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jAZ
12-16-2007, 08:56 AM
http://www.epi.org/content.cfm/webfeatures_snapshots_20070829

Snapshot for August 29, 2007.

Bush tax changes wreck budget

by Max Sawicky

New projections from the Congressional Budget Office provide the ingredients for two important stories about the nation's fiscal condition if the Bush tax cuts are extended rather than allowed to expire.

One story involves prospects for balancing the budget. For fiscal years 2007 through 2010, the Bush tax cuts will make balancing the budget impossible in those years. Extending the tax cuts would make matters worse, indefinitely delaying any hope of balanced budgets or generating the surpluses achieved in the late 1990s. More important, under reasonable assumptions, the tax cuts push the deficit to unsustainable levels (in excess of 2% of gross domestic product). The top line of Figure 1 represents the official baseline, founded on assumptions that current law remains unchanged. Those assumptions imply that the tax cuts will expire on schedule. Extending the tax cuts—combined with the likely to be adopted policies of reducing the Alternative Minimum Tax (AMT), renewing long-standing tax breaks (known as "tax extenders"), and allowing discretionary spending to grow at the same rate as the economy—gives rise to the line at the bottom of the chart.

http://www.epi.org/images/fig_12.jpg

The second story is the imminent collision between the Bush tax cuts and the benefits promised by Social Security, Medicare, and Medicaid. For those planning retirement as early as 2017, most analysts agree that enacting benefit cuts that soon would be grossly unfair to those workers because they would not have enough time to adjust to the benefit reductions. The second chart (Figure 2) shows projected growth in Social Security,* Medicare, and Medicaid spending as a percent of GDP between 2007 and 2017. The second bar shows the cost of Bush tax cuts and related revenue policies in 2017, not including associated interest costs. Growth in "entitlements" is said to be out of control, but the extent of projected growth to 2017 is dwarfed by revenue losses implied by Bush administration policy. Without significant adjustments elsewhere in the budget, benefit costs and revenue shortfalls will have to be reconciled somehow over the next 10 years.

http://www.epi.org/images/fig_11.jpg

* The revenue needed with respect to Social Security stems from money owed by the federal government to the Trust Fund, which will have to be paid from general revenues (primarily income taxes). Dedicated tax revenues to the Social Security Trust Fund, primarily the payroll tax, keep it solvent for another 30 years or more.

wazu
12-16-2007, 04:33 PM
...and allowing discretionary spending to grow at the same rate as the economy—gives rise to the line at the bottom of the chart.

Discretionary spending needs to shrink, not grow. And that includes the nearly trillion dollars per year in the defense budget. There is no need to raise taxes.

Dave Lane
12-16-2007, 05:17 PM
Discretionary spending needs to shrink, not grow. And that includes the nearly trillion dollars per year in the defense budget. There is no need to raise taxes.


Actually rolling back the tax cuts would be smart. However with the economy in near shambles it would probably be unwise at this time.

Dave

banyon
12-16-2007, 05:55 PM
Report Says That the Rich Are Getting Richer Faster, Much Faster

http://www.nytimes.com/2007/12/15/business/15rich.html?ex=1355374800&en=10a3f3696a68ec00&ei=5090&partner=rssuserland&emc=rss

At the New York Stock Exchange. Investments have been a big source of rising wealth.

By DAVID CAY JOHNSTON
Published: December 15, 2007
The increase in incomes of the top 1 percent of Americans from 2003 to 2005 exceeded the total income of the poorest 20 percent of Americans, data in a new report by the Congressional Budget Office shows.

The poorest fifth of households had total income of $383.4 billion in 2005, while just the increase in income for the top 1 percent came to $524.8 billion, a figure 37 percent higher.

The total income of the top 1.1 million households was $1.8 trillion, or 18.1 percent of the total income of all Americans, up from 14.3 percent of all income in 2003. The total 2005 income of the three million individual Americans at the top was roughly equal to that of the bottom 166 million Americans, analysis of the report showed.

The report is the latest to document the growing concentration of income at the top, a trend that President Bush said last January had been under way for more than 25 years.

Earlier reports, based on tax returns, showed that in 2005 the top 10 percent, top 1 percent and fractions of the top 1 percent enjoyed their greatest share of income since 1928 and 1929.

The budget office report takes into account a broader definition of income than tax returns that is known as comprehensive income. It includes untaxed Social Security benefits, welfare, food stamps and part of the value of Medicare benefits, giving a fuller picture of incomes at the bottom than tax data.

