Friday, December 17, 2010

Bush Tax Cuts - Part VIII

Well the deed is done.  Here are the highlights:



Highlights of the $858 billion tax-cut package

Income taxes: Extends Bush-era tax rates at all income levels. Cost: $186.8 billion
Alternative Minimum Tax: 20 million middle-income households spared AMT. $136.7 billion
Itemized deductions: More generous for high-income households. $20.7 billion
Standard deduction: Higher for married couples. $18 billion
Extension of sales-tax deductions: Washington residents take note. $5.5 billion
Payroll tax: Lowers Social Security tax from 6.2 percent to 4.2 percent in 2011. $112 billion
Estate tax: 35 percent tax, over $5 million/individuals, $10 million/couples. $68.1 billion
Child tax credit: Expands who can claim $1,000 credit. $71.7 billion
Jobless benefits: Up to 99 weeks, through 2011. $56.5 billion
Source: Joint Committee on Taxation
(from The Seattle Times)




Rob Natelson wrote at Freedom's Front Line:

So Congress is now about to give us a deal that raises spending and adds to the deficit.  How can this happen?  It can happen because the Supreme Court has so expanded Congress’s spending power as to change the U.S. Constitution from a good constitution to a bad one.
Constitutions are rules for the political game.  Good rules translate the normal political process into generally good results.  Bad rules translate them into bad results.
If the courts were still enforcing the original Constitution’s limits on federal spending, this deal would have come out differently: Instead of Republicans winning tax cuts and Democrats getting spending increases (resulting in a higher deficit), the principal dealing would have been over whether to cut more or less spending, resulting in a lower deficit.
Maybe we need a constitutional amendment requiring a balanced budget?  From my understanding, the constitution requires a balanced budget over the long term.  Lately, all the government's deficit spending are emergency spending (as in the case of war.)  At any rate the next session of congress will be looking for cutting government spending.  Hmm, I wonder whether it will be military cutbacks or social programs on the chopping block...

Bush Tax Cuts - Part VII

The only issue the Republican party cares about right now is extending the Bush Tax Cuts.  Oh what a failure Republicans would be if the Bush Tax Cuts don't get extended!  Oh how their masters will whip them!

Mr. President Obama - please raise my taxes!  I don't mind paying my fair share of taxes.  I value our social safety net.  I value our police force, firefighters, teachers, librarians and everyone else who gets paid by the government to provide the infrastructure for our society.

Raise my taxes!

Tuesday, December 14, 2010

The Corporatocracy Strikes Again!

Quote of the day:
Mitch McConnell, a Republican from Kentucky, said in a floor speech that the compromise was an essential first step toward addressing the nation’s deficit, by “cutting off the spigot’’ of tax income to the federal government to force Congress to make spending cuts.
The Republicans have an agenda which is to cater to the corporatocracy and the affluent.  However, in order to do this they have to "sell" their agenda to the average American.  And this they do very well.  Traditionally, they have done this with deceit and subterfuge.
 
Lately, they are not even trying to conceil their true intentions but are outright announcing that they want lower taxes for the top 2% and that they want the government to make spending cuts.  If you read between the lines, it means cuts to social programs like public schooling, unemployment insurance, social security and medicare.  They're not that keen on infrastructure either so even our civil servants aren't safe.

It doesn't matter if the government increases the deficit by spending or by tax cuts.  Either way the corporatocracy wins when the government doesn't have money for social programs.

The corporatocracy consists of the biggest corporations that have the most influence on government like banks, defense contractors, energy companies, big pharma, etc.  The corporatrocracy has another name - the "military-industrial complex" and Dwight D. Eisenhower dropped the bomb on it in his farewell speech:
In the councils of government, we must guard against the acquisition of unwarranted influence, whether sought or unsought, by the military-industrial complex. The potential for the disastrous rise of misplaced power exists and will persist. We must never let the weight of this combination endanger our liberties or democratic processes. We should take nothing for granted. Only an alert and knowledgeable citizenry can compel the proper meshing of the huge industrial and military machinery of defense with our peaceful methods and goals, so that security and liberty may prosper together.
Two points come to mind.  One, why wasn't anything done about it after it had been exposed by Ike?  And two, we must fight for democracy as well as life, liberty and the pursuit of happiness.

