Seniors Look at the Federal Tax Cuts Issue

Sep 17th, 2010 | By | Category: Senior Moments Blog

BREAKING NEWS Wednesday, September 15:  The Washington Post reported, “…the nonpartisan Congressional Budget Office recently forecast that… a full repeal of the estate tax would force the nation to borrow an additional $3.9 trillion over the next decade and increase interest payments on the national debt by $950 billion. That’s more than four times the projected deficit impact of President Obama’s health-care overhaul and stimulus package combined.


The Internet and mainstream news media are full of articles, blogs and news reports about how, when and if the federal tax cuts enacted early in the Bush administration will be extended.  They are due to expire at the end of December this year (2010). 

Unfortunately a lot of information is clouded in distortions and midleading statements.  Those who want all of the tax cuts to remain in effect say it is necessary in order to avoid making the recession worse.  On the other side of the fence, there are those who want the tax cuts on the wealthiest Americans (those earning $200k and up) to be reversed and eventually get back to the pre-2000 level.  They maintain the wealthy do not pay their fair share of taxes; the counter-argument is that if the wealthy have to pay more taxes, there is less to trickle down to the middle and lower classes in the form of jobs. 

We did some research on the Internet and found an interesting tidbit on Bloomberg News, the financial news giant.  President Obama proposes that the tax cuts remain at the current levels for 98% of citizens.  The tax increase would affect only 2% of taxpayers, and research indicates the effective tax rate of the wealthiest (400) Americans is actually only 17% of income.  The issue seems to boil down to what the wealthy 2% who might suffer a tax increase would do with the money if they didn’t have their taxes increased.  The suggestion is that they would make it available to hire more people in business and industry, thus fostering recovery from the recession.

However, Bloomberg News and Moody Analytics, Inc, have some interesting data on what the 2% of wealthy Americans would likely do with the money not spent on a tax increase.  Moody Analytics research revealed that, historically, the wealthy save that money; they do not spend it on offering jobs to the unemployed.  The wealthy are more driven by the stock market than they are tax increases or decreases, say Moody’s researchers.  Saving money does not put it back into circulation, and has little effect on the economy.

It seems to me that with the Lehman Brothers bankruptcy costing us taxpayers $2 billion (a result of Wall Street greed and deception), and with the 2010 poverty guidelines for the lower 48 at $22,050 for a family of four, and with the wealthy spending $375 on baby outfits and $750 on a child’s coat and $1430 on a bag to carry a pet (that totals a month and a half income for a family of four at the poverty level), we should all be more concerned about lower and middle income families than we are about protecting the wealthy against tax increases.  The poverty projections for 2009 are about to be released.  Those living in poverty are expected to increase from 13.2% to the neighborhood of 15%; that’s one in seven Americans.  Fifteen percent of people in poverty vs 1-2% wealthy (bringing home 23% of nation-wide pre-tax income)… that’s a no brainer.

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  1. […] Fifteen percent of all Americans live in poverty; that’s the highest rate in 15 years. […]

  2. […] for what it does will find the money to hire. Businesses want customers, not tax cuts.  See the SCJ article on what employers do with tax savings, based on the research from Moody Analytics, Inc, on how employers respond when their taxes […]

  3. […] year goes to creating jobs, goes back into business investments in the United States.  Not so.  Studies have shown that when wealthy Americans get tax cuts, savings/investments in the country […]

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