Friday, May 05, 2006
TAX CUTS BENEFIT THE REALLY RICH
Under pressure from the president the republican controlled congrss is passing an extension of tax cuts for the wealthy. The effects of these tax cuts are worthy of examination.
In an earlier blog called "Tax Policies Grow Wealth," the Militant Moderate provided an analysis of how the current administration's tax policies have encouraged the growth and the concentration of wealth within a limited sector of our people. This is another attempt to offer information on the effects of reductions of tax rates at upper income levels, principally the reduction of tax rates on earnings from investments.
Republican congressmen have defended lower rates on dividends and capital gains by use of misleading statistics such as, "Nearly 60% of taxpayers with incomes less than $100,000 have income from financial investments." IRS records show only 5% receive capital gains and 14% get dividends. Average people hold their stocks in non-taxable pension and IRA accounts, and thus do not benefit from these tax cuts. The truth is that only a few taxpayers benefit from investment income rate reductions.
The cost of making just investment tax rate cuts permanent is estimated to be $200 billion over the ten year period. This is highly significant, considering deficit problems.
Taxpayers with incomes over $10 million per year have had tax reductions of just over $1 million average. While averaging $26 million in income, this group paid about the same share of their income in taxes as did those who earned just $200,000 or so. This was primarily because of the lowered rates on investment income produced from wealth.
One-tenth of one percent (one in a thousand) of Americans with incomes of $1 million or more reaped 43% of all the tax savings from investment income. This same group had 10% of the benefits of regular income tax rate reductions. Thus, wealth makes wealth, and lower investment tax rates accelerate the process.
Through these methods the really rich are pulling away from the barely rich, and both move up and away from the shrinking middle class, whose union jobs are taken by corporate moves, outsourcing, and immigration.
In Oklahoma and nationally, republican legislators are advocating doing away with inheritance taxes entirely. Again, the effects of this should be analyzed. One group of economists has concluded that if the inheritance tax were abolished, then by the third generation fewer than 15% of the people would have over half the wealth, becoming more concentrated thereafter. Such is the traditional economic breeding ground for hostile, violent political revolutions.
Dr. Edwin E. Vineyard, AKA Militant Moderate