Friday, December 10, 2010

A little to the right...

A little to the right...
  • I believe in democracy.
  • I believe in free enterprise.
  • I am not a big fan of unemployment insurance or social security - social programs should be based on need.
  • I am not a big fan of unions in that it interferes with the equilibrium of the supply and demand of labor.  I believe that professionals should not be able to limit their numbers.  Secret societies should be highly illegal.
  • I believe the role of the government isn't to own or operate its companies.
  • I believe in free-trade in principle if it's fair trade.
  • I believe in transparency.  Governments agencies should not be acting in secret other than intelligence gathering.
  • I believe that governments should not wage war on foreign countries.  Foreign countries should not be exploited.
  • I believe that rules and regulations should be simple and fair to small business and large corporations alike.
  • I believe that estate taxes should be eliminated.
  • I believe in a fair, just, timely, predictable and non-political legal system.
  • I believe that the government should balance their budget over a complete business cycle.  That means running surpluses in good times and deficits in bad times.
A little to the left... 
  • I believe in universal heath care paid through general revenue.
  • I believe good free education right on through university.
  • I believe if you cause harm to someone or society in general then you should have to compensate the injured party.  That means taxes on gasoline, pollution, alcohol, tobacco, sodas, candy and anything with excessive fat or sugar in it, etc.
  • I believe that government must build and maintain infrastructure in the public good. 
  • I believe that industries in the public good or with extraordinary market share should be regulated.
  • I believe that fines should be high enough to deter unwanted unlawful/illegal activities.
  • I believe that companies that abuse their market share should be broken up.
  • I believe that individuals within companies should held accountable for their actions and crimes.
  • I believe that minimum wage should be a livable wage.
  • I believe in capital gains tax - triggered when sold or otherwise changed ownership (gift/death).
  • I believe that a society should take care of those who cannot take care of themselves.  I believe that the government should provide job training and jobs to those that want to work (excluding handicapped or retired).
  • I believe than tenants whether individuals or businesses should be protected from excessive rate increases.

Sunday, December 5, 2010

Bush Tax Cuts - Part VI

The estimates we see from the press are 3 trillion over 10 years for couples who have earned $250k or less and $700b over 10 years for the top 2%.  That's $3.7t in total.

The United States population is about 311m.   See the US Population Clock.

So the tax cost per person is approx $12k.  So why not send out rebate checks instead?  We'll all share the stimulus money equally and the low income earners will get a larger percentage relative to their income.  Now the government needs to save some money.  So lets save half and distribute the remaining 6k to every person in the us over the next 10 years.  That's approximately $600 per person per year.   Oh wait, that's the same amount of the Bush Stimulus Rebates.  Except Bush had caps $75k for individuals, $150k for couples and parents only got $300 per child.  Now why is this socialist agenda coming from the Republicans and not the Democrats?  I know I got some kind of a tax credit from the Democrats for 2009 and 2010 but I'm going to have to check my tax returns to make sure I got it.  I think checks are more memorable.

Let's let the Bush Tax Cuts expire and send out Obama Stimulus Rebate Checks instead!

Saturday, December 4, 2010

An open letter to President Obama

Dear Mr. President Obama,

You've been pulling the wool over our eyes for almost 2 years now but we've wised up.  You may claim to be the great centrist and work with Democrats and Republicans alike to get the job done.  But we've seen the way you work.  You start by talking tough and holding your ground.  Before even negotiations get tough it's leaked that your willing to compromise.  Then it's leaked that your willing to compromise a little more, and then a little more.  It looks like that your in the pocket of the Corporatocracy.  Where shall we start?
  • Your biggest campaign contributors were banks and investment banks. (http://wiki.answers.com/Q/Who_are_Barack_Obama%27s_biggest_campaign_donors)
  • Department of the Treasury: Secretary Timothy F. Geithner.  Straight from Federal Reserve Bank of New York where he was president and chief executive officer.
  • On Finance Reform Bill - gave them everything they wanted.
  • Department of Defense:  Secretary Robert M. Gates.  Nothing quite says no change here by appointing the guy from the previous administration.  No sign of either the War in Afghanistan nor the war in Iraq ending.  Defense budget up and increase of troops.
  • Guantanamo Bays shows no sign of closing.
  • Fair trials for Guantanamo Bay detainees.  Keeping Guantanamo Bay detainees without trial indefinitely.
  • Reappointing Ben Bernake.
  • Michael Taylor was the FDA official who approved the use of Monsanto's Bovine Growth Hormone in dairy cows (even though it's banned in most countries and linked to cancer). After approving it, he left the FDA—to work for Monsanto. Until last year, when he moved back to the government—as President Obama's "Food Safety Czar." No joke. (No. 4 from from http://www.fightwashingtoncorruption.com/top10.html)
  • Health Care:  No public option.  Gave the HMO everything they could possibly want.  Didn't have public support.  Will force people to purchase health care or pay a penalty: probably unconstitutional.
  • Cap and Trade: gone.
  • Bush Tax Cuts:  Willing to compromise with the Republican-house-elect on extending the Bush Tax Cuts for the top 2%.  Why should the Republicans compromise when you've indicated that you're will to extend the Bush Tax Cuts for the top 2% in exchange for a few bones.
  • Protected the Bush administration from indictment domestically and abroad.
  •  The 'Making Homes Affordable' program was a joke.  It was completely at the bank's discretion.
Obama supporters may want to check the entertaining site:

http://whatthefuckhasobamadonesofar.com/

While more realists may want to check out:



The Obameter Tracking Obama's Campaign Promises

I think what I'm really upset about is what you've done to the Democrat party.  William Lyon Mackenzie King said something like, "
The first thing a politician does after getting into office is get to work on his reelection campaign."  Instead of being true to Democrat ideals or following public opinion, you've chosen your own 'please no one' strategy.  You've taken the 'moral high ground' as the Republican have made mincemeat out of you.

Finally Mr. President, if you really wanted to change the way Washington works then you should have started with bills such as:


  • Removing the filibuster rules.
  • Restricting corporate influence over elections.  (Corporations aren't people and cannot vote thus restrictions on their influence should have been legislated.)
  • Tackled earmarks, transparency and lobbyists.
  • Fund all candidates and put caps on spending.
The good news, Mr. Obama, is that you've been a good Corporatocracy soldier and I'm sure they will get you re-elected.

Sunday, November 28, 2010

Bush Tax Cuts - Part V

by Mindsweeper

                                                         ‘Welfare for the Wealthy’

                      As % of GDP     DowJones Industrials   Unemployment      Defense Spending  
          Revenues         Outlays      (year-end close)         Rate (%)             (FY2009 constant$)
1980     19.0                   21.7                      964                      7.1                           $385 bln
1981     19.6                   22.2                      875                      7.6                           $428 bln
1982     19.2                   23.1                    1047                      9.7                           $470 bln 
1983     17.5                   23.5                    1259                      9.6                           $502 bln
1984     17.3                   22.2                    1212                      7.5                           $522 bln
1985     17.7                   22.8                     1547                     7.2                           $557 bln
1986     17.5                   22.5                     1896                     7.0                           $536 bln 
1987     18.4                   21.6                     1939                     6.2                           $519 bln
1988     18.2                   21.3                    2169                      5.5                           $508 bln
1989     18.4                   21.2                    2753                      5.3                           $502 bln 
1990     18.0                   21.9                    2634                     5.6                           $492 bln
1991     17.8                   22.3                    3169                      6.8                           $447 bln
1992     17.5                   22.1                    3301                      7.5                           $443 bln 
       
2000     20.6                   18.2                  10788                      4.0                           $387 bln
2001     19.5                   18.2                  10022                      4.7                           $426 bln
2002     17.6                   19.1                    8342                      5.8                           $448 bln
2003     16.2                   19.7                  10454                      6.0                           $547 bln
2004     16.1                   19.6                  10783                      5.5                           $570 bln
2005     17.3                   19.9                  10717                      5.1                           $565 bln
2006     18.2                   20.1                  12463                      4.6                           $605 bln
2007     18.5                   19.6                  13265                      4.6                           $660 bln
2008     17.5                   20.7                    8776                      5.8                           $709 bln
2009     14.8                   24.7                  10428                      9.3                           $687 bln

Sources:

 The Reagan and GWBush tax cuts took effect in years 1-3 after their respective elections, leading to a sharp drop in revenue during years 2-5.  Most of the benefit went to the richest Americans, who put their windfall into the stock market and NOT, as Republicans and conservatives allege, into creating jobs and opportunities for the rest of Americans.  After the cuts of 1981 and 2001-3, stocks entered a bull market phase and tax revenues began to gradually increase, although never returning to pre-tax cut levels.   While unemployment spiked up in 1982-3 and then back down from 1984-1991, by the end of of both Republican tax cut eras, it was actually higher than it was at the start.

