View Full Version : why are these rich guys smiling?
May 31st, 2003, 1:34am
We close tonight with some items in the news. You no doubt saw this — Mr. Bush signing his tax cut. A big day for the President.
on Neglected News
But in fact, it's the richest Americans — the top one percent — who get the lion's share of the tax cuts. People like Secretary of the Treasury John Snow, Vice President Dick Cheney and Secretary of Commerce Don Evans, multimillionaires all. Mr. Cheney actually cast the deciding tie-breaker vote in favor of the tax cut in the Senate...as this headline in THE WALL STREET JOURNAL says, some people could wind up paying virtually no tax at all.
Where's that money coming from to make the rich richer? Some of it's coming from the working poor. Remember that $400 per child tax credit that was in the tax bill?
We have now learned that at the very last minute, behind closed doors, the Republican leaders in Congress pulled a bait-and-switch. They eliminated from the bill that $400 child credit for families who make just above the minimum wage. They will use that money to pay for the cut on dividend taxes. Eleven million children in families with incomes roughly between ten thousand and twenty six thousand dollars a year won't be getting the check that was supposed to be in the mail this summer. Eleven million children punished for being poor, even as the rich are rewarded for being rich.
Nothing was said about cutting out the working poor from this tax credit as Mr. Bush signed his tax bill. Nor was anything said when the President closed the door to his office and quietly put his signature on another bill, this one raising the debt ceiling to its highest level in history. No sooner had this happened than it was revealed, by the FINANCIAL TIMES, a British newspaper by the way, that the White House withheld a Treasury Department study showing that the country faces chronic deficits totalling over $44 trillion dollars. They kept it in secret lest it throw the fear of God into Congress and the financial markets and cost them the tax cut for the rich.
This was enough to send us over to the debt clock just a few blocks from our offices in midtown New York. Standing there you can watch the country's future slip deeper and deeper into a black hole of red ink. At midday today the national debt was over 6 trillion dollars and climbing. It makes you wonder...exactly why are these rich guys smiling?
That's it for NOW. Thanks for watching. I'm Bill Moyers.
May 31st, 2003, 1:58am
May 31st, 2003, 3:35pm
That $400 going to families would have actually generated some economic stimulus, because people would have gone out and bought something with it. What's $400 to a rich person?
May 31st, 2003, 3:52pm
What I meant to say was that $400 to a struggling family would buy food, clothing heat, rent, maybe even a trip to the movies. All of which benefits both the family (the kids!) and the general economy--which benefits everyone! Also the rich person got much more than $400 in this deal.
May 31st, 2003, 4:04pm
In my opinion, it is the rich that provide the most jobs/ income. They run businesses where we make a living, they buy lots of stuff and that in itself provides jobs.
I'll take my tax cut and smile (providing the State doesn't up state taxes and take what we save on Federal taxes).
May 31st, 2003, 4:06pm
It's too bad the rich get to avoid paying taxes, because the tax burden is then shifted to the middle class. Trickle-down economics, as good as it sounds, may work in theory, but not in practice.
May 31st, 2003, 4:11pm
I think that stinks. I struggle every month to pay the bills and keep my son in pull-ups. I could really use that 400.00!!! I am among the ones that won't be getting it. Shame on them politicians!!!!:nay: :nay: :nay:
May 31st, 2003, 4:44pm
Originally posted by Kimberly
In my opinion, it is the rich that provide the most jobs/ income. They run businesses where we make a living, they buy lots of stuff and that in itself provides jobs.
Actually, that's not true when you're talking about an economic stimulus tax cut. The New York Times had an editorial the other day where they quoted economic studies. Those studies showed that those who were closer to the poverty line would generate $1.78 in economic activity for each dollar in tax cut. The rich, who have more disposable income, will generate 9 cents in economic activity for each dollar in tax cut.
May 31st, 2003, 5:21pm
I dont think the rich will reinvest the tax breaks. The economy is weak and a wealthy person will not see the point in opening a new business when no one can afford to buy anything because everyone else is broke.
May 31st, 2003, 5:26pm
You're right, Donald. The rich, when they get the tax cut, will just save it. It's those who aren't as well off who will spend it and thereby generate economic activity.
May 31st, 2003, 5:55pm
How Taxes Really Work
by The Unknown Taxpayer
January 29, 2003
Let's put tax cuts in terms everyone can understand. Suppose that every day, ten men go out for dinner. The bill for all ten comes to $100.
If they paid their bill the way we pay our taxes, it would go something like this:
The first four men -- the poorest -- would pay nothing; the fifth would pay $1, the sixth would pay $3, the seventh $7, the eighth $12, the ninth $18, and the tenth man -- the richest - would pay $59.
