Saturday, December 11, 2010

Bush Tax Cut Extension Offers Most For The Rich

It’s perverse enough that the Bush tax cuts will be extended for millionaires and billionaires, increasing the national debt by billions for no reason at all. The cuts for the wealthy over the past decade have not stimulated economic growth. How could they when the wealthy save rather than spend their tax cuts? It’s all the worse when one realizes that the cuts offer more for the rich than any other economic group–and that those near the bottom are actually facing an increase:

...the tax benefits will flow most heavily to the highest earners, just as the original cuts did when they were passed in 2001 and 2003. At least a quarter of the tax savings will go to the wealthiest 1 percent of the population.

...The wealthiest Americans will also reap tax savings from the proposal’s plan to keep the cap on dividend and capital gains taxes at 15 percent, well below the highest rates on ordinary income.

And negotiators have agreed that the estimated $900 billion cost of the cuts will simply be added to the deficit — not covered by reductions in spending or increases in other taxes. That is good news for hedge fund managers and private equity investors, who appear to have withstood an effort to get them to pay more by eliminating a quirk in the tax code that allows most of their income to be taxed at just 15 percent.

In fact, the only groups likely to face a tax increase are those near the bottom of the income scale — individuals who make less than $20,000 and families with earnings below $40,000.

“It’s going to look like the rich are getting richer again,” said Anne Mathias, an analyst for MF Global Inc.

...Although the $120 billion payroll tax reduction offers nearly twice the tax savings of the credit it replaces, it will nonetheless lead to higher tax bills for individuals with incomes below $20,000 and families that make less than $40,000. That is because their payroll tax savings are less than the $400 or $800 they will lose from the Making Work Pay credit.

No comments: