Democrats & Liberals Archives

Pandering with Tax Shelters

Republicans in the House, by an essentially party-line vote of 244 - 185, pushed through another tax-cut that benefits primarily the rich. Why did they do this, even though the Republicans are in so much trouble that they stand to lose the November election to Democrats? They can’t help themselves. Pandering to the rich has done wonders for Republicans in the past. Pandering to the rich now by presenting them with a rich source of tax shelters should, they hope, keep the rich vein of campaign money flowing.

Republicans in the House had a tax-cut package worth $106 billion. According to an arcane rule, they could prevent a filibuster in the Senate if they divided the package in two, which they did. The first part, the one they just passed, is worth $70 billion. The other $36 billion will come up later.

The bill repeals the alternate minimum tax, which most people agree should be done.

The major part of the bill is devoted to keeping the decreased capital gains tax at 15% for 2 more years. Outrageous! Those who invest money and then go golfing or on a pleasure cruise have their taxes reduced, while those who work hard for each penny they earn do not have their taxes reduced. As a matter of fact, a reduction in tax on investors is essentially an increase in tax on workers. This is Republican fairness!

Republicans say everybody will benefit. To which The Times says:

"The top 10 percent of income earners will get almost all of the benefits, and everyone else will get crumbs."

Another argument is that reducing the tax on capital gains causes economic growth. Republicans have repeated this so often, it is accepted as common knowledge.

But it ain't necessarily so!

Leonard E Burman, from the Tax Policy Center, a nonpartisan research group, who has studied the matter extensively, says he has found absolutely no relationship between tax rates on investment income and economic growth. But, he said that low tax rates on capital gains were:

"the linchpin behind every sort of tax shelter you can imagine."

Shelters are the means the rich use to avoid paying taxes. Some of these shelters are so good, their owners may pay nothing in taxes. The poor worker has no such loophole. He pays.

Republicans think that pandering to the rich will bring results just as it has in the past. But this time they are wrong. We, the people, now see it for what it is: part of the "culture of corruption." We will vote legislators into office who vow to bring fairness into the tax code.

Posted by Paul Siegel at May 11, 2006 5:43 PM
Comments
Comment #147351

I believe the word you want is pandering. To philander is to womanize.

Posted by: phx8 at May 11, 2006 6:00 PM
Comment #147357

If you think about it, philandering could be appropriate, lets find out who they are in bed with.

:)

Posted by: womanmarine at May 11, 2006 6:22 PM
Comment #147363

Captial gains cuts make sense. The U.S. even now has some of the world’s highest taxes on captial and corporations.

When all the rhetoric is over, the smart Dems are not enthusiastic about raising captial gains taxes. They actually understand the situation better than the chattering rank and file.

Posted by: Jack at May 11, 2006 6:58 PM
Comment #147366

Drop a bomb on DC and start from scratch!

Posted by: Sonny! at May 11, 2006 7:16 PM
Comment #147383

Basically - the top 10% will see tax savings of approx. $54,000 with the extension… the person making $50,000? They will average $46 in savings.

The tax rate will stay at 15%… which for me is a really damn good deal. I own an s-corp, which allows me to pay myself through distribution of profit (capital gains) instead of salary. So, for now, my tax levels are really low.

There difference is in how my pay and most people’s pay are classified - not sure how anyone can see this as fair. Hey, as long as we’re making sure the wealthy get their fair share (and more) why shouldn’t the middle class pay through the nose for it (well… OK, their kids pay through the nose…)???

Posted by: tony at May 11, 2006 8:17 PM
Comment #147408

The Republican Party outfinances the Dems over 2-1 in every election. There is a reason for that.

What you must understand is that this is the GOP Base. The Repugs have every right to reward them for their loyalty.

Posted by: Aldous at May 11, 2006 9:18 PM
Comment #147440

Didn’t Bush Sr. call trickle down economics “voodoo economics”, because it wasn’t based on any sound economic theory?

Isn’t there any interest in buying our country out from China?

Posted by: Max at May 11, 2006 11:11 PM
Comment #147449

Philandering is dead on right Paul!

You actually could have titled this, “Bush & Co. Bankrupt America”.

Or just pick a headline:

(1)The Bureau of Economic Analysis (BEA) announced today that the current account deficit (i.e., the broadest measure of the U.S. balance of trade in goods, services, and payments to the rest of the world) soared to an all-time record level of $900 billion, at an annual rate

(2)The U.S. trade deficit increased 17% in 2005, and 9% in the fourth quarter alone

(3)Although the U.S. dollar has fallen 11% in value since 2002q2, this decline has not been sufficient to slow the trade deficit’s growth

(4)The rapid growth of interest payments to foreign holders of U.S. Treasury securities has also contributed to the growth of the deficit, and those payments will grow rapidly in the future for two reasons

(5)Total U.S. imports of goods and services hit $2.1 trillion in the second half of 2005 for the first time, 58% more than the $1.3 trillion in exports.

(6)The current account deficit indicates that the United States is purchasing about 7% more than it is producing. It needs to import about $2.5 billion per day in foreign capital to finance this deficit.

