Senior Finances: Separating Truth from Lies About the ‘Bush Tax Cuts’Nov 27th, 2010 | By Sharon Shaw Elrod MSW EdD | Category: Senior Finances
Senior citizens are deeply concerned about the national debate over the ‘Bush tax cuts’. We read and hear so many conflicting statements that it’s hard to know what to believe. Some people on the national level who ought to know and share the truth about the effects of extending the cuts versus letting them expire just aren’t leveling with us. How do we know what to believe?
As our faithful readers know, SCJ is committed to researching issues and presenting the truth that we find. We do so again now regarding the tax cuts. Here’s what we found out:
- The lower rates for all taxpayers, including the most wealthy, are scheduled to expire on Dec. 31 unless Congress acts to extend them.
- President Barack Obama supports making the current tax rates permanent for most Americans, but he wants to let the lower rates expire for couples that make more than $250,000 or individuals who make more than $200,000.
- Several other ideas are floating around: One idea is to make the tax cuts permanent for the middle-class and extend them temporarily for higher incomes. Another option would be to pass a two-year extension for everyone. Still other options call for repealing the tax cuts for the wealthy and giving tax breaks to employers who create jobs. We’ll have to wait and see what sort of bill Congress actually votes on.
Some of the discussion about the tax cuts includes what we here at SCJ have identified as fear-mongering. In our continuing attempt to cull facts from fiction, we found an article in the St Petersburg Times, the largest daily newspaper in Florida, that is very helpful. Written by Angie Drobnic Holan, Pulitzer prize winning writer, this article identifies what is factual and what is a distortion or an outright lie. (It’s a shame that we have to monitor our elected representatives like this!) SCJ thanks Ms. Holan and the St Petersburg Times for this information:
- Rep Mike Pence, R-Ind. said, “Should Democrats get their way,every income tax bracket will increase on Jan. 1, 2011. Every single one.” We’ve noticed that those who favor extending all the tax cuts will sometimes say that their opponents want to see all the tax cuts expire. But this is not the case. It’s not President Barack Obama’s position, nor of the Democratic leadership in Congress. And some Democrats think it might be a good idea to extend the Bush tax cuts for everyone, at least until the economy has recovered. Rep. Mike Pence, R-Ind., said this one, and we rated his statement False.
- Rep Randy Neugebauer, R-Texas said, “Ninety-four percent of small businesses will face higher taxes under the Democrats’ plan.” Republicans often say they’re opposed to the tax increases because they will hit small businesses, but the numbers don’t really support that. Under the Democratic plan, a small business owner would have to report profits of more than $250,000 before the tax increases kicked in. (Rates would rise for the top two brackets, from 33 percent to 36 percent and from 35 percent to 39.6 percent.) But most small businesses aren’t nearly that profitable. In fact, Internal Revenue Service data shows that of all taxpayers who declare business income, only 2 to 3 percent declare that much. We rated this Pants on Fire when Rep. Randy Neugebauer, R-Texas, said this back in August.
- Rep. Michele Bchmann said, “Small businesses that have “$250,000 in gross sales for the business … They’re the ones that are looking at massive tax increases.” This is another variation on the claim that tax increases will hit small business. This statement is wrong because gross sales are all the money a business takes in. Under longstanding IRS rules, businesses get to deduct most expenses before reporting their final taxable income. That includes things like employees’ pay, supplies, a car or truck, fuel costs, advertising, and more. Rep. Michele Bachmann said this on Nov. 16, and we rated it Pants on Fire.
- Former Governor of Alaska, Sarah Palin, said “Democrats are poised now to cause this largest tax increase in U.S. history.” To examine this statement, we looked at tax increases measured as a percentage of the entire economy, a method that takes into account inflation and economic growth. If the current tax rates for the wealthy expire, it will raise their taxes, but it will not be the largest tax increase in history. In fact, a 1982 tax increase signed into law by President Ronald Reagan would be larger. If all the tax rates went up in 2011, that would be larger, but the evidence shows that tax increases passed to pay for World War II were larger still. Sarah Palin, the former governor of Alaska, said this, and we rated it Pants on Fire.
- Rep. Robert C Scott, D=Va. said, “If all of the tax cuts expire on schedule, the budget will be close to being balanced in four years.” Would budget shortfalls be less if you let all the tax cuts expire? Yes, definitely. Would it bring you close to a balanced budget? No. You would still have a deficit of about 3 percent of the Gross Domestic Product, a measure of the entire economy. That might be a sustainable deficit, but it wouldn’t be a balanced budget. Rep. Robert C. “Bobby” Scott, D-Va., said this; he supports letting all the tax cuts expire. We rated the statement False.
These statements are simply not true, dear readers. They were made in an attempt to influence you by creating fear, an easy emotion for senior citizens to experience. And there are additional fear-mongering lies and distortions in the article referenced. We recommend you take a look at them so you can be reassured about what is reality and what is an elected representative’s attempt to scare you.