Former President George W. Bush has now been thoroughly demonized for his 2001 and 2003 tax cuts.
Former President George W. Bush has now been thoroughly demonized for his 2001 and 2003 tax cuts. All Americans who can hear or read know they were aimed at making life better for the rich. But since all provisions are set to expire at midnight on the 31st of this month, perhaps we should examine what else is involved.
Here is a table of pre- and post-tax-cut rates so you can compare them more easily:
Taxable income (for simplicity, 2000 taxable income for individuals) for those making more than $288,350: 39.6 percent in 2000 and 35 percent in 2003.
Up to $288,000, 36 percent in 2000 and 33 percent in 2003.
Up to $132,600, 31 percent in 2000 and 28 percent in 2003.
Up to $63,550, 28 percent in 2000 and 25 percent in 2003.
Up to $26,250, 15 percent in 2000 and 15 percent in 2003.
Zero to $6,000, 15 percent in 2000 and 10 percent in 2003.
If you had dependent children, they became worth a credit of $1,000 in tax, up from $500. If you didn’t owe any tax, you were paid the credit in cash. Also, if you were married, the Bush law reduced (but didn’t eliminate) the tax penalty for being hitched.
If the income tax cuts expire, the upper income folks would pay $52 billion more per year, the middle-incomers $84 billion more, and lower brackets $55 billion, according to a study by the Economic Policy Institute of Sept. 18. The 10 percent bracket’s elimination will cost the working poor $40 billion a year.
However altogether, the Congressional Research Service estimates government revenue would grow by $325 billion over the next two years if there is no extension. On the other hand, Mark Zandi, chief economist of Moody Analytics, estimates the economy will contract by $281 billion just in 2013.
So, let’s see if I have this correct. The government might get $325 billion over two years while the rest of us lose $281 billion in just one year. Sounds like a great deal.
It reminds me of the punishment handed out to fat cats a few years ago with great fanfare. In the 1990 tax act that caused a small recession that cost President George H.W. Bush his re-election, a 10 percent excise tax was levied on expensive boats to make the rich pay their fair share. When they quit buying yachts, 100,000 yacht-building workers lost their jobs and various boat companies went out of business. Then the tax was repealed, and those rich people started buying boats again.
Perhaps we should all go over the falls together. You might lose your job, but then your taxes will be lower anyway.
(Primary information from Evan Soltas, Bloomberg.com, Nov. 28.)
Ron Finke is president of Stewardship Capital, a registered investment adviser. This is general advice and not meant to contain specific recommendations. Reach Finke at email@example.com.
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