To summarize what actually occurred:
1. the wealthiest Americans received huge tax cuts early in the terms of Reagan and GWBush
2. the Dow rallied from Dow 875 at the end of Reagan’s 1st year(1981) to over 2740 in Aug 1987 before crashing and then resuming the rally to new highs in 1992
3. the Dow rallied from 10,022 at the end of GWBush’s 1st year(2001) to over 13,850 in Dec2007 before crashing and then rallying back to 10,400 at the end of 2009
4. those most able to invest in and benefit from a bull market in stocks received a “tax windfall” and then paid a lower tax rate “post-windfall” than “pre-windfall”
5. the nation’s unemployment rate at the time of the stock market peaks in late- 1987(6.2%) and 2007(4.6%) was little-changed from what it was when Reagan (7.1% in 1980) and GWBush(4.0% 2000) took office


Now let’s look a Measure of Income Dispersion
Source:

                Mean Household Income by Quintiles (in 2009 CPI-U-RS adjusted dollars)
                                Lowest 20%            Second 20%          Third 20%              Fourth 20%            Top 20%
                1980        10,682                     26,586                     43,870                     64,631                     115,236
                1981        10,414                     25,942                     42,975                     64,061                     114,432
                1982        10,223                     25,868                     42,820                     63,683                     116,800
                1983        10,342                     25,980                     42,954                     64,457                     118,343  
                1984        10,689                     26,624                     44,120                     66,429                     122,148
                1985        10,672                     27,046                     44,893                     67,528                     126,139                                  
                1986        10,781                     27,734                     46,410                     69,914                     132,332
                1987        11,076                     28,148                     47,060                     71,133                     135,278
                1988        11,264                     28,428                     47,548                     71,875                     137,218
                1989        11,681                     29,063                     48,311                     73,076                     142,851  
                1990        11,400                     28,684                     47,379                     71,433                     138,627
                1991        11,098                     27,875                     46,302                     70,582                     135,349
                1992        10,868                     27,233                     45,711                     71,038                     136,470                  
% Increase            
1980-1992               1.74%                      2.43%                      4.20%                      9.91%                      18.42%
% Increase
1992-2000               16,41%                    15.99%                    15.08%                    15.11%                    29.85%

                2000        12,651                     31,588                     52,603                     81,774                     177,203                  
                2001        12,280                     30,855                     51,647                     80,978                     176,848
                2002        11,911                     30,284                     51,032                     80,271                     171,382
                2003        11,658                     29,947                     50,834                     80,463                     171,527
                2004        11,633                     29,765                     50,431                     79,518                     171,965
                2005        11,707                     30,057                     50,871                     80,014                     175,335
                2006        12,077                     30,614                     51,301                     81,201                     178,904
                2007        11,949                     30,457                     51,691                     81,839                     173,763  
                2008        11,612                     29,405                     49,942                     79,457                     170,408  
                2009        11,552                     29,257                     49,534                     78,694                     170,844  
% Decrease
2000-2009               -8.69%                    -7.38%                    -5.83%                    -3.77%                    -3.59%
% Increase
1980-2009               8.14%                      10.05%                    12.91%                    21.76%                    48.26%


Overall, for the 30 year period since 1980, income for the top 20% increased at nearly 6X
the rate at which it grew for the lowest 20% and at nearly 5X the rate of the second 20%.

During the Reagan years, income for the top 20% increased  at more than 10X the rate at which It grew for the lowest 20% and at nearly 8X the rate of the second 20%.  Under GWBush, all incomes dropped, but for the bottom 40% it dropped at a rate more than 2X greater than it did for the top 20%.   

