Tax Update Blog: Permalink

« Previous · Tax Update Blog Home · Next »

OTHER PEOPLE SHOULD SACRIFICE

May 08, 2007

One of the dubious perks of high office is the free advice you get on your tax situation when you make your returns public. The labor-financed group Citizens for Tax Justice did that favor for George W. Bush and Dick Cheney this week. Their advice? They should pay higher taxes.

'The Bush and Cheney tax returns illustrate the kind of wealthy people that the President most intended to help with his tax cut program," noted Robert S. McIntyre, director of Citizens for Tax Justice. "At a time when our nation is running huge deficits and spending hundreds of billions of dollars and thousands of American lives on the Iraq war, you’d think such people would be asked to sacrifice a little rather than receiving such largesse."

It's an interesting mindset that equates "having less of your money taken" to "receiving largesse." But let's go to the charts:

This shows that the income tax burden has tilted to the high end of the scale. The share of national income earned by the top 1% of earners has declined from 2000 to 2004 (the most recent figures available), but they actually shoulder more of the tax burden. The Vice-President cracks the top 1%, while the President falls a bit short.

The arguments for more "progressive" taxes only make sense if it somehow is good for the less well-off. But "progressivity" as a goal in itself is pointless if it doesn't help the poor.

The question should be "what is the optimal rate of tax for the economy as a whole?" The poor are helped by growing the economy, not by making the rich poorer. If raising rates on the "wealthy" damages the economy, the poor will suffer the most.

In many cases, the "wealthy" are owners of businesses that pay taxes for the businesses on their 1040s via S corporations or partnerships. Increasing taxes on the "wealthy" increases taxes on these businesses. Paying higher taxes doesn't help a business hire poor folks.

Meanwhile, under the Bush administration, the bottom 40% of income earners have no net income tax burden at all. This means the question is no longer whether the income tax is progressive enough; it's whether tax policies will create a powerful constituency for big government that has no responsibility for paying the bills.

The implied logic of CTJ is "screw the economy, rich people should pay more tax anyway. Especially Bush and Cheney" But if having lower marginal rates helps the economy, it's not so terrible that rich people pay lower taxes than they otherwise would. Even Bush and Cheney.

Hat tip: Don't Mess With Taxes.

      Bookmark: del.icio.us • Digg • reddit