That's what they decided to do. The ten men ate dinner in the restaurant every day and seemed quite happy with the arrangement --
until one day, the owner threw them a curve (in tax language, a tax cut).
"Since you are all such good customers," he said, "I'm going to reduce the cost of your daily meal by $20." So now dinner for the ten only cost $80.00."
The group still wanted to pay their bill the way we pay our taxes. So the first four men were unaffected. They would still eat for free. But what about the other six -- the paying customers? How could they divvy up the $20 windfall so that everyone would get his "fair share?"
The six men realized that $20 divided by six is $3.33. But if they subtracted that from everybody's share, then the fifth man and the sixth man would end up being PAID to eat their meal. So the restaurant owner suggested that it would be fair to reduce each man's bill by roughly the same amount and he proceeded to work out the amounts each should pay.
And so the fifth man paid nothing, the sixth pitched in $2, the seventh paid $5, the eighth paid $9, the ninth paid $12, leaving the tenth man with a bill of $52 instead of his earlier $59. Each of the six was better off than before. And the first four continued to eat for free.
But once outside the restaurant, the men began to compare their savings.
"I only got a dollar out of the $20," declared the sixth man who pointed to the tenth. "But he got $7!"
"Yeah, that's right," exclaimed the fifth man, "I only saved a dollar, too! It's unfair that he got seven times more than me!"
"That's true!" shouted the seventh man," Why should he get $7 back, when I got only $2? The wealthy get all the breaks!"
"Wait a minute," yelled the first four men in unison, "We didn't get anything at all. The system exploits the poor!"
The nine men surrounded the tenth and beat him up.
The next night he didn't show up for dinner, so the nine sat down and ate without him. But when it came time to pay the bill, they discovered, a little late, what was very important. They were FIFTY-TWO DOLLARS short of paying the bill!
And that, boys and girls, journalists and college instructors, is how the tax system works. The people who pay the highest taxes get the most benefit from a tax reduction. Tax them too much, attack them for being wealthy, and they just may not show up at the table anymore.
Where would that leave the rest? Unfortunately, most taxing authorities anywhere cannot seem to grasp this rather straightforward logic!
This story has made the internet rounds many times, and has widely been attributed to a professor of accounting at the University of South Dakota, who it turns out had distributed it to his graduate tax class, but did not write it. The true author remains unknown.
May 31st, 2003, 8:54pm
They don't show at the table anyway.
May 31st, 2003, 9:27pm
Ah, droller02, but you can't just talk about this one dinner. You have to take all kinds of other things into account like something called disposable income.
The reason, you see, that we have a graduated income tax is because the 10th guy (the really rich one) gets a large income - let's say $11.2 million a year before his bonuses. Yeah, he's got two kids who go to expensive private schools, but he's got a lot of income that he doesn't really need in order to meet his basic needs of three houses, four Mercedes, one Jag and having dinner out all the time. Not to mention his wife's love of jewelry.
The first four guys are making minimum wage and they're having a hard time paying for rent and food, let alone buying new shoes when their old shoes get holes in 'em.
Hey, did you know that back in the Eisenhower era, the highest marginal tax rate was 91%?
We'll discuss marginal tax rates in the next lesson, class. Bring your pillows. There's a reason they call economics the "dismal science."
June 1st, 2003, 1:28pm
I heard that was going to happen. Families who make $26,000 a year or less get no tax break. I liked Bush for what he did about 9/11 but that's about it. I hope he isn't re-elected another term.
June 1st, 2003, 2:04pm
Saw Warren Buffet ($$$$$$) he said the tax break is no far to us liltte people. The people who wanted it was the rich greedy one. Alot of people own business that aren't rich. He said it should go to the low class who would put the money back into the economy which is what we need. All the rich would do is invest in more stock leaving more layoffs. Considering him being one of the richest men around but it was true --he says why should I pay only 3% in taxes and my secretary pay 30%.
June 1st, 2003, 3:00pm
Well, I'm not an economist but in my opinion that $100 dinner story is complete ahem, garbage. It doesn't take into account all of the other factors..tax breaks, tax dodges, etc. It is an overly simplistic story to show the basic *theory* of our tax system - not the entire unabridged tax code that would take us all to forever and back to read.
I don't really know enough to comment on whether or not the tax cut is fair or unfair.
But I will say that it does *seem* that the tax code is written for the benefit of those that have more. I don't know if that is true or not, it just seems that way to me, maybe it is just because I am not one of those people who can afford to pay someone else to figure out how I can pay fewer taxes. I pay what I have to pay and that is as far as my knowledge goes. I can hear my economics professor groaning as I type! I suppose it just snored into one ear and snored out the other.
