Death and Taxes [Archive] - PDGA Discussion Board

Lyle O Ross

Aug 12 2008, 12:19 PM

WASHINGTON - Two-thirds of U.S. corporations paid no federal income taxes between 1998 and 2005, according to a new report from Congress.
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The study by the Government Accountability Office, expected to be released Tuesday, said about 68 percent of foreign companies doing business in the U.S. avoided corporate taxes over the same period.

Collectively, the companies reported trillions of dollars in sales, according to GAO's estimate.

"It's shameful that so many corporations make big profits and pay nothing to support our country," said Sen. Byron Dorgan, D-N.D., who asked for the GAO study with Sen. Carl Levin, D-Mich.

An outside tax expert, Chris Edwards of the libertarian Cato Institute in Washington, said increasing numbers of limited liability corporations and so-called "S" corporations pay taxes under individual tax codes.

"Half of all business income in the United States now ends up going through the individual tax code," Edwards said.

The GAO study did not investigate why corporations weren't paying federal income taxes or corporate taxes and it did not identify any corporations by name. It said companies may escape paying such taxes due to operating losses or because of tax credits.

More than 38,000 foreign corporations had no tax liability in 2005 and 1.2 million U.S. companies paid no income tax, the GAO said. Combined, the companies had $2.5 trillion in sales. About 25 percent of the U.S. corporations not paying corporate taxes were considered large corporations, meaning they had at least $250 million in assets or $50 million in receipts.

The GAO said it analyzed data from the Internal Revenue Service, examining samples of corporate returns for the years 1998 through 2005. For 2005, for example, it reviewed 110,003 tax returns from among more than 1.2 million corporations doing business in the U.S.

Dorgan and Levin have complained about companies abusing transfer prices � amounts charged on transactions between companies in a group, such as a parent and subsidiary. In some cases, multinational companies can manipulate transfer prices to shift income from higher to lower tax jurisdictions, cutting their tax liabilities. The GAO did not suggest which companies might be doing this.

"It's time for the big corporations to pay their fair share," Dorgan said.

md21954

Aug 12 2008, 03:15 PM

you're surprised? paying taxes as a corporation should be a last resort.

businesses do their fair share by providing jobs and paying salaries. gouge their profits here in the US and plenty of other countries will welcome them with open arms.

i'm not a tax accountant but i do believe corporations are able to write off payroll and other invested assets. this is the same as small business owners writing off expenses for tools and transportation but on a much larger scale. if the company isn't investing in itself to the extent that taxes are still owed, the balance can be avoided with charitable giving programs. contrary to your opinion "big" corporations doesn't always equal "evil" corporations. don't forget that many of these corporations are publicly owned.

the author is short sighted in saying "nobody knows" how they're getting away with it. this is pretty common knowledge. it scares me that someone can be elected to office and carry this naive opinion. anyone with any biz school background or even the slightest hint of business acumen should realize this.

"It's shameful that so many corporations make big profits and pay nothing to support our country," said Sen. Byron Dorgan, D-N.D., who asked for the GAO study with Sen. Carl Levin, D-Mich.

pay nothing? how about paychecks, investments in other companies and bills?

gnduke

Aug 12 2008, 03:44 PM

AviarX

Aug 12 2008, 07:38 PM

that's ridiculous. jobs are two way streets -- corporations give money to employees and employees give their time and energy to corporations: enabling them to do business and make a profit. corporations use roads, bridges, police, the military, the weather service, fire departments, etc. and should pay their fair share. if you want to give truly small businesses a break that is one thing, but no good-sized corporation should get away from paying taxes. if every American and American corporation pays a small percentage of their income in taxes we will have a great country and taxes won't be outrageous. when very wealthy individuals and corporations don't pay taxes an undue burden is placed on the rest of us and our long-term national security is put at stake.

Pizza God

Aug 12 2008, 10:19 PM

Spoken like a true Democrat.

I own 1/4 of a Partnership and 100% of an S-Corporation. Nether pay taxes. It all falls on me.

Of course I have not paid any taxes for 9 years now. (I last paid taxes in 1998) I got my Earned Income Tax Check in the mail this week for $1440.

Thanks all you tax payers :D

but then, if you are paying taxes, you are making MUCH more money than I am. And I am willing that I pay more taxes still than any of you. (unless you make a buttload of money or own a business larger than mine)

I just don't pay income taxes due to not making a profit.

tbender

Aug 13 2008, 10:25 AM

I just don't pay income taxes due to creative accounting.