During the Clinton years (1993-2000), tax rates were raised slightly for the wealthiest Americans.  The economy and stock markets boomed and incomes for the bottom 80% rose equally on a percentage basis.  The top 20% still did nearly 2X better than everyone else, but American prosperity was shared, however briefly, for the only time period of the last 30 years.


None of this is to say that higher tax rates were the driving force behind the economic boom of the Clinton years.  However, the data presented here clearly shows that the Reagan and GWBush tax cuts CLEARLY are regressive in their effect upon income growth.   During the income growth period from 1980-1992, the top 20% saw their incomes grow at 8-10X the rate of the bottom 40%.  During the income decline period from 2000-09, the bottom 40% saw their incomes decline at more than 2X the rate of the top 20%.  Those who “needed it most” got the least in upturns and lost the most in downturns.  

A truly progressive tax system is one in which those who can least afford it share on a proportionate percentage basis of income  during both times of economic growth and contraction.  A system of tax cuts for the wealthy which enables the rich to earn disproportionally greater income increases in good times and to experience disproportionally smaller income declines in bad times is nothing but WELFARE FOR THE WEALTHY and is truly SHAMEFUL!!

At least Warren Buffett and Bill Gates agree!

Friday, November 26, 2010

Bush tax cuts IV-WELFARE for the WEALTHY

‘Welfare for the Wealthy’

As % of GDP DowJones Industrials Unemployment
Revenues Outlays (year-end close) Rate (%)
1980 19.0 21.7 964 7.1
1981 19.6 22.2 875 7.6
1982 19.2 23.1 1047 9.7
1983 17.5 23.5 1259 9.6
1984 17.3 22.2 1212 7.5
1985 17.7 22.8 1547 7.2
1986 17.5 22.5 1896 7.0
1987 18.4 21.6 1939 6.2
1988 18.2 21.3 2169 5.5
1989 18.4 21.2 2753 5.3
1990 18.0 21.9 2634 5.6
1991 17.8 22.3 3169 6.8
1992 17.5 22.1 3301 7.5

2000 20.6 18.2 10788 4.0
2001 19.5 18.2 10022 4.7
2002 17.6 19.1 8342 5.8
2003 16.2 19.7 10454 6.0
2004 16.1 19.6 10783 5.5
2005 17.3 19.9 10717 5.1
2006 18.2 20.1 12463 4.6
2007 18.5 19.6 13265 4.6
2008 17.5 20.7 8776 5.8
2009 14.8 24.7 10428 9.3

Sources: http://www.gpoaccess.gov/usbudget/fy11/sheets/hist01z3.xls
http://www.bls.gov/cps/cpsaat1.pdf

The Reagan and GWBush tax cuts took effect in years 1-3 after their respective elections, leading to a sharp drop in revenue as %of GDP during years 2-5. Most of the benefit went to the richest Americans, who put their windfall into the stock market and NOT, as Republicans and conservatives allege, into creating jobs and opportunities for the rest of Americans. After the cuts of 1981 and 2001-3, stocks entered a bull market phase and tax revenues began to gradually increase, although never returning to pre-tax cut levels. While unemployment spiked up in 1982-3 and then back down from 1984-1991, by the end of of both Republican tax cut eras, it was actually higher than it was at the start.

To summarize what actually occurred:
1. the wealthiest Americans received huge tax cuts early in the terms of Reagan
and GWBush
2. the Dow rallied from Dow 875 at the end of Reagan’s 1st year(1981) to over 2740
in Aug 1987 before crashing and then resuming the rally to new highs in 1992
3. the Dow rallied from 10,022 at the end of GWBush’s 1st year(2001) to over 13,850
in Dec2007 before crashing and then rallying back to 10,400 at the end of 2009
4. those most able to invest in and benefit from a bull market in stocks received
a “tax windfall” and then paid a lower tax rate “post-windfall” than “pre-
windfall”
5. the nation’s unemployment rate at the time of the stock market peaks in late- 1987
(6.2%) and 2007(4.6%) was little-changed from what it was when Reagan (7.1% in
1980) and GWBush(4.0% in 2000) took office



Now let’s look a Measure of Income Dispersion
Source:
http://www.census.gov/hhes/www/income/data/historical/inequality/taba2.pdf

Mean Household Income by Quintiles (in 2009 CPI-U-RS adjusted dollars)
Lowest 20% Second 20% Third 20% Fourth 20% Top 20%
1980 10,682 26,586 43,870 64,631 115,236
1981 10,414 25,942 42,975 64,061 114,432
1982 10,223 25,868 42,820 63,683 116,800
1983 10,342 25,980 42,954 64,457 118,343
1984 10,689 26,624 44,120 66,429 122,148
1985 10,672 27,046 44,893 67,528 126,139
1986 10,781 27,734 46,410 69,914 132,332
1987 11,076 28,148 47,060 71,133 135,278
1988 11,264 28,428 47,548 71,875 137,218
1989 11,681 29,063 48,311 73,076 142,851
1990 11,400 28,684 47,379 71,433 138,627
1991 11,098 27,875 46,302 70,582 135,349
1992 10,868 27,233 45,711 71,038 136,470
% Increase 1980-1992
1.74% 2.43% 4.20% 9.91% 18.42%
% Increase 1992-2000
16.41% 15.99% 15.08% 15.11% 29.85%

2000 12,651 31,588 52,603 81,774 177,203
2001 12,280 30,855 51,647 80,978 176,848
2002 11,911 30,284 51,032 80,271 171,382
2003 11,658 29,947 50,834 80,463 171,527
2004 11,633 29,765 50,431 79,518 171,965
2005 11,707 30,057 50,871 80,014 175,335
2006 12,077 30,614 51,301 81,201 178,904
2007 11,949 30,457 51,691 81,839 173,763
2008 11,612 29,405 49,942 79,457 170,408
2009 11,552 29,257 49,534 78,694 170,844

% Decrease 2000-2009
-8.69% -7.38% -5.83% -3.77% -3.59%
% Increase 1980-2009
8.14% 10.05% 12.91% 21.76% 48.26%


Overall, for the 30 year period since 1980, income for the top 20% increased at nearly 6X the rate at which it grew for the lowest 20% and at nearly 5X the rate of the second 20%.

During the Reagan years, income for the top 20% increased at more than 10X the rate at which it grew for the lowest 20% and at nearly 8X the rate of the second 20%. Under GWBush, all incomes dropped, but for the bottom 40% it dropped at a rate more than 2X greater than it did for the top 20%.

During the Clinton years (1993-2000), tax rates were raised slightly for the wealthiest Americans. The economy and stock markets boomed and incomes for the bottom 80% rose equally on a percentage basis. The top 20% still did nearly 2X better than everyone else, but American prosperity was shared, however briefly, for the only time period of the last 30 years.

This is NOT to say that higher tax rates were the driving force behind the economic boom of the Clinton years. However, the data presented here clearly shows that the Reagan and GWBush tax cuts are REGRESSIVE in their effect upon INCOME GROWTH. During the income growth period from 1980-1992, the top 20% saw their incomes grow at 8-10X the rate of the bottom 40%. During the income decline period from 2000-09, the bottom 40% saw their incomes decline at more than 2X the rate of the top 20%. On a PERCENTAGE BASIS, those who “needed it most” got the least in upturns and lost the most in downturns!

A truly progressive tax system is one in which those who can least afford it share on a proportionate percentage basis of income during both times of economic growth and contraction. A system of tax cuts for the wealthy which enables the rich to earn disproportionally greater income increases in good times and to experience disproportionally smaller income declines in bad times is nothing but WELFARE FOR THE WEALTHY and is truly SHAMEFUL!!

At least Warren Buffett and Bill Gates agree!

http://www.huffingtonpost.com/2010/11/21/warren-buffett-paying-more-taxes_n_786516.html

Thursday, November 18, 2010

BUSH TAX CUTS III

THE MAIN REASON WHY WE NEED TO KEEP THE BUSH TAX
CUTS FOR THE WEALTHIEST AMERICANS (and why it’s
complete-and-utter GREEDY bullshit)

The top 3% of earners already pay a huge proportion of their hard-earned income in
Federal taxes. Raising the current top Marginal tax brackets on those making over
$200,000 from 33% and 35% to 36% and 39.5%, respectively, is punishing them for
their hard-earned success. After all, they pay more than 51% of the total taxes collected.

Bullshit!
The average tax rate paid by the top 3% of earners in 2008(Adjusted gross
income in excess of $204,000) was 21.88% of Adjusted gross income(“AGI”).
Recall from the recent blog “TAX BASICS” that AGI is income AFTER all the
allowable deductions AND that capital gains and qualified dividends receive
special tax rates much lower than those for ordinary income. 21.88% is a far cry
from the 33%,35%, 36% or 39.5% brackets the GREEDY scream and whine about.

By way of contrast, the 2008 tax owed by a single filer with an AGI of $46,000
was $7,850 or 17.06%! An individual who made 22.5% of what the wealthiest
Americans made paid at a rate equal to 78% of the average top rate! While a
married couple filing jointly with the same $46,000 AGI paid at the lesser rate of
13.26%, do the wealthiest Americans work so much harder and contribute so
much more to our society that they deserve to pay at only a slightly higher average
tax rate than those who earn much, much less? If that married couple with the
$46,000 AGI can afford to and does pay 13.26% without whining, can’t
those making over $204,000 afford an average rate of 26% or even 39.5%
without bitching and moaning about “big government” and “being punished”?

Haven’t the wealthy already ‘gamed’ the tax system through capital gains, itemized
allowable deductions, qualified dividends, special trusts, tax shelters, inheritance
provisions and high-paid accountants and attorneys whose sole purpose is to ‘push
the legal envelope’ to ensure their ‘patriotic’ clients pay as little as possible in taxes?
GREED GREED GREED!!!

SOURCES: http://www.irs.gov/taxstats/indtaxstats/article/o,,id=133521,00.html
http://www.irs.gov/pub/irs-prior/i1040tt--2008.pdf

Sunday, November 14, 2010

TAX BASICS

SOME TAX BASICS

A general understanding of how our tax system works is critical for informed voters to reach their own considered opinion about US budget priorities, deficits and tax rates. Very simplistically, the IRS collects taxes on individuals and households as follows:

Ordinary income + Capital Gains + Dividends=Gross income
Gross income – Capital losses - allowable deductions= Adjusted gross income

The adjusted gross income is then taxed in a ‘progressive’ manner, meaning that the higher the
amount, the higher the tax rate(commonly referred to as the ‘marginal tax bracket’).

As the terms, definitions and explanations below explain, different types of income are taxed at different rates. While the specific treatment of various forms of income and deductions can be quite complex, the big picture is essentially as above.


Ordinary income: “Income received that is taxed at the highest rates, or ordinary income rates.
Orindary income is composed mainly of wages, salaries, commissions and interest income (as from bonds). Ordinary income can only be offset with standard tax deductions..”
http://www.answers.com/topic/ordinary-income

Adjusted gross income (“AGI”): “A United States tax term for an amount used in calculation of an individual’s income tax liability. AGI is calculated by taking an individual’s gross income and subtracting the Income tax code’s enumerated deductions..”
http://en.wikipedia.org/wiki/Adjusted_Gross_Income

Capital Gains and Losses
Almost everything owned and used for personal or investment purposes is a capital asset. Examples are a home, household furnishings, and stocks or bonds held in a personal account. When a capital asset is sold, the difference between the basis in the asset and the amount it is sold for is a capital gain or a capital loss. If you received the asset as a gift or inheritance, refer to Topic 703 for information about your basis. You have a capital gain if you sell the asset for more than your basis. You have a capital loss if you sell the asset for less than your basis. Losses from the sale of personal-use property, such as your home or car, are not deductible.
Capital gains and losses are classified as long-term or short-term. If you hold the asset for more than one year before you dispose of it, your capital gain or loss is long-term. If you hold it one year or less, your capital gain or loss is short-term.
Capital gains and deductible capital losses are reported on Form 1040, Schedule D (PDF). If you have a net capital gain, that gain may be taxed at a lower tax rate than the ordinary income tax rates. The term "net capital gain" means the amount by which your net long-term capital gain for the year is more than the sum of your net short-term capital loss and any long-term capital loss carried over from the previous year. Currently net capital gain is generally taxed at rates no higher than 15%, although, for 2008 through 2010, some or all net capital gain may be taxed at 0%, if it would otherwise be taxed at lower rates. There are three exceptions:
1. The taxable part of a gain from selling Section 1202 qualified small business stock is taxed at a maximum 28% rate.
2. Net capital gain from selling collectibles (such as coins or art) is taxed at a maximum 28% rate.
The part of any net capital gain from selling Section 1250 real property that is required to be recaptured in excess of straight-line depreciation is taxed at a maximum 25% rate. http://www.irs.gov/taxtopics/tc409.html
Current (and future) Capital Gains Rates