I welcome this thread, however. This is the best way to learn - hear all the opposing sides and find out more from listening and reading.
Yup, that's me, let other people do the hard work for me
June 1st, 2003, 3:43pm
Would you cry if you were rich? No most people are not rich. It only is in comparison that the rich would get more cut. Look at it this way at a 2 percent cut:
You make $50,000 a year = $1000.00
Rich person at $5,000,000 a year = $100,000
Boo hoo, the rich person is benefiting... by this tax cut.
The only real thing is people are jealous of the rich. You have the same opportunity as every other American to take advantage of the tax system too. If you were rich you wouldn't be crying.
I say GO OUT and create yourself rich (legally).
June 1st, 2003, 4:11pm
Time to bring back the old Steve Forbes Flat Tax idea. 15% tax for everybody regardless of your income. You make more, you pay more. Seems fair to me.
June 1st, 2003, 4:44pm
Hooray for droller02. Thanks for trying to put the issue into perspective. The objections Mary Beth raises sound valid, until you realize that the truth about how the taxes are apportioned doesn't have much to do with the fact that the rich are rich and the poor are poor. Of course it seems unfair that the rich have so much while the poor have so little. But what's the alternative? Communism and socialism don't work (not that Mary Beth was suggesting that :) ) and in our society we ideally should neither punish the rich for being rich nor reward the poor for being poor. Helping the poor is accomplished by providing and creating jobs and low-income programs, not by giving them money out of the pockets of the wealthy - however much the wealthy might not need it. I am not one of the rich who would be on the receiving end of this money, I can't really claim that I've been treated unfairly. My opinion only.
June 1st, 2003, 4:51pm
Originally posted by mudpuppy
[...and in our society we ideally should neither punish the rich for being rich nor reward the poor for being poor. Helping the poor is accomplished by providing and creating jobs and low-income programs, not by giving them money out of the pockets of the wealthy - however much the wealthy might not need it. [/B]
June 1st, 2003, 6:25pm
Of course it's unfair that some people are rich and others are not. But who ever promised you fairness? It certainly wasn't me!
Actually, nothing in life is fair. It's not fair that my hubby can eat 'burgers and fries and milkshakes all day and never gain an ounce, when I can gain three pounds looking at a carrot! That's not fair, is it? It's also not fair that I didn't get naturally blond, thick hair and blue eyes.
That was just to make a point. Life isn't fair.
But what I was talking about wasn't the concept of rich vs poor when it comes to fairness, but rich vs poor when it comes to disposable/discretionary income. Those who are rich can, to put it bluntly, afford to pay more in tax. That's why the tax code is structured the way it is.
You're right that the money for those who are less well-off doesn't come from the pockets of the rich, but it is a method, however crude, of income redistribution. And there's nothing really wrong with that at all! It's been done by every society in history. The main crux has always been that though life isn't fair, we should be helpful to those who aren't as lucky. And the people who can best afford to pay taxes are going to be those who have the most money.
Actually, I'm not criticizing your message, but just trying to expand upon my own, with the hope of making it a little clearer.
(and today's the 23rd anniversary of me starting my own business - since June 1, 1980)
June 2nd, 2003, 12:01am
Happy anniversary and congratulations! I think it takes a lot of courage to step out and start your own business and you've obviously been successful. I hope to do the same thing when the last of my kids graduates from high school in 2 years. My point about fairness was the same as yours: life just isn't fair. But I don't think this justifies taking additional money out of someone's pocket just because that person has been successful and made him/herself wealthy. Your comment was, " Those who are rich can, to put it bluntly, afford to pay more in tax." But just because they can afford to pay more doesn't make it right that they should; at least not according to the free enterprise system. I agree that ridiculous tax breaks and shelters should be questioned and contested. (I heard recently that it's possible to write off as much as $100,000 for the purchase of an SUV if you fall into a certain tax bracket. Even if it's for business, that's nuts.) The problem I have is disproportionate taxation of the wealthy just because they are wealthy. Doesn't it seem that there should be some other option; one that might be more equivocal? Perhaps that's naive of me. Oh well. My opinion only. Thanks for your comments.:)
June 2nd, 2003, 1:49am
Thanks. I did it when my daughter was 9! And the years after that brought things like private school and college, so I have done well enough, thankfully. I wish you much success in your own business. It is great fun, to be sure. Make sure your house is refinanced, if you want to do that, and that you have health insurance. Those are two big problems for the self-employed/small business, especially when you're starting out.