Fixed.

(Not saying illegal, just saying creative. If you weren't making a profit, you'd have another job.)

Alacrity

Aug 13 2008, 11:29 AM

I am curious, who actually pays taxes..........

For Tax Year 2006<o:p></o:p>[/b]

<div align=center>

<table class=MsoNormalTable border=1 cellspacing=0 cellpadding=0
style='mso-cellspacing:0in;mso-padding-alt:0in 0in 0in 0in'>
<tr style='mso-yfti-irow:0;mso-yfti-firstrow:yes'>
<td width=148 valign=top style='width:111.0pt;padding:0in 0in 0in 0in'>
Percentiles Ranked by AGI<o:p></o:p>[/b]
</td>
<td width=148 valign=top style='width:111.0pt;padding:0in 0in 0in 0in'>
AGI Threshold on Percentiles<o:p></o:p>[/b]
</td>
<td width=148 valign=top style='width:111.0pt;padding:0in 0in 0in 0in'>
Percentage of Federal Personal
Income Tax Paid<o:p></o:p>[/b]
</td>
</tr>
<tr style='mso-yfti-irow:1'>
<td width=148 valign=top style='width:111.0pt;padding:0in 0in 0in 0in'>
Top 1%<o:p></o:p>[/b]
</td>
<td width=148 valign=top style='width:111.0pt;padding:0in 0in 0in 0in'>
$388,806<o:p></o:p>[/b]
</td>
<td width=148 valign=top style='width:111.0pt;padding:0in 0in 0in 0in'>
39.89<o:p></o:p>[/b]
</td>
</tr>
<tr style='mso-yfti-irow:2'>
<td width=148 valign=top style='width:111.0pt;padding:0in 0in 0in 0in'>
Top 5%<o:p></o:p>[/b]
</td>
<td width=148 valign=top style='width:111.0pt;padding:0in 0in 0in 0in'>
$153,542<o:p></o:p>[/b]
</td>
<td width=148 valign=top style='width:111.0pt;padding:0in 0in 0in 0in'>
60.14<o:p></o:p>[/b]
</td>
</tr>
<tr style='mso-yfti-irow:3'>
<td width=148 valign=top style='width:111.0pt;padding:0in 0in 0in 0in'>
Top 10%<o:p></o:p>[/b]
</td>
<td width=148 valign=top style='width:111.0pt;padding:0in 0in 0in 0in'>
$108,904<o:p></o:p>[/b]
</td>
<td width=148 valign=top style='width:111.0pt;padding:0in 0in 0in 0in'>
70.79<o:p></o:p>[/b]
</td>
</tr>
<tr style='mso-yfti-irow:4'>
<td width=148 valign=top style='width:111.0pt;padding:0in 0in 0in 0in'>
Top 25%<o:p></o:p>[/b]
</td>
<td width=148 valign=top style='width:111.0pt;padding:0in 0in 0in 0in'>
$64,702<o:p></o:p>[/b]
</td>
<td width=148 valign=top style='width:111.0pt;padding:0in 0in 0in 0in'>
86.27<o:p></o:p>[/b]
</td>
</tr>
<tr style='mso-yfti-irow:5'>
<td width=148 valign=top style='width:111.0pt;padding:0in 0in 0in 0in'>
Top 50%<o:p></o:p>[/b]
</td>
<td width=148 valign=top style='width:111.0pt;padding:0in 0in 0in 0in'>
$31,987<o:p></o:p>[/b]
</td>
<td width=148 valign=top style='width:111.0pt;padding:0in 0in 0in 0in'>
97.01<o:p></o:p>[/b]
</td>
</tr>
<tr style='mso-yfti-irow:6'>
<td width=148 valign=top style='width:111.0pt;padding:0in 0in 0in 0in'>
Bottom 50%<o:p></o:p>[/b]
</td>
<td width=148 valign=top style='width:111.0pt;padding:0in 0in 0in 0in'>
<$31,987<o:p></o:p>[/b]
</td>
<td width=148 valign=top style='width:111.0pt;padding:0in 0in 0in 0in'>
2.99<o:p></o:p>[/b]
</td>
</tr>
<tr style='mso-yfti-irow:7;mso-yfti-lastrow:yes'>
<td width=443 colspan=3 valign=top style='width:332.25pt;padding:0in 0in 0in 0in'>