Much of the increase at the top reflected the rebound of the stock market after its sharp drop in 2000, economists from across the political spectrum said. About half of the income going to the top 1 percent comes from investments and business.

In addition, Congress in 2003 cut taxes on long-term capital gains and most dividends, which advocates said would encourage people to turn untaxed wealth into taxable income. Some economists have said that the increase in incomes at the top is illusory and is in good part simply converting untaxed assets into taxed income to take advantage of reduced tax rates.

The Congressional Budget Office report made no attempt to explain the increases in income in its annual report on effective federal tax rates paid by people at different income levels.

Asked how much of the increase at the top was from the tax cuts rather than market gains, Peter R. Orszag, the budget office director, said, “I can’t give you an answer to that because we just don’t know.”

Chris Frenze, Republican staff director for the Congressional Joint Economic Committee, said the increase in top incomes is much more modest if viewed over longer time periods. Since 2000, he said, the average income of the top 1 percent has risen $97,900, or 6.7 percent, the same percentage increase this group had from 1992 to 1997.

Jared Bernstein, an economist at the Economic Policy Institute in Washington who characterizes the Bush administration’s policies as YOYO economics, based on You (Are) On Your Own, said the differences in income growth explained why so many Americans have told pollsters that they are feeling squeezed.

“A lot of people justifiably feel they are working harder and smarter, they are baking a bigger and better pie, and yet their slice is not growing much at all,” Mr. Bernstein said. “It is meaningless to middle- and low-income families to say we have a great economy because their economy looks so much different than folks at the top of the scale because this is an economy that is working, but not working for everyone.”

At every income level Americans had more income, after adjusting for inflation in 2005 than in 2003, but the increases ranged from almost imperceptible for the poor to modest for the middle class and largest for those at the top.

On average, incomes for the top 1 percent of households rose by $465,700 each, or 42.6 percent after adjusting for inflation. The incomes of the poorest fifth rose by $200, or 1.3 percent, and the middle fifth increased by $2,400 or 4.3 percent.

The share of all federal taxes paid by the top 1 percent grew, but only slightly more than half the rate of their growth in incomes because of the tax rate cuts. The top 1 percent paid 27.6 percent of all federal taxes in 2005, up from 22.9 percent in 2003, while the share paid by the middle fifth of taxpayers declined to 9.3 percent from 10 percent in 2003.

The share of their income that the top 1 percent paid in all federal taxes and in income taxes fell. The total tax rate dropped 1.8 percentage points, to 31.2 percent, from 2003 to 2005 while their average income tax rate declined one percentage point, to 19.4 percent, largely because of the cuts in taxes on capital gains and dividends.

'Hamas' Jenkins
12-16-2007, 06:06 PM
Report Says That the Rich Are Getting Richer Faster, Much Faster

http://www.nytimes.com/2007/12/15/business/15rich.html?ex=1355374800&en=10a3f3696a68ec00&ei=5090&partner=rssuserland&emc=rss

At every income level Americans had more income, after adjusting for inflation in 2005 than in 2003, but the increases ranged from almost imperceptible for the poor to modest for the middle class and largest for those at the top.

On average, incomes for the top 1 percent of households rose by $465,700 each, or 42.6 percent after adjusting for inflation. The incomes of the poorest fifth rose by $200, or 1.3 percent, and the middle fifth increased by $2,400 or 4.3 percent.

An exact replica of the last time our country tried this.

Brock
12-16-2007, 06:06 PM
Tell ya what: Stop taking money from me for SS, and I'll never ask for a dime of what you've already taken.

banyon
12-16-2007, 06:08 PM
Tell ya what: Stop taking money from me for SS, and I'll never ask for a dime of what you've already taken.


They do, at $90k. Get to that perch and you too can have a lower effective tax rate than the slobs.

Brock
12-16-2007, 06:16 PM
They do, at $90k. Get to that perch and you too can have a lower effective tax rate than the slobs.

Seriously, I wish there was an "opt out" box to check.

banyon
12-16-2007, 06:20 PM
Seriously, I wish there was an "opt out" box to check.


Social Security has been one of the most effective and popular government programs. That said, changes have to be made before the baby boomers get too far into it.

"There are polls that say that young people in their twenties think it's more likely that they will see UFOs than that they will ever collect Social Security." This pronouncement came from President Clinton in an address at the University of Illinois this year. But you could have heard virtually the same thing from Newt Gingrich ("More people below the age of thirty believe in UFOs than believe in their Social Security pensions") or Richard Gephardt ("Many young people now think there is a better chance they'll see a UFO than a Social Security check") or John Kasich ("More kids believe in UFOs than the Social Security check").

Cochise
12-16-2007, 06:20 PM
Seriously, I wish there was an "opt out" box to check.

They can't do that, everyone who contributes would opt out, leaving no one to pay for everyone else.

:shake:

Brock
12-16-2007, 06:23 PM
Social Security has been one of the most effective and popular government programs. That said, changes have to be made before the baby boomers get too far into it.


Yeah, and those changes are going to be "keep paying and we'll keep raising the age where you get to see any of it back." At this rate, I'll get it back when I'm 95.

banyon
12-16-2007, 06:35 PM
Yeah, and those changes are going to be "keep paying and we'll keep raising the age where you get to see any of it back." At this rate, I'll get it back when I'm 95.

People are living longer, buck up! :)

Pitt Gorilla
12-16-2007, 08:28 PM
Seriously, I wish there was an "opt out" box to check.
I agree. I told my wife I was going to tell HR that I'm opting out. She didn't think that would work.

wazu
12-19-2007, 09:38 PM
Actually rolling back the tax cuts would be smart. However with the economy in near shambles it would probably be unwise at this time.

Dave

Tax revenue increased after the tax cuts. Why would rolling them back be smart? Rolling back spending, now that sounds smart.

banyon
12-19-2007, 10:07 PM
Tax revenue increased after the tax cuts. Why would rolling them back be smart? Rolling back spending, now that sounds smart.

I'm sorry if it feels like I am being a contrarian with you today, because I generally enjoy your posts.

But revenue from income taxes fell quite a bit (esp. taking inflation into account, which these numbers do not) from 2001 to 2005.

(in millions of dollars)

2000 1,004,462
2001 994,939
2002 858,345
2003 793,699
2004 808,959
2005 927,722

http://www.taxpolicycenter.org/taxfacts/displayafact.cfm?Docid=203

wazu
12-19-2007, 10:26 PM
I'm sorry if it feels like I am being a contrarian with you today, because I generally enjoy your posts.

But revenue from income taxes fell quite a bit (esp. taking inflation into account, which these numbers do not) from 2001 to 2005.

(in millions of dollars)

2000 1,004,462
2001 994,939
2002 858,345
2003 793,699
2004 808,959
2005 927,722

http://www.taxpolicycenter.org/taxfacts/displayafact.cfm?Docid=203

Of course, the last line is:

2006 1,043,908

And the "Total Receipts" column grew from 2,025,457 to 2,407,254 during that time. (Also in millions.) Seems to me that it's pretty prudent that if tax revenue goes up as a whole, no way should we raise taxes.

At the end of the day, I just want to cut spending. Cut it, cut it, cut it some more. Slash it to the bone. If I were the Pres, I'd be demanding a 10% decrease in spending every year, with no adjustment for inflation. The number one item on my agenda would be a balanced budget amendment. By the beginning of my second term we would be ready to eliminate personal income tax altogether. Oh, if only.

banyon
12-19-2007, 10:33 PM
Of course, the last line is:

2006 1,043,908

And the "Total Receipts" column grew from 2,025,457 to 2,407,254 during that time. (Also in millions.) Seems to me that it's pretty prudent that if tax revenue goes up as a whole, no way should we raise taxes.

At the end of the day, I just want to cut spending. Cut it, cut it, cut it some more. Slash it to the bone. If I were the Pres, I'd be demanding a 10% decrease in spending every year, with no adjustment for inflation. The number one item on my agenda would be a balanced budget amendment. By the beginning of my second term we would be ready to eliminate personal income tax altogether. Oh, if only.

I'll agree I could've included the 2006 figure, but I hope you can see that it isn't a given that the tax revenues worked as if we were on the extreme apex of the Laffer Curve either.

The total revenues column you are citing looks to me it had the exact same pattern as the individual ones:

2000 2,025,457
2001 1,991,426
2002 1,853, 395
2003 1,782,532
2004 1,880,279
2005 2,153,859
2006 2,407,256

i.e, it fell and in the end probably didn't even keep up with inflation. It's one reason (among others) that Bush so thoroughly f***ed our budget as the OP says is happening again.

wazu
12-19-2007, 10:37 PM
It's one reason (among others) that Bush so thoroughly f***ed our budget as the OP says is happening again.

Bush is a horrible Republican, and should never be referred to as any kind of conservative. Cutting taxes is easy. Cutting spending requires standing on principle and refusing to back down.

Once again, the problem is the lack of spending cuts. Bush cut taxes and in five years we were back above the baseline. Had he cut spending as well, he'd be doing okay economically.