(7)As long as the U.S. maintains sizeable current account deficits, net borrowing and payments to foreign investors will continue to grow.

And the GOP answer is “let’s all party like fools, tax cuts for the rich, yeeeeeehaaaaaaaaa!”

Disparity anyone?

KansasDem

Oh, headlines honor of:
http://www.epi.org/content.cfm/webfeat_econindicators_capict_20060314

Posted by: KansasDem at May 11, 2006 11:38 PM
Comment #147450

I thought about it a few hours after I wrote the article and realized the word I wanted was “pandering” and not “philandering.” Although womanmarine may be right: there’s plenty of philandering going on too.

Posted by: Paul Siegel at May 11, 2006 11:48 PM
Comment #147451

Where did all the Neo-Cons go?

I posted a very statistical reply at American Pundit’s “Baby Killer” editorial and I see no response. My guess is that the Neo-Cons are either (1) partying hardy or (2) too damn ashamed to admit they’re Republicans.

KansasDem

Posted by: KansasDem at May 11, 2006 11:51 PM
Comment #147461

“I thought about it a few hours after I wrote the article and realized the word I wanted was “pandering” and not “philandering.” Although womanmarine may be right: there’s plenty of philandering going on too.

Posted by: Paul Siegel at May 11, 2006 11:48 PM”

Paul,

You got your point across regardless. I actually preferred the “philandering” reference. It indicates that someone is getting screwed and I believe most of us are getting screwed. What’s even worse is that we’re passing the screwing on to future generations.

I honestly fear that we’re past the point of no return. I fear that no one will vote for true reform until our entire social fabric has totally collapsed.

All that aside, your choice of words amounts to the “potato/potawto” or “tomato/tomawto” debate. You did and always do get your point across.

KansasDem

Posted by: KansasDem at May 12, 2006 12:10 AM
Comment #147468

Where did all the Neo-cons go?

The latest Harris poll shows Bush with a 29% approval rating. That represents a remarkable drop since January. Bush Supporters are becoming rarer and rarer, with more and more Republicans and conservatives divorcing themselves from Bush in order to keep their ideals intact.

This $70 billion tax cut beggars description. I am not a deficit hawk. But regardless of the way this particular cut is targeted, regardless of the merits of the particulars, it simply makes no sense to continue cutting taxes in a recovery. Just the opposite should be occurring; and just as the Fed uses monetary policy to brake the economy and restrain inflation, the Republicans should be using fiscal policy to do the same.

Posted by: phx8 at May 12, 2006 12:29 AM
Comment #147526

KansaDem asked:

Where did all the Neo-Cons go?

Haven’t you heard? There’re Free Gay Hookers over at the Watergate!

Posted by: Betty Burke at May 12, 2006 3:31 AM
Comment #147532

Paul, lest you forget: Congress is filled with millionaires and soon-after-leaving-congress millionaires.

Millionaires Fill Congress Halls

No conflict of interests here.

Posted by: gergle at May 12, 2006 3:49 AM
Comment #147567

Nuke’em all in the Big House and start over!

Posted by: Sonny! at May 12, 2006 9:12 AM
Comment #147569

KansasDem,

I too am a fan of the EPI, but the trade deficit and current account flow of funds are not affected all that much by income tax rates. The federal budget deficit obviously is. I’m glad you brought it up, though. People on this blog seem to ignore the trade deficit when talking about the economy.

Posted by: Greg at May 12, 2006 9:13 AM
Comment #147607

“pandering” The Republicans pandering? First, everyone in DC is guilty of pandering, both sides of the aisle, so it is name-calling to single any group out. Pandering is how they survive, and after all, we’re the fools that keep re-electing them. I think the country should vote out every incumbent and start over. But we don’t have the guts to do that bcuz no one wants to oust their guy.

I won’t even respond to the “tax cuts for the rich” rhetoric bcuz that is all it is…rhetoric. It denies all factual basis for political purposes. Remember, the argument here is between the millionaires and the billionaires (as gergle points out). They cannot relate to our situation and we are fools to think that they do. Our govt is larger, and spends more, than ever before which means they have plenty of our money. Are our lives any better for it. No way! Give us back our money and let them learn to live on less.

Captial gains taxes affects me too and I’m not rich. Not even close. I’m not out golfing or cruising every day but working like most of you 5 days a week. I choose to budget a small portion each paycheck for investing on the hopes of retiring in about 25 years (not counting on social security). Please don’t destroy my future in the fray of politics.

Posted by: Stephen at May 12, 2006 11:21 AM
Comment #147608

If the big boys can get mega cuts on capital gains, why cannot small savers get a tax cut on that puny 1-2% interest on savings accounts???

Posted by: Lynne at May 12, 2006 11:25 AM
Comment #147609

From a table in yesterday’s Arizona Daily Star, the percentages of people in income brackets who will receive a tax cut under this horrendous bill:

Less than $10K …0.1%
$10K - $20K …2.3%
$20K - $30K … 6.1%
$30K - $40K … 9.9%
$40K - $50K … 17.6%
$50K - $75K … 29.2%
$75K - $100K … 53.5%
$100K -$200K … 81.8%
$200K - $500K … 94.8%
$500K - $1mil …83.5%
$1 mil plus … 88.4%

Posted by: Lynne at May 12, 2006 11:26 AM
Comment #147614

Sure Lynne’s presentation of data makes it “look” bad but it’s all in the presentation. “According to the Office of Tax Analysis, the U.S. individual income tax is “highly progressive,” with a small group of higher-income taxpayers paying most of the individual income taxes each year.”