Note: AGI is Adjusted Gross Income

Source: Internal Revenue Service<o:p></o:p>[/b]
</td>
</tr>
</table>

</div>

From this we see that almost 1/2 of the population pays less than 3% of the taxes. This is the group that uses more public services than any other group, and drives more cars, etc. So the argument that companies should be paying their "fair share" is ludicrous. It presupposes that everyone else is. Don�t get me wrong, I don�t think that companies should use overseas holdings and other crap to get out of paying taxes, but don�t assume the world is �Fair�. There is no cotton candy, no rides going round and round, and you don�t get the pony that goes up and down.

What irks me is that 50% of the US Taxpayers covers 97% of the taxes. And before we say let us rob from the rich, what happens when the cost of business cuts profits in a capitalist society? You the consumer either pays more for the product or the job moves overseas, where the companies pay �taxes�
somewhere else and I personnally think capatilistism is the way to go.

Don�t believe me? Call Dell computers tech support and ask for some help with your computer. Use to be you could get some Texan down in Austin, now you get �Robert� from India.

sandalman

Aug 13 2008, 12:03 PM

why care about taxes? they'll get what they get, and we get roads, and beer, and the armed forces to make sure we can continue to enjoy driving and drinking. its a good deal.

Pizza God

Aug 13 2008, 01:33 PM

I just don't pay income taxes due to creative accounting.

Fixed.

(Not saying illegal, just saying creative. If you weren't making a profit, you'd have another job.)

My store lost 23k for the year.

my net taxable income last year was 8K which includes both the farm and my store.

you see, the reason the store lost money was because it could not even afford to pay me the $500 per week I take out to pay my bills.

As of the end of July, my checking account is nearly 30K NEGITIVE.

In Febuary of last year, it was positive for the first time ever.

That is how bad the last year was with prices skyrocketing and sales going down.

just over one year left on my lease, if things don't get better by next year, I will be out of business. I will not continue this. As it is, I had to get a line of credit from the bank earlier this year to keep the doors open.

minimum wage laws, Ethanol laws and Federal Reserve actions have all helped in the demise of a lot of business.

Just some people can't see it. Usually Democrats who think just because you own a business, you have money. I, along with nearly every business owner I know, knows bettter. We are all struggling to keep the doors open. (I do know some business owners that do not fall into this catigory)

Creative accounting does not hide money earned. If you reinvest in your company or pay your employee more, that is an expence. Also, you can carry over losses from previous years.

Lyle O Ross

Aug 13 2008, 06:53 PM

I am curious, who actually pays taxes..........

From this we see that almost 1/2 of the population pays less than 3% of the taxes. This is the group that uses more public services than any other group, and drives more cars, etc. So the argument that companies should be paying their "fair share" is ludicrous. It presupposes that everyone else is. Don�t get me wrong, I don�t think that companies should use overseas holdings and other crap to get out of paying taxes, but don�t assume the world is �Fair�. There is no cotton candy, no rides going round and round, and you don�t get the pony that goes up and down.

What irks me is that 50% of the US Taxpayers covers 97% of the taxes. And before we say let us rob from the rich, what happens when the cost of business cuts profits in a capitalist society? You the consumer either pays more for the product or the job moves overseas, where the companies pay �taxes�
somewhere else and I personnally think capatilistism is the way to go.

Don�t believe me? Call Dell computers tech support and ask for some help with your computer. Use to be you could get some Texan down in Austin, now you get �Robert� from India.

Let me begin with this and then I'll move on. Being in the 35% tax bracket, let me assure you, I do not pay 35% of my income in taxes. No creativity involved, standard deductions. The deductions that the top 5% or even top 10% have available far outstrip what I can access... legally. The notion that the top 50% pay most of the taxes is beyond naive. Of course, so is the notion that they get the most benefit out of the tax base...

Lyle O Ross

Aug 13 2008, 07:06 PM

Let's see, we use the tax code to add incentive to specific activities that we would like to see businesses get involved in and then complain when corporations do the things we want to reduce their tax liability?

Does something not sound right?

