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View Diary: The 2003 Tax Cuts -- Top 10% receive 90% the Benefits (209 comments)

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  •  well, (2+ / 0-)
    Recommended by:
    cathy b, NearlyNormal

    it seems patently obvious that if you cut a tax, the people who will benefit are the people who actually pay the tax.  If the tax does not affect you, then you will not receive a direct benefit.

    So, bonddad, are you saying that the cut in dividend and cap gains was a bad idea, because the people who face no dividend or cap gain tax get no benefit?

    •  It was certainly a bad idea if the goal was to (9+ / 0-)

      grow the economy by increasing consumer spending. those folks who are most likely to benefit are the ones who are least likely to turn around and spend the money.

      •  I think the goal was to spur growth by (1+ / 0-)
        Recommended by:
        bluewolverine

        facilitating accelerated capital accumulation.

        That's always the way it has worked, and this was true under Reagan, Bush I (who proposed, for instance, that capital gains cut, from 33% to 15% we all derided him for), Clinton (who actually did what Bush I proposed, dropping it to 20% on long-term gains and shortening the term which determined what was long term to 1 year) and now Dubya, who's one-upped them all.

        Many say that they spur growth by consumer spending, but that's not really how the policy fundamentally worked, though it would be a mistake to say that Dubya's tax cuts didn't put a fair chunk of change in some families' pockets, say, a family of 5 earning 50K/year, what with all those child credits all but eliminating the federal tax burden...

        Freedom is merely privilege extended unless enjoyed by one and all -9.50, -5.74

        by redstar on Thu Oct 26, 2006 at 07:08:12 AM PDT

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        •  Maybe I'm simple, but (5+ / 0-)
          Recommended by:
          bobinson, cathy b, dus7, Do Tell, ilex

          doesn't it make more sense to give middle income families (you know, the ones that are in debt up to their necks and all) money to either pay off some of that debt, or buy durable goods, in a kind of "trickle up" way that benefits the ENTIRE economy (through saving or purchases or whatever) rather than give people who already have plenty of money MORE money to hide from the government?

           I understand that the top 3% keep the stock market going and all, but seriously, the economy cannot be gauged simply by the markets.  We see spending dropping, wages haven't moved significantly in 30+ years, how much more money do these people need?

           

          "Those who would divide us will never be able to lead us."

          by vibinc on Thu Oct 26, 2006 at 07:18:13 AM PDT

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          •  I totally agree. You are not being oversimple at (4+ / 0-)
            Recommended by:
            vibinc, txdemfem, MarketTrustee, ilex

            all.

            I'd add, for my part, two modifications:

            1. Take care of poor folks first, they've been getting the shaft for three decades whereas the more comfortable of the middle class, only the past 5 years;
            1. Make sure that growth is sustainable, and adjust the targeted consumption accordingly.

            I'd also point out that consumerism is an element of the grease which keeps the system going, incenting as it does folks to keep working harder, get into more debt, then having to more easily accept lower pay jobs out of necessity when the inevitable job transition occurs (also part of the economic system and its inherent insecurity for all but those who's accumulation of money is virtually subsidized).

            Freedom is merely privilege extended unless enjoyed by one and all -9.50, -5.74

            by redstar on Thu Oct 26, 2006 at 07:54:37 AM PDT

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        •  increased capital accumulation... (4+ / 0-)

          There's a basic economic idea called the "golden rule level of savings."

          It says that every economy has level of savings (capital accumulation) that is ideal. Save more or less than this, and your economy is not as efficient as it could be.

          Decreasing the capital gains tax in order to encourage capital accumulation is a crude, half-baked way of getting closer to this point. The trouble with it, though, is that this method doesn't really get us there.

          If 5% of the people are saving vastly more than they ought to in order to get the aggregate economy to that ideal level of savings, then that's basically cheating our way there - and it robs us of the positive effects of achieving that level of savings.

          What we REALLY NEED is to have the other 95% of Americans saving enough to help get us to that ideal level - and capital gains taxes sure as hell aren't the way to help them, because those people don't have enough money to buy the ammount of capital that would be affected by such a cut.

          What we need is to make fundamental changes to the economy - before the other 95% of Americans can accumulate capital, they've got to STOP accumulating debt!!!

          •  Sure, but it ain't set in stone who is to (0+ / 0-)

            accumulate that capital and who is to disproportionately enjoy the fruits of whatever expansion normally results.

