cut extension. The current rate of 15% is set to sunset along with the other Bush-era tax cuts, at which time, capital gains would be taxed at 1990's levels as regular incomes. If the dividend tax is fixed permanently at 20% instead of rising back to 1990's levels, as Obama has suggested, the wealthy fair even better:
The middle-class tax-cut package The Joint Tax Committee analyzed does not extend the reduction in the tax rate on dividends for couples with incomes over $250,000 (and singles over $200,000). President Obama has proposed, however, that the dividend top rate for high-income people be permanently set at 20 percent, rather than being allowed to return to its pre-2001 level of 39.6 percent. If Congress follows that approach and incorporates this proposal into a middle-class tax-cut package, the average tax cut that high-income households will receive from enactment of such a package will be considerably larger than the figures just cited, and the dollar amount by which the average tax cut going to high-income households exceeds the average tax cut for middle-income households will be significantly larger, as well.
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a note on the graduated income tax
Theodore Roosevelt said:
“No person should receive a dollar unless that dollar has been fairly earned. Every dollar received should represent a dollar's worth of service rendered, not gambling in stocks, but service rendered. The really big fortune, the swollen fortune, by the mere fact of its size acquires qualities which differentiate it in kind as well as in degree from what is possessed by people of smaller means. Therefore, I believe in a graduated income tax on big fortunes, and in another tax which is far more easily collected and far more effective, a graduated inheritance tax on big fortunes, properly safeguarded against evasion, and increasing rapidly in amount with the size of the estate.”
And the people thought: Good, we are stiffing it to those rich people. Boy, I'm glad I'm not having to pay such high tax rates.
But alas, the people were fooled again – because the graduated income tax is in fact another legal theft.
Here’s how it works: If a person who is getting out of the pool of wealth 100 times what he or she puts in pays only a 75% tax rate, they still get out 25 times as much as they put in. A person being underpaid and paying a 25% taxrate is still being robbed - by the underpay. A person being underpaid should be getting a negative tax-rate that brings their pretax income up to equality with what they contribute by their work. If both people are producing $1000 of work products, the person pulling out 100 times as much as he put in, and paying a 75% taxrate, would be getting $25,000, and the person being underpaid 20%, and taxed 25%, would be getting $600. The one putting in $1000 and taking out $25,000 in money and power, the other putting in $1000 and getting out $600 in money and power.
This is not justice. This is far from it. This is theft.
If only Teddy (or Jefferson) had thought of public inheritance, the just sharing of deceased estates among everyone. If they had, they would have turned around the downward slide of America from democracy to decline and fall. The force of erroneous tradition was still bending Teddy's reform thinking away from sense, but once/if people had seen how much money and political power they were getting from public inheritance, Teddy would have got more presidential terms, and been the greatest President. And he would have given a practical demonstration to the world, and saved millions of lives, and saved billions from unnecessary sufferings. Saved the entire infinite future of the human race from an infinity of giant unnecessary sufferings. If only he had seen that all inheritance is other-earned, that any other-earned money is a license to create violence and destroy happiness.
There is the further point that, with unlimited-personal-fortunes systems, with the corruption of ever-expanding bureaucracy and tyranny, you don't know that money going to the government is getting back fully to the people who earned it.
It certainly isn’t today.
I can't decide. Is our government a gig for a gag, or is it a gag for a gig?
(apologies to JJ)