Let me give you one example of how a company reduced their taxes. It's beautiful. It was a nice little loophole developed for Standard Oil of Ohio. Basically, if you invest in certain kinds of infrastructures in other countries, you can write it off. Wachovia, before they were Wachovia, used this loophole. They bought a public tram in a German City. then, they leased it back at exactly the same cost. No real money changes hands, Wachovia gets a multi-million dollar tax write off.

The notion that these companies play this on the up and up is plain wrong.

Lyle O Ross

Aug 13 2008, 07:07 PM

BTW - I think Za has the right of it, the fact that the top of the country often does not pay any taxes, and that the small and medium sized companies and middle class do, bites my donkey big time.

gnduke

Aug 13 2008, 07:54 PM

Pizza God

Aug 13 2008, 10:24 PM

Sorry, got busy today

http://www.taxfoundation.org/blog/show/1471.html

the US is the 2nd highest corporate tax rate IN THE WORLD. Japan is only slightly higher.

Now do you understand why our companies are moving overseas???

Do you understand why a lot of American Icon companies are now Foreign owned.

Pizza God

Aug 13 2008, 10:57 PM

Anheuser-Busch - Belgian
CITCO - Venezuela
Good Humor, Ben & Jerry's and Breyers - British-Dutch
French's Mustard - British
Frigidaire - Sweden
Adidas - German
The Plaza Hotel (A national Landmark) - Israeli
The Flatiron Building (A National Landmark) - Italian
The Chrysler Building - Abu Dhabi
Caribou Coffee & Church's Chicken - Bahrain
Trader Joe's - German
7-Eleven - Japan
Holiday Inn - British
Dial Soap - German
Campton Place Hotel (landmark in San Fransisco) - India
Shell - Dutch
T-Mobile - German
Firestone - Japan
Sunglass Hut - Italian
The Indiana Toll Road, The Chicago Skyway and 161 in the DFW area - Spain and Australia
Toll House Cookies - Swiss
Georgia Life and Southland Life - Norwegian
For sale
Chicago Midway Airport - Spanish, Australian, German, Canadian and French are all bidding (only one American company)
The Pennsylvania Turnpike - Spanish, highest bidder
Puget Sound Energy - Australia bidding

sandalman

Aug 13 2008, 11:16 PM

foreign investment in the US is proof that the US is the shiznitz

Pizza God

Aug 14 2008, 12:19 AM

Pizzeria Uno could be latest in string of bankrupt restaurants (http://www.bloggingstocks.com/2008/08/13/pizzeria-uno-could-be-latest-in-string-of-bankrupt-restaurants/)

Look around when you drive. notice how many empty spaces there are that were occupied even just one year ago.

in my strip center, 4 business have been locked out in the past year.

2 in the last month.

And no, I have not paid my rent yet. I paid last month 20 days late.

Lyle O Ross

Aug 14 2008, 11:43 AM

I want to expand on what Aviar X wrote. Let's take a simple case, the intranet. I don't think anyone needs me to explain the cost benefit of the intranet to America's businesses. Do those companies pay for the use of that tool (I mean for the development and research benefit, not access fees). The answer is no. They don't because the intranet was developed via government funded research. Presumably, those companies pay via their taxes.

Up until the last 20 or 30 years, America dominated in technological prowess. That came about because of research funded by our government. One only had to look at the opening ceremonies of the Olympics to realize that we no longer dominate the world. That's would be because our tax base has shriveled, and not because we are spending it all on the poor.

Now, I don't know about the rest of you, but it bugs the horse dooky out of me that in today's world, a substantial portion of our government is owned by the Chinese and Saudis. It goes way beyond spending too much (not to mention spending too much on a very foolish war) it is because the middle class and small businesses of this country are the only ones paying.

Isn't it time the top 10% actually started paying for the benefits they get.

Every few years someone talks about a flat tax, and what the guys who think through the numbers say is that a flat tax of 10% would suffice. Now, it's not the poor who shoot down the flat tax idea, it's the rich and powerful. If those guys are really paying 39% of their income in taxes, why in the world would they shoot down this concept?

Lyle O Ross

Aug 14 2008, 11:45 AM

Lyle O Ross

Aug 14 2008, 11:52 AM

Also,

What % of their total worth goes to taxes, for the top guys and the bottom 50%. What is the average salary and spread for those bottom guys? Where do you draw the conclusion that they (that bottom 50%) use most of the services? What is that based on? Does it really account for the use of all our infrastructure? I find this even harder to believe. When people assess the use of our government paid for wealth, the always look at medical issues, they never look at real federal expenditures in research, education and infrastructure and what the real benefits of those things are.