When we look at the way the tax rates are structured, I think we'll see that there is a fairness about it. (Though, what is fair to one person may not be to another. The $100,000 tax deductible SUVs don't seem really fair to me, to be honest. But I'm not fond of the SUVs anyway, since I can't see around them in my Miata. Your opinion may change in two years, when your business takes off and you want to deduct your new Hummer.)
For anyone making less than a certain amount, there is no tax. If you make less than that, you are not taxed. If you make more, the first amount is not taxed. Let's say that amount is $20,000. If you make less, you pay no federal tax. If you make a million dollars a year, you pay no tax on the first $20,000.
Let's say our next bracket is at $35,000 and the percentage is 10% for taxes. The first $20,000 is still tax-free. The amount between $20K and $35K is taxed at 10%. That just means that you'll be taxed at 10% of the $15,000 difference. This is the marginal tax rate. (I'm trying to hit a happy medium here - I don't know how much about the tax code that you know.)
As one's income rises, the amount one pays on those latest dollars of income also rises. Though, the lower amounts will remain the same for everyone, no matter what they make - on that first $20,000, you pay no tax; on the next $15,000, you pay 10% of that, etc.
The highest marginal tax rate, which was 91% under Eisenhower, is now at something like 39%. But remember, that's only on the part of the income over the highest bracket. No one will ever pay 39% of their total income in federal taxes.
This isn't such a bad idea, this graduated system of paying tax.
What's really unfair is the way that the tax system discriminates in favor of those who can afford enough to "buy" a nice provision in the tax code that allows you not to pay tax. Now, that's a bad idea, but it's done all the time and called campaign contributions or contributions to Senator So-and-So's fund.
But don't worry about the wealthy. We've only talked about federal income taxes here. If you really want to see taxes that discriminate against those who are less-well-off, we should go look at the FICA/Medicare tax! Now, there's something that's hurting the poor, not the rich. Everyone's paying into FICA at 6.2% up until a certain limit is reached. That limit is $87,000 this year. Everyone's paying into Medicare at the rate of 1.45%. No income level maximum is applied.
What happens is that those who are making $20,000 are paying nothing in federal taxes, but $1,530 in FICA/Medicare taxes. If the FICA/Medicare taxes were really going into a separate fund, I'd be singing a different tune, but they're not. They go into the same pile as the federal taxes. What happens is that the politicians get out there and sound "holier-than-thou" and tell you how the poor aren't paying any taxes. But they are! They're paying FICA/Medicare taxes.
In a very large percentage of cases, taxpayers are paying more in FICA than they are in federal taxes.
(Finally can get back to message - a cat wanted my full attention.)
What we need to do is rewrite the tax code to allow for deductions, but not get ridiculous. If we see home ownership as desirable, that can remain as deductions for interest paid and real estate taxes paid. But we need to think differently about the whole method of taxation to see if we can accomplish something that is fairer. (Not just disallow SUVs because they block my vision, while allowing little red sports cars since they're cute and fun. :grin3: )
There are actually other ways to write the tax laws. What about writing the law to encourage saving? I guess the credit card companies wouldn't like my ideas there - I'd tax you on what you spent in a year, even if it was more than you made, but you'd deduct investments like a house. If we could come up with a list of desirable goals, we could write a tax law and incorporate those goals. That's what Congress should do, but they never will. Until we get rid of the lobbyists.
June 2nd, 2003, 2:06am
There is also the argument that Bill Gates Sr. makes that taxation is part of the capitalist and democratic process. By taxing the rich more it spreads the wealth among all of the people allowing a fairer playing field for those trying to work towards the "American Dream". Concentration of wealth has detrimental effects in both capitalism and democracy, and so some measure of taxation can be seen as an attempt to thwarth this type of trend, which may be one of the greatest faults of capitalism.
The rich do employ people, but in Denver CO around 80-90% of the jobs are from small businesses (probably includes franchises - not sure), so there is some benefit in a capitalistic system for allowing assitance to smaller organizations that help a majority of people in lower taxation or from monetary assitance.
I also take this perspective on an international level. There are many countries and people in the world living in desperate poverty, and as one of the richest countries in the world I support international assitance and the acceptance of refugees. This is more of a sociological perspective and justification for spreading the wealth, but the same principle applys: In most cases your success in the world, economic or otherwise, comes more from where you are born or who your parents are - who you know - your luck of the draw in looks or physical ability - than your efforts to rise to the top. There are many examples to counter that perspective, however, and the US is one of the few places in the world where you have a good chance because of our lack of a strong class system, but there are also a large number of talented people who need some type of help, so I do not see the graduated scales as being unfair in any way.
Hope my opinion isn't too convoluted - I assure you I am not ready for a debate - just trying to bring in another perspective.