            And you ought to ask yourself what it is about policy which enables a situation where 5% do all the accumulating and the other 95% simply, according to you, consume and go into debt.

            It is vastly oversimple to accuse 95% of Americans of over-accumulating debt, thereby blaming the situation on them, when there are reasons for this (for many, making ends meet) and when some Americans can't afford food or shelter.

            And folks, this response is exactly the "trickle-down" tinged ideological response one finds on occasion on kos, for those of you who doubted this was possible.

            Freedom is merely privilege extended unless enjoyed by one and all -9.50, -5.74

            by redstar on Thu Oct 26, 2006 at 08:00:07 AM PDT

            [ Parent ]

            •  you've got it backwards... (4+ / 0-)
              Recommended by:
              3goldens, bluewolverine, Mad Mom, ilex

              It is vastly oversimple to accuse 95% of Americans of over-accumulating debt, thereby blaming the situation on them, when there are reasons for this (for many, making ends meet) and when some Americans can't afford food or shelter.

              It's not an accusation, it's a statement of fact. 95% of Americans are accumulating debt instead of capital. Silly me for assuming that making ends meet was so obviously the reason for this situation that it didn't need to be stated.

              I layed out exactly why trickle-down doesn't work. I have NO idea where you got the idea that I was defending it.

              EVERY American needs to be able to save money, not just the top 5%. When that's possible, we can make real economic progress.

              •  Naw, its you who have it backwards. (1+ / 1-)
                Recommended by:
                ilex
                Hidden by:
                Richard Carlucci

                Why do your hyperbolic 95% of Americans find themselves in a net debtor position.

                According to you: too much consumption of stereos, flat screen tvs and so forth.

                I disagree with that characterization. Wages are stagnant, health care costs are rising at double digit rates, housing costs have been rising at similar rates, and let's not even talk about heating and transportation, or the marginal cost of education.

                All the while, social spending has gone exactly where, in your opinion?

                The real inflation rate for products that folks who earn at lower decile rates is higher than the rate which is reported by the BLS, and I'd be happy to share the stats with you if you like.

                If you're well-to-do, good for you, but blaming a worker's financial precarity on the worker in present circumstances is not just insensitive, it strains credulity.

                Freedom is merely privilege extended unless enjoyed by one and all -9.50, -5.74

                by redstar on Thu Oct 26, 2006 at 08:24:46 AM PDT

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                •  where on EARTH did you get this from? (1+ / 0-)
                  Recommended by:
                  redstar

                  According to you: too much consumption of stereos, flat screen tvs and so forth.

                  I said no such thing.

                  Wages are stagnant, health care costs are rising at double digit rates, housing costs have been rising at similar rates, and let's not even talk about heating and transportation, or the marginal cost of education.

                  I have never disagreed that this is why so many people are in debt.

                  Either you've got me confused with someone else, or you're just a common troll, because I have NEVER suggested the things you claim I have.

                  •  sorry if I misunderstood you. (0+ / 0-)

                    i read:

                    What we need is to make fundamental changes to the economy - before the other 95% of Americans can accumulate capital, they've got to STOP accumulating debt!!!

                    and perhaps read in an accusatory tone.

                    one does hear such things in my world, derisively, about the poor and, lately, the profligate middle-class.

                    not sure my misunderstanding was troll-worthy, though.

                    Freedom is merely privilege extended unless enjoyed by one and all -9.50, -5.74

                    by redstar on Thu Oct 26, 2006 at 10:11:32 AM PDT

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                  •  and btw, i sorta musta had you mixed up with (0+ / 0-)

                    bonddad, who i've read suggesting, by way of financial advice, that folks eschew debt, including mortgage debt to the extent possible.

                    don't get me wrong, it's good advice.

                    but it totally misses why folks are in debt in the first place, and in many cases, it's because they can't afford basic necessities like a decent education for their kids, quality healthcare, decent housing, even a proper bank account if you're poor enough (like the 9% of americans who don't even have bank accounts and are preyed upon by payday loan usurers, check-cashing schemes and so forth).

                    so i'm all for paygo, and the debt-free life. but i'm also for all americans having access to decent housing, decent educational oppty's, and a decent access to quality healthcare among a few other things. and in this environment, for large swathes of americans, that means debt and even bankruptcy.

                    so to talk the fiscal conservative talk like i hear many democrats talk (perhaps not you, sorry 'bout that) these days, i want to hear them walk the walk on democratic values like healthcare, like housing, like education, and yes, deeply progressive taxation.