Lyle O Ross

Aug 14 2008, 11:58 AM

*Tax Havens for One and All?*
*Newsweek (04/08/02) p.33; Samuelson, Robert J.*

The number of Americans opening overseas bank accounts is growing; the Internal Revenue Service (IRS) estimates that between 1 million and 2 million Americans are trying to evade taxes by using overseas tax havens. Foreign bank accounts have become havens, not just for multimillionaires, but for what one expert calls the "working affluent." With the number of IRS audits conducted each year falling, people are less afraid of being caught, but the rise in tax evaders could prompt more evasion and erode the trust on which the tax system depends.

Alacrity

Aug 14 2008, 12:05 PM

Lyle O Ross

Aug 14 2008, 12:08 PM

foreign investment in the US is proof that the US is the shiznitz

And here I thought it meant the dollar wasn't worth shiznitz...

sandalman

Aug 14 2008, 12:12 PM

nope, it means that the buyers think the value is there relative to value they could receive elsewhere in the world. Undervalued is different from worthless.

Lyle O Ross

Aug 14 2008, 12:42 PM

Who pays taxes? (http://www.ntu.org/main/page.php?PageID=6)

Give me a link to the data. I find this hard to believe based on the number of exemptions that I've read about. On the other hand, let's assume it's true. Does this mean that the top 10% of our country should have to support big business? Or that big business should have to pay for the advantages they get? Or on the other hand, does it mean that those top guys own the businesses and are only paying taxes on their salaries while exempting their businesses?

That's what I thought, it's a conservative anti-tax group that looks at only what is paid on income taxes. It ignores actual income data and the breakdown of benefits and and real salaries. That bottom 50% that pays so little, they make less than 14% of the total income in this country. They start at 26,000 and go down from there. Now, just how is it that they're using all the services and getting all the benefits out of this country? Many of them can barely afford to drive in today's $3.50/ per gallon of gas environment. Many of them don't have health insurance. I fail to see how they're getting such a great benefit?

But, here is a dated article that actually takes you through the numbers. The article is directed at Rush who often presents the same kind of numbers that Alacrity did. It shows the truth of the numbers and that things aren't always what they seem to be.

November 25, 2003 � The article on his website starts with the outraged exclamation, "Only The Rich Pay Taxes - Top 50% Of Wage Earners Pay 96.03% Of Taxes." (see "Only The Rich Pay Taxes")

Ok, I have to be fair. I've never done Oxycontin, so I'm not sure if it's what made Rush so hyped up with stupidity that he put numbers on his website that flat out disprove the argument he is trying to make.

But I suspect there must be something either in either sucking down Oxycontin or sucking on right-wing bunghole that made the King Of All Bloated People, Rush Limbaugh, declare that these numbers that clearly show he is full of it will, "stay on this website forever," because he is so proud how they make his dishonest case backing up the above headline. In reality, by "forever," he surely means for a while until he realizes how the numbers prove he is asinine and full of it, which I guess will be forever now that I think about it.

So now for the numbers. Look at the chart below for a second, taken directly from Rush's site:

"Think of it this way: less than four dollars out of every $100 paid in income taxes in the United States is paid by someone in the bottom 50% of wage earners. Are the top half millionaires? Noooo, more like "thousandaires." The top 50% were those individuals or couples filing jointly who earned $26,000 and up in 1999. (The top 1% earned $293,000-plus.) Americans who want to are continuing to improve their lives - and those who don't want to, aren't. Here are the wage earners in each category and the percentages they pay:

Top 5% pay 53.25% of all income taxes (Down from 2000 figure: 56.47%). The top 10% pay 64.89% (Down from 2000 figure: 67.33%). The top 25% pay 82.9% (Down from 2000 figure: 84.01%). The top 50% pay 96.03% (Down from 2000 figure: 96.09%). The bottom 50%? They pay a paltry 3.97% of all income taxes. The top 1% is paying more than ten times the federal income taxes than the bottom 50%! And who earns what? The top 1% earns 17.53 (2000: 20.81%) of all income. The top 5% earns 31.99 (2000: 35.30%). The top 10% earns 43.11% (2000: 46.01%); the top 25% earns 65.23% (2000: 67.15%), and the top 50% earns 86.19% (2000: 87.01%) of all the income."

