The CBO was asked to, adjusting for tax breaks, loopholes, etc, determine the average effective tax rate for each quintile of individual income. For those of you who did not do well in 7th grade math, a quintile is 20% of the population ranked from the lowest income 20% to the highest income 20%.
Simply put, while it is true that the rich have gotten a tax break of 1.3% from 1979 to 2007, the poor have gotten a tax break of 6.8% or over 4 times larger a tax cut. Sweet!!! So, the argument that the tax code is not “progressive” is disingenuous at best. However, don’t blame me, blame the Congressional Budget Office and those pesky Republicans.
The real argument is not about rates, it’s about dollars. 1% of a $1 billion is greater than a 100% of $50 thousand. Example: Hedge fund manager Carl Icon. Carl made $900 million in 2010. Presumably, most of that taxed at 15%.
Taxing capital gains at significantly lower rates backfired. Steered our economy in the direction of short term money shuffling rather than long term investment.
What’s at issue today is what’s the least damaging place to look for new revenue.
The argument boils down to who bears the brunt of fixing the fiscal situation. The working poor or those blessed with the most? What’s so wrong with going back to the early-1990′s rates. Why is there such opposition to something so straightforward?
America always raises taxes and lowers taxes depending on circumstances. Like we did during the Vietnam war. A surtax to pay for war. Like Reagan raised taxes when things were getting too out of kilter. Now we want a free lunch. Not just a free lunch, no tax to pay for war, we want tax cuts as desert.
Things were so flush under the old rates we had a surplus. President Bush sent everybody a $600 rebate then slashed income tax rates. No rainy day funds for us free lunchers. Got a surplus? Get rid of it quick. Now, we are in the opposite situation. So why not adjust?
For some reason we now look at rates like religion rather than simple math. Not good.