“”Treasury Department analysts credit President Bush’s tax cuts with shifting a larger share of the individual income taxes paid to higher income taxpayers. In 2005, says the Treasury, when most of the tax cut provisions are fully in effect (e.g., lower tax rates, the $1,000 child credit, marriage penalty relief), the projected tax share for lower-income taxpayers will fall, while the tax share for higher-income taxpayers will rise.”

“The share of taxes paid by the bottom 50 percent of taxpayers will fall from 4.1 percent to 3.6 percent.?

“The share of taxes paid by the top 1 percent of taxpayers will rise from 32.3 percent to 33.7 percent.”

“The average tax rate for the bottom 50 percent of taxpayers falls by 27 percent as compared to a 13 percent decline for taxpayers in the top 1 percent.”

Simply google “who pays the most taxes” and check it out for yourself.

Posted by: Stephen at May 12, 2006 11:50 AM
Comment #147616

Oops, forgot the citation…


http://usgovinfo.about.com/od/incometaxandtheirs/a/whopaysmost.htm

Posted by: Stephen at May 12, 2006 11:51 AM
Comment #147618

Stephen
Its not about who pays the most, its about being envious of those with money, telling them what to do with their money and convincing those who dont pay as much into thinking the rich dont pay taxes.
Fairness goes out the window when the left starts pandering for votes.

Posted by: kctim at May 12, 2006 11:57 AM
Comment #147626

kctim:

It’s about fairness…or is that word not part of your vocabulary???

Posted by: Lynne at May 12, 2006 12:17 PM
Comment #147648

Fairness? I defer to my previous statements that the rich are truly carrying the lion’s share of the burden. I admit that any tax cut affecting the “rich” makes for easy spinning but it does not change the fact that most citizens do not carry the load. it is simple politcal capital.

The key is reduced spending and fiscal responsbility from all parties. (I admit that my party, the Republicans, have been shameful in this respect.) When they stop spending our money then everyone, including the rich, benefit. Pork, or earmarks, should be absolutely forbidden. Thus the problem is not taxes but expenditures. The more the spend, the more they take…they more they take, the more they spend.

I wonder why those “rich” politicians, if they are so concerned, don’t simply write a bigger personal check to the US govt. If their wealth-guilt is so heavy then take steps to relieve it…but leave us out of it.

Posted by: Stephen at May 12, 2006 1:27 PM
Comment #147684

Stephen at May, the tax rate for the wealthiest is lower than the tax rate for the Wal-mart supervisor.

Who will be harmed least by sunsetting their tax cut? No brainer. We have deficits and debt to pay down. Allowing the tax cuts for the wealthiest to sunset would still have left them very wealthy and comfortable. To me its a no brainer. This tax bill was a bust for Republicans come November - voters will remember who they are representing, and it ain’t them, or their children who will have to shoulder the 11 Trillion dollar national debt legacy of Republicans.

Posted by: David R. Remer at May 12, 2006 3:05 PM
Comment #147712

“GOOD LORD WON’T ANYONE THINK OF THE CHILDREN???”

You all sound like a made-for-TV Sally Field movie.

Posted by: Craig at May 12, 2006 4:47 PM
Comment #147729

“You all sound like a made-for-TV Sally Field movie”

And you sound like a partisan hack with his blindfold firmly in place.

Posted by: Tim Crow at May 12, 2006 5:51 PM
Comment #147757

To whom much is given, more is expected.

Posted by: Lynne at May 12, 2006 7:35 PM
Comment #147765

Under the just passed Republican tax deal …

If you make less than $10,000/year, you will save $0 in taxes annually.
If you make $10,000-20,000/year, you will save $3 in taxes annually.
If you make $20,000-30,000/year, you will save $10 in taxes annually.
If you make $30,000-$40,000/year, you will save $17 in taxes annually.
If you make $40,000-50,000/year, you will save $47 in taxes annually.
If you make $50,000-75,000/year, you will save $112 in taxes annually.
If you make $75,000-100,000/year, you will save $406 in taxes annually.
If you make $100,000-200,000/year, you will save $1,395 in taxes annually.
If you make $200,000-500,000/year, you will save $4,527 in taxes annually.
If you make $500,000-1 million/year, you will save $5,656 in taxes annually.
If you make more than $1million/year, you will save $42,766 in taxes annually.

Less than 3.5 percent of U.S. taxpayers fall into the category of making $200,000 a year or more.

So, this is a targeted tax cut — at a $70 billion cost to the Treasury — for less than THREE AND A HALF PERCENT of the population.

Posted by: Lynne at May 12, 2006 7:57 PM
Comment #148515

In other words: Standard Conservative Operating Procedure.

Posted by: Betty Burke at May 15, 2006 10:56 PM
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