I’m for ’em! Moderate ones, targeted mainly, but not entirely, to working folks who have the toughest time making ends meet. (Bush’s tax cut would go 60% to the 10% who have the easiest time making ends meet.) And timed more to boost a flagging economy than to overheat a booming one.
Keith Fette: “You never mention that the reason tax cuts benefit the rich the most is the fact that they pay most of the taxes! The numbers are amazing: the top 1% in income pay something like 33% of all taxes, and the top 10% pay about 50% of all taxes. But even an average wretch like me has to fork over everything he makes to the government until sometime in mid-May, at which point he can finally keep the money he earns.”
Well, that’s my point! I’d rather see a modest tax cut, directed mostly to wretches like you, than a bonanza directed to minor millionaires like me. (Let me stress: minor.) Yes, I’d like some sop sent my way. For example, it would sure be nice to have that “millionaires” 39.6% tax bracket kick in at $1 million instead of $250,000, as it does now. Or maybe raise the estate tax exemption from $1 million, where it’s headed now, to $3 million — and perhaps reduce the top rate from 55% to 45%. That would be a great gift to the well-to-do — yet fall far short of the windfall George W. proposes.
Keith continues: “As for that extra $100,000 you’d save, don’t you think you (of all people) could put it to better (charitable) use than a bureaucrat?”
Actually, I’m not sure. In the first place, it’s not at all clear that most rich people would give their tax cuts to charity. But even if they did, let’s think about this accepted wisdom for a minute. The charities and causes I give to are terrific. But in many cases, 20% to 30% of what they raise goes just to the raising itself. The IRS, by contrast, spends less than 1% collecting its money. And can we say that every opera company or church program is ultra-effective? Can we say that charities tend to be run by flinty-eyed business types who measure their performance monthly and — spurred by competition — provide superior results or disappear? Can we say that the average person who gives to charity allocates his dollars shrewdly, after careful analysis, and within an overall coordinated plan? Ahem.
Anyway, let me give the last words on all this to two of you, who say it better than I have.
Michael Kjar: “A giant tax cut at this time goes against Economics 101. If there are inflationary pressures in the economy, as the Fed believes, a tax cut will only exacerbate them. This will, in turn, force the Fed to continue to raise rates. That isn’t going to hurt me much — I’m debt free with a 6.5% mortgage and I live frugally — but what about those paying for cars, tuition, computers, etc? It seems their tax cut will quickly be swallowed up by interest payments.”
Hal Crawford: “I have been trying to explain to my friends why Governor Bush’s tax cut plan is so stupid. I have a degree in finance, but it doesn’t really take one to understand this. I’m not sure exactly how big the current debt is, but I’ll take your number. At $5 trillion, the amount of interest that the US taxpayers have to pay each year on that at 5.0% would be $250 billion. If there are about 150 million taxpayers in the US, then that would equal about $ 1,667 of taxes each year that do nothing but pay interest. Notice that this doesn’t pay it down, just pays the interest. [Four-fifths] of that debt was run up during the Reagan & Bush administrations. Thus, the taxpayers can thank the Reagan & Bush administrations for a large part of their current and future tax bills.
“But this doesn’t explain why I think a large tax cut is so bad. [First,] we need to ask what happens if the surplus doesn’t happen as forecast? [Second,] Alan Greenspan is concerned that the economy is overheated and is trying to slow it down — to prevent inflation. A tax cut would tend to speed it up, thus causing the Federal Reserve to further increase interest rates. The increased interest rates would hurt people who borrow money to buy cars and houses. It might not hurt the wealthy, but it would hurt the average American family.
“So, let’s see, pass a tax cut that would mainly go to the wealthy, increase interest rates that would mainly hurt the middle and lower income groups — yep, sounds like a plan that a “compassionate” person would recommend. NOT!
“And if anyone is thinking about the next generation — what better present could the current generation give them than a strong economy with no heavy debt?
“The slogan that really irritates me is the one that says that it’s the public’s money, so it should go back to them. IT IS ALSO THE PUBLIC’S DEBT! And the current generation ran up most of it, so it follows that we should be the ones to pay it off.”
Still, we’d all like a little tax relief – including the both the President and Vice President. Their tax cuts, though, would be moderate, and aimed mainly at “average wretches,” as Keith put it.
Quote of the Day
Guys, just remember: if you get real lucky, if you make a lot of money, if you go out and buy a lot of stuff, it's gonna break. You got your biggest, fanciest mansion in the world. It has air conditioning. It has a pool. Just think of all the pumps that are going to go out. Or go to a yacht basin any place in the world. Nobody is smiling and I'll tell you why: something broke that morning. The generator's out, the microwave oven doesn't work, the cook's gay. Things just don't mean happiness.~Ross Perot to Harvard B-School students, quoted in Forbes
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