                    Freedom is merely privilege extended unless enjoyed by one and all -9.50, -5.74

                    by redstar on Thu Oct 26, 2006 at 10:45:57 AM PDT

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              •  95% of Americans are accumulating debt instead (0+ / 0-)

                of capital, you call that a fact?

                Please, cite the source.

                I suspect you went to the Karl Rove school of rhetoric. Complete with the "blame the victim" specialization.

                Freedom is merely privilege extended unless enjoyed by one and all -9.50, -5.74

                by redstar on Thu Oct 26, 2006 at 08:26:23 AM PDT

                [ Parent ]

          •  There's only so much saving to go around. (2+ / 0-)
            Recommended by:
            bluewolverine, redstar

            Individuals can't make a decision to save more that is not a decision to spend less, and as it turns out, its total spending and total income that has the flex to it ... total Saving to go around is determined by other factors.

            That is, people spending less to save more won't increase the total amount of saving, it will just slow down the economy until people are saving a bigger share of a smaller income and it evens out at the same total saving.

            I've already posted the argument before, but its straightforward, so I'll post it here again. Its simple economy-wide double entry accounting plus the institutional rules of how one engages in the transactions that the accounting adds up:

            Saving = I + (G-T) + (EX-IM)

            And I'm pushing the implication of this up in front of the derivation, which few people will work through:

            • That is why household Saving is so low ... with lackluster investment in real assets, and the large government deficit overwhelmed by the massive trade deficit, there is not much saving to go around. Corporate retained earnings come out before they distribute dividend income, so they push to the front of the line. There is very little left for households, and, in the words of JK Galbraith, the people with money to save have more money than the people who do not have money to save.

            And the derivation (and rough explanation of terms) is:

            Investments in real assets (productive equipment, inventories, etc.)

            • net amount of purchasing power injected by the domestic private sector

            PLUS

            The government deficit

            • net amount of purchasing power injected by the government

            PLUS

            The trade surplus

            • net amount of purchasing power injected from the external accounts

            Why?

            BECAUSE

            Income GOES TO Money Spent plus Money Not Spent
            Income COMES FROM Money Spent from Income plus Money Injected from elsewhere

            SO

            Money Not Spent COMES FROM Money injected from elsewhere.

            Saving PLUS Taxes COMES FROM Domestic Content of Investment in real assets, plus Domestic Content of Government Spending, plus Domestic Content of Exports. SO

            S + T = (I+G+EX) - IM

            and the top just rearranged the terms to isolate SAVING in a given period:

            S = I + (G-T) + (EX-IM)

            Banks can create new purchasing power to finance the purchase of new assets, government can create new purchasing power to finance the net deficit, and (to cut a long story short), the finance for the net trade surplus (when there is one) really comes from those two sources as well.

            So Saving is a residual ... individuals can make a decision to save more, but when they do, they are playing a game of getting into a queue of a fixed length, so they are pushing someone else out.

            OH15: IN: Kilroy for Congress. OUT:Deborah Pryce

            by BruceMcF on Thu Oct 26, 2006 at 09:20:47 AM PDT

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    •  Hell Yeaz! (2+ / 0-)
      Recommended by:
      opinionated, bluewolverine

      It was a terrible idea!

      I have enough investments that I pay some (not huge) capital gains and dividends taxes, so I'm not saying it because it didn't help me.

      Capital gains in the stock market are gambling profits. Why in the world do we tax earned income more highly than gambling profits?

      OK, there's an argument that if we lower the tax rate for profits from direct investments, we'll spur entrepreneurship and reward risk-taking and the economy will grow faster and we'll all have better lives hooray. Um, a pretty good argument, actually. But why structure the tax laws to also reward gamblers in the secondary market? If you build up a company, go public, and 2 years later sell your shares to me for a huge profit, why do I deserve any tax break if those shares continue to appreciate in value?

      OTOH: I'd love to see a comparison between the benefits of the tax cuts at different levels, and the amount of taxes people at those levels pay.

      The Geneva Conventions are not a suicide pact

      by Brain Donor on Thu Oct 26, 2006 at 07:31:35 AM PDT

      [ Parent ]

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