Tax the rich, whoever they are
Thursday, September 30, 2010
Just who is rich? That's the underlying question behind the now-postponed battle over which of the expiring Bush tax cuts to extend or ditch.
Under the Obama Administration plan, the 2001 and 2003 tax cuts for the middle-class (and yes, there's another definitional issue there) would be retained.
But the income tax rates for the top 2.5 percent of taxpayers -- individual making more than $200,000 a year and families bringing home more than $250,000 -- would be hiked.
Those folks, for the prez's tax plan purposes, are rich.
In most cases, that's a safe assumption. The vast majority of us make far less than that. And we would indeed feel richer, if not technically rich, if we were pocketing $250,000 or so each year.
I mean, c'mon. There's never been a television show called "Who Wants to Be A Quarter-of-a-Millionaire."
Location, location, income: But if you live in a major metropolitan area, you have different perspective on a lot of things, including money. You're more likely to argue that a hefty six-figure income don't necessarily qualify you as rich.
Acknowledging that possibility recently got the junior Senator from Virginia into some hot water with his party's leadership.
Jim Webb (D-Va.) is "definitely in favor of passing tax cuts," a spokesman Will Jenkins told TPM. "He is still discussing the specifics with his colleagues, but he has said that he thinks the proposed $250,000 cut off level is too low, and he is advocating that it be raised."
Sure, Webb represents all of the Old Dominion. But a sizable chunk of voters live in Norther Virginia, the costly suburbs just outside Washington, D.C. I suspect some of those voters had been talking to Webb about their pay and possible taxes.
Are 'tax' and 'fair' possible? The $200,000 or $250,000 threshold for the top tax rates also are troubling to some as a tax fairness issue. They question whether a person earning more than $200,000 a year should be taxed at rates similar to those making $5 million.
They have a point. That same across-the-board application drove me crazy when the hubby and I paid the same health insurance rate for our family of two that a household with a mom, dad and four kids paid. I was quite pleased when we were offered the less-pricey couple-only premium option.
That's why there's now some talk of a millionaires' tax. This plan would create one or two additional tax brackets for the wealthiest Americans and eliminate the Bush tax cuts only for true millionaires, those whose annual earnings top seven figures.
Now that Congress has pushed off any debate on Dubya's expiring tax cuts until after the midterm elections, we'll see what kind of tax-rate tweaks might come up in November.
What the rich do with their tax cuts: A related tax cut question is, are the tax breaks for the rich worth it? No, according to a recent study.
Moody Analytics recently looked at economic data and tax-cut history and found that the rich tend to save their tax cut money instead of spending it.
That certainly tends to take some of the shine off the argument that all tax cuts will get every American spending again and get the U.S. economy back on track.
You can check out all the details in Moody's complete report, The Economic Impact of Tax Cut Proposals: A Prudent Middle Course.
- No votes on tax cuts until November
- Effect of expiring tax cuts on the rich
- Democrat vs. Republican tax cut graphics
- Tax cuts favor ...
- Taxes, wealth and relativity
- Democrats who support Bush tax cuts
- Representing the rich ... or not
- Some quick tax cut calculations
- OMG! What will happen to my tax bill if the Bush tax cuts expire!?!
- Don't hate me because I'm rich
- A look at who's paying how much taxes
- 'Tax us more,' say some rich Americans
- Refund loans and the once-a-year 'rich'
- U.S. income ups and downs
- Aspirational investing
- 2010's expiring tax cuts likely to be dealt with by a
- California millionaires' tax is legal
- New Jersey tax tidbit: rich get relief
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Tim, it's working OK for me, but it's a pretty good sized PDF and I've had to hit reload before to get it to show up. Here's the direct link: http://www.economy.com/mark-zandi/documents/Tax_Cuts_091510.pdf If that doesn't work for you, drop me another note and we'll see what we can do to get you a copy. Kay
Posted by: Kay | Friday, October 01, 2010 at 04:33 PM
Hi Kay, the link to the .pdf from Moody's is not working, is it just me? I would love to read it.
Posted by: Tim | Friday, October 01, 2010 at 10:15 AM
Thanks for distinguishing between tax thresholds for single people and households.
Posted by: Susan | Friday, October 01, 2010 at 01:27 AM
"Are 'tax' and 'fair' possible?"
Not really. By definition, the EIC isn't really fair to everyone else who works and has to pay taxes.
Taxes might be as fair as possible, though, like in the "more perfect union" in the Preamble of the constitution.
"Moody Analytics recently looked at economic data and tax-cut history and found that the rich tend to save their tax cut money instead of spending it. "
If we're talking about people who aquired most of their wealth during their lifetime, then this is a "duh" moment. You don't get to be rich by spending every nickel. (In other news, Moody studies report that water is mostly wet...) *grin*
On the other hand, you can demoralize ambitious people from either working at or for high income careers or small business owners on the edge by taxing the snot out of them. People need to feel like they can get ahead if they work at it. The government can only do a good job at discouraging that attitude.
Posted by: Amy | Thursday, September 30, 2010 at 08:07 PM
Then there are those of us who are rich in things that (private) money can't buy.
I feel rich to live in a place with clean air, clean water, breathtaking mountain views, safe streets, excellent schools, great libraries, refreshing parks, sensible health care providers, and surrounded by many people who share my values and ideals, including my beloved family.
Posted by: Mary OKeeffe | Thursday, September 30, 2010 at 07:35 PM