http://www.taxfoundation.org/taxdata/show/2088.html


Dividends
The IRS classification of qualified dividends generally leads to a lower tax liability for most tax payers. Although there are a number of additional steps involved in calculating your total tax in light of the impact of qualified dividends, doing so reduces the amount you owe.
Definition of Dividends
Dividends are paid by corporations to its investors, and they may be paid as cash, stock or other property. Dividends represent a share of the profit earned by a corporation over a set time period. Dividends are considered income by the IRS and taxed accordingly. Ordinary dividends are the most common type of payout and are taxed as regular or "ordinary" income at your normal tax rate. Unless a corporation specifies otherwise, dividends are considered to be ordinary.
Qualified Dividends
Some dividend payments fall into a "qualified" category and are subjected to a lower tax rate. According to the IRS, "Qualified dividends are the ordinary dividends that are subject to the same 0% or 15% maximum tax rate that applies to net capital gain." There are restrictions that must be met for dividends to be considered "qualified." First, the dividend must be paid by a U.S. corporation or qualified foreign corporation. Secondly, the dividends must not fall into the IRS's "not qualified" category, and lastly, they must meet the specified holding period.

Tax Rate
Qualified dividends that normally fall into the 25-percent tax-rate bracket are taxed at 15 percent. If the regular applicable tax rate is less than 25 percent, qualified dividends are then taxed at 0 percent.
Holding Period
You must own the stock that earns the dividends for more than 60 days of a prescribed 121-day period. That period begins 60 days prior the "ex-dividend date." The IRS defines the ex-dividend date as "the first date following the declaration of a dividend on which the buyer of a stock will not receive the next dividend payment. Instead, the seller will get the dividend." The holding period effectively requires tax payers to commit to longer-term investments ensuring any dividends earned fall into the qualified category.
http://www.ehow.com/about_5162787_definition-qualified-dividends.html

Marginal tax bracket: “The highest tax rate imposed on your income.”
Average tax rate: “This rate is a person’s total federal tax liability divided by his or her total
income.”
Obama's Proposals for Changing the Marginal Tax Brackets
Currently there are six tax brackets: 10%, 15%, 25%, 28%, 33%, and 35%. Those tax brackets were implemented in 2001 and are scheduled to expire at the end of 2010. If Congress does not pass a new law, the marginal tax brackets will revert to their pre-2001 levels, which were five tax rates of 15%, 28%, 31%, 36%, and 39.6%.
Instead of reverting to these tax rates, President Obama has proposed to continue using six tax rates: the 10% through 28% tax rates would remain the same and the top two rates would of 33% and 35% would be replaced with 36% and 39.6% rates, respectively. How income is measured in determining the tax bracket would also change. The 36% bracket would begin at $200,000 minus the standard deduction and one personal exemption for single filers, and at $250,000 minus the standard deduction and two personal exemptions for married filers. How tax rates are determined remains unchanged for the other tax brackets. The beginning of the 39.6% bracket was not explained in the administration's Greenbook. The new tax rates would begin in 2011, but requires Congressional action to implement these legislative proposals. http://taxes.about.com/od/preparingyourtaxes/a/tax-rates.htm


SOME 2008(most recently available) BASIC TAX FACTS

FOR THE TOP 3% OF TAX RETURNS (those with an AGI in excess of $204,000)
Number of returns: 4,198,817
Total Adjusted Gross Income(“AGI”): $2.43 Trillion
Total Income Tax Paid: $530.1 Billion
Average Tax Rate: 21.88%

http://www.irs.gov/taxstats/indtaxstats/article/0,,id=133521,00.html