Ok, so there it is. Notice anything? If you are looking at the numbers I am looking at, you will notice a few things.

For starters, look at what percentage of the income 50% of Americans combined earn: 13.81%.

Where is that number on the chart? He didn't put it there directly, but do the math: if the top 50% earned 86.19% of the income, that means that the other half of Americans - not a small group, we are talking half of us combined - earned only 13.81% of all the income in the nation. That is criminal. Half the nation is being made to work as slave laborers to support the other half.

Right, they don't pay much in taxes, but that is because they DON'T EARN ANYTHING. Look again at Rush's numbers. 1 out of 2 American tax filers takes home less than a pathetic $26,000 a year. And no, that is not even per person. Rush says plainly, "The top 50% were those individuals or couples filing jointly who earned $26,000 and up in 1999." That means the bottom 50% of us - including couples filing jointly - made $25,999 or less per household.

Again, this is HALF OF US COMBINED making less than 14% of all the income, half of our households earning less than $26,000 each.

Now let me point out here that to begin with Rush only talks about "wage earners." Yes, for the sake of this analysis, he is not covering corporate taxes or income at all. He's not covering one of the biggest scams the Republicans run, slashing corporate taxes, increasing the burden on individuals. Nope, that's scam number one in his numbers. But let's not start pointing out that his numbers are entirely misleading, as one would expect from him, just yet. Let's just continue to show that even when he was trying to make his distorted, misleading point, the numbers he chose to give show his points to be completely inaccurate.

Ok, so using Rush's numbers again, what do the other half of us make? Yes, the other half of the nation makes not 2, not 3 times as much as the rest of us, no not 4, not even 5, but over 6 times as much as the other half of us combined. This is what Rush wants to brag about? One half of the nation is making over 6 times as much as the other half? Right, there is inequity proven here Rush, but not in the tax code, it is in the wage distribution. But wait, we see something even worse if we keep looking at his numbers.

Let's use his 2000 figures just for fun (why he gives 1999 and then 2000 in parenthesis is, I guess, to prove he can be asinine with two consecutive years worth of outdated data, so let's indulge him.)

The top 25% of us made over 2/3 of all the money (67.15% he tells us) - yes, that means 75% of us combined don't earn 1/3 (32.85%) of what the top 25% of us made.

Now let me ask you a question: looking at the sentence above, tell me how much more, on average, does someone in the top 25% earn than one of the other 75% of us?

Careful now, Rush is playing a game to make things seem not so uneven. He is comparing a small group - the top 25% percent - with a group 3 times its size - the other 75%. This is a game the right often uses to make the disparity not seem so bad. If you just look as it is presented, it seems like the people in the top 25% only make 33 percent more than the rest of us: they have 67% of the money, we have 33%, so they only have 33 % more, right? Wrong. Allow me to sound like your fifth grade math teacher for a second: if 1/4 of the people have 2/3 of the money, and 3/4 of the people have only 1/3 of the money, how much more does each person in the top 1/4 have than the rest of the people?

Yes, Rush is counting on you having skipped math class that day. The main difference between Bush/Limbaughians and the rest of us is that we deal with facts and truth, they count on the fact you are too busy to look into things or question if they are accurate.

Ok, so let us solve this grade school math equation for you and give you a useful, accurate answer. The real amount the average person in the top 25% of earners makes is over 6 times what the other 75% percent of us make on average. (For those of you who want to refresh your math skills, they have 2 times as much money, multiply by the fact we are 3 times as many people as them - fun, isn't it? Maybe not, but at least you get a useful answer.)

Ok, still just using his numbers, the top 10 percent earn almost half (46.01%) of all the money. Yes, if 9 out of 10 of us put all the money we made in a pot, it would about equal what just this 10% made. But no, don't get confused and think that means the top 10% just earns a little over 2 times as much as the rest of us. That is the small group vs. the larger group illusion again. On a per person basis, the top 10 percent earn almost 8 times as much as the other 90 percent of us. How much more do they earn then the first half of us - the 1 out of 2 of us Rush wrote his article to bag on? The people in this top 10% each make 17 times as much as half of us do - and remember, we are talking per household (including "couples filing jointly.")

Wait, this is just how bad it is using Rush's numbers. The reality is actually even worse - and yes, his complaints about the tax burden falling unfairly on the "top 50%" turns out to be based entirely on bogus numbers as well. But let's just finish off with his numbers as he presents them before showing the even grislier reality.

According to the numbers Rush Limbaugh will run "forever" on his website, proclaiming they show tax cuts for the rich are not only "fair", but required to "balance things out," as he and his buddies regularly claim, the top 1% of us made 20.81 percent of the money. Now compare that to what the first 50% of wage earners make: 12.99 percent for the year 2000.

Notice anything? Notice that half of us combined, half of the nation working for the whole year, not only doesn't make as much as this top 1% of us, they make barely half? Remember, this includes "households filing jointly." Half of the households in this nation, working for a year, don't make combined what just 1 percent of us makes.

So say the number of wage earners is 131 million (the actual number from 2002.) If there are 131 million households, like there were last year, then that would mean 65.5 million our families combined don't make as much total as 1.3 million of us.

Yes, again when you first look at the numbers as Rush presents them it merely looks really bad - that the top 1% makes almost double what the lower 50% does combined - but again, remember, this does not mean that on average they just make 2 times as much as half of us. Ah, the perspective distorting games of the lying right. The reality, once you compare on a per person basis, is that the top 1% of is making over 80 times as much on average as half of our households.

Now remember, we are not saying they are making 80 times more than a couple lazy, dirty poor people, as Rush tries to make it seem when he says, "Americans who want to are continuing to improve their lives - and those who don't want to, aren't."

We are talking about 1 out of 2 of us who earn money. He is flat out saying that 1 out of 2 of us "don't want to" "improve their lives." Now, these divide and conquer hate tactics can be useful for amoral scum like Rush, but half the nation? Half of us are lazy scum who don't want to or aren't improving our lives?

But yes, the way he presents the numbers makes it seem like one small group against another. He purposefully breaks it into the "top 50%" and "bottom 50%" of wage earners. Why? Ah, now we get to the misleading part of Rush's numbers.

Let's start by sending you back up to his chart. Scroll back up for a second and look at the chart from his site that we pasted above. Compare the top tax group he uses with the top income group. Notice anything? That's right, for showing how much each group pays in taxes, he uses the "top 5%" of tax payers, while for income he uses only the "top 1%."

Yes, the top 1% pay so little in taxes Rush was too embarrassed to put the number. In fact, he was so embarrassed that his argument was destroyed right from the get go that he risked using the obvious tactic of avoiding to mention how little the top 1% pays at all - even though the whole point of what he's saying is how much each group pays in taxes compared to what they earn. Risky, but the facts he wanted to hide so instantly shot down his argument that he had to do something.

So, he decided to sneak in up front a bait and switch to the top 5% of taxpayers, not the top 1% he shows the income of. It is the first group he lists for a reason: he hopes people will blow right by without noticing. Oops, busted red-handed, without possible justification, Rush. You just shot down the integrity of your chart - your "forever" chart - in its first statistic.

We will get back to this in a second, but let's just first look at the general picture he tries to paint.

Rush wants to make it seem - as the Bush Republicans do - that when the Democrats complain about "tax cuts for the rich," they don't just mean the rich, they mean you - yes you, average American. You, earning just $26,000 or over. Because you, person earning $26,000 or over, are part of the group paying 96% of the taxes.

Now, that is a lie directly, since the Democrats clearly state they are talking about the part of the tax cuts that affect the top 1% only, i.e. people who earn over $293,913.

But Rush and the Bush/Limbaugh Republicans somehow try to make it sound like us average Americans are paying all the taxes while the other half of the nation is just socking it away and not being made to pay their fair share.

Now, here are the real facts that show why his numbers are completely bogus to begin with.

Do you know what the top 10% of us earn as opposed to the bottom 10%? Oops, Rush left that number out. We won't bother with tricky percentages or different size groups or anything. Here are the simple numbers for this past year: The top 10% make $92,754 or more, the bottom 10% make $5,121 or less. Let's make sure this is clear. The first 10% of us earn less than $5,121 - not even $5,121 on average, $5,121 is the max cut off point for the first 10 percent. So the first 13 million of us hard American workers earn... between $1 and $5,121. Now, do you see some reason whey the first 10% percent of us would not be paying any taxes? Right, BECAUSE THESE ARