Bush shifts tax burden to middle class

[TexasTiger 13,119]

Tax burden shifts to the middle

New report could roil presidential campaign

By Jonathan Weisman

Updated: 12:04 a.m. ET Aug. 13, 2004

Since 2001, President Bush's tax cuts have shifted federal tax payments from the richest Americans to a wide swath of middle-class families, the Congressional Budget Office has found, a conclusion likely to roil the presidential election campaign.

advertisementThe CBO study, due to be released today, found that the wealthiest 20 percent, whose incomes averaged $182,700 in 2001, saw their share of federal taxes drop from 64.4 percent of total tax payments in 2001 to 63.5 percent this year. The top 1 percent, earning $1.1 million, saw their share fall to 20.1 percent of the total, from 22.2 percent.

Over that same period, taxpayers with incomes from around $51,500 to around $75,600 saw their share of federal tax payments increase. Households earning around $75,600 saw their tax burden jump the most, from 18.7 percent of all taxes to 19.5 percent.

• More politics newsThe analysis, requested in May by congressional Democrats, echoes similar studies by think tanks and Democratic activist groups. But the conclusions have heightened significance because of their source, a nonpartisan government agency headed by a former senior economist from the Bush White House, Douglas Holtz-Eakin. Indeed, the study will likely stoke an already burning debate about the fairness and efficacy of $1.7 trillion in tax cuts that the president pushed through Congress.

"CBO is nonpartisan, it's independent, and right now it works for a Republican Congress with a former Bush economist at its head," said Jason Furman, economic director of the presidential campaign of Sen. John F. Kerry (D-Mass.). "There's no higher authority on the subject."

http://www.msnbc.msn.com/id/5689001/

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http://www.politicalindex.com/wrong1.htm

http://www.ourcivilisation.com/economy/usa/middle.htm

America:What Went Wrong by D. Barlett & J. Steele (1992)

Dismantling The Middle Class

The total amount of dollars in salaries funneled to the rich soared in the 1980s—as did the number of rich themselves. Meanwhile, the total dollars in wages that went to the middle class increased an average of just 4% a year, or 44% over the decade.

Rigging the Game

Casualties of the New Economic Order

Downward Mobility

Life on the Expense Account

An Indifferent Congress

Wall Street's Greatest Accomplishments

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Yeah and we know what Kerry plans don't we!

http://www.aunation.net/forums/index.php?showtopic=9434

[TitanTiger 20,539]

Typically, in an economic downturn, it is the rich whose incomes are affected the most in raw dollar terms. That's not to say they "feel" it the most, just that the fluctuations in their income varies much more than the lower and middle classes. Naturally, if they receive less income than before, they pay less taxes than before and if their income decreases in larger amounts, so will their taxes. And if the rich as a segment of the population sees more raw dollar decreases, then their share of the overall taxes will reflect that. It's temporary and when the economy is rolling full steam again, those numbers will change on their own.

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It's temporary and when the economy is rolling full steam again, those numbers will change on their own.

Not so fast. I think that's a "pipe dream." I think we have seen the last of the full-blown economies of America and those economies created by the Federal Reserve. Don't get your hopes up, It's not going to happen because what you are about to experience hasn't happen for over seventy years, at least in the US. Every American is expecting a recovery that will not, again will not, materialize.

http://www.lewrockwell.com/north/north296.html

There has been a recovery of sorts. Manufacturing is up, surely. But wages adjusted for price inflation have been stagnant or worse. Interest rates are low, which is good for borrowers and bad for savers. Unemployment is still around 5.5%, which is on the high side. This figure keeps getting revised. Job growth is slow, and has remained slow throughout the entire period.

http://www.federalreserve.gov/releases/housedebt/default.htm

Household Debt Service and Financial Obligations Ratios

This compares what households are paying on their debt each quarter in relation to disposable personal income. For homeowners over the last quarter century, this figure has rarely gone below 13.5% or above 16%. In fact, the only time it exceeded 16% was in the 4th quarter of 2001 – the end of the recession. It is in the range of 15.5% today. It has not been below 15% since 1995.

http://www.morganstanley.com/GEFdata/diges...040809-mon.html

Lacking in the organic staying power of job creation and wage earnings, the US economy has become addicted to the steroids of extraordinary monetary and fiscal support. But with policy levers pushed to the max, the lifeline of support is now dangerously thin. For such an unbalanced and vulnerable economy, it doesn’t take much of a shock to put a low-quality recovery in trouble. As bad luck would have it, that’s precisely the risk as oil has once again entered the macro equation.

Myth #1: Jobless recoveries don’t generate enough income to drive consumer demand.

Myth #2: Debt isn’t a problem because interest rates are still low -- at least for the moment.

The New Economy promised an ever-rising US equity market. And now yet another new paradigm argues that foreign investors will gladly foot the bill for a US economy that continues to push the envelope in living beyond its means.

The likelihood of a saving-short US economy continuing to run ever-wider current account deficits without suffering dollar and/or real interest rate consequences is close to zero, in my view.

Myth #3: The record is pretty clear on this risk factor: Each of the five recessions since the early 1970s has been preceded by an oil shock in one form or another. The key question, in this instance, is whether the US has experienced a true oil shock.

http://www.foreignaffairs.org/19990101faes...-economics.html

http://www.henrygeorge.org/bust.htm

A lot of land is unused, (or run down in its present use), as the holder waits for a possible higher use that never materializes. In and after a crash, bid prices for land fall, but asking prices stay high, so sales drop like a stone. This behavior is inconsistent with the premises of the "rational expectations" theorists, but is good history: it has been extensively documented, over several giant cycles of boom and crash.

Land Speculation and Inflation?

"Taxes may be imposed upon the value of land until all rent is taken by the state, without reducing the wages of labor or the reward of capital one iota; without increasing the price of a single commodity, or making production in any way more difficult."

What has this to do with inflation? George identifies land rent as an income for which no production is needed; it is, in effect, a tax on production, the burden of which increases as production increases, due to rising demand for the same supply of land. The tendency of this process is, as we have seen, to eventually raise land rents beyond the marginal ability of labor and capital to pay them - and depression is the result.

Is there any way that this process can be forestalled, temporarily at least? Yes: the money supply could be increased. Remember, the income of landowners is increased by land speculation, even though this makes no contribution to actual production. The buying power that landowners gain, laborers and capitalists lose. But the effect of this can be blunted by increasing the money supply, without any increase in production: that's called inflation. Real wages might be in the process of declining, but people would still have the same amount of money to spend - and they will try to spend it before it loses its value. Thus, an increase in the money supply can create a surge in demand, keeping a period of economic growth alive - at least until after the next election. Eventually, though, increased rents will consume the extra money. Then, one of two things must happen: either the money supply must be increased further, risking runaway inflation - or there must be a recession.

Everyone remembers the disastrous effects of runaway inflation in the Weimar Republic prior to the rise of the Third Reich. What is less generally known, however, is how large a role land speculation played in that hyperinflation.

Economists recognize two major types of inflation. Demand- pull inflation occurs in a growing economy in which increased demand for goods and services leads producers to raise prices faster than the overall growth in output. Cost-push inflation occurs when a "supply shock" - a rise in the cost of some vital material or resource - raises the cost of production, and hence the market prices, of goods whether demand is increasing of not. It's easy to see that a combination of the two could result in stagflation.

This is exactly what Henry George is describing, in his theory of booms and busts. In a growing economy, land rents increase faster than overall growth. This creates an incentive for more land speculation, further increasing land rents and prices. Higher rents are passed on into consumer prices: a "supply shock" which grows more severe as the economy increases its output!

George's reasoning, combined with a modern macroeconomic analysis of inflation, confirms that inflation and unemployment/recession are not opposed - they are different sides of the same coin. Land speculation, by George, does two things to create inflationary pressures: 1) It increases the volatility of the economy, creating more severe swings and a sharper demand- pull climate when things are moving upward. 2) It creates a growing cost-push effect by creating a general increase in the cost of land, exacerbated by unproductive land-hoarding. Thus we are led to suspect that if we could rid our economy of land speculation, we could erase the tendency for economic growth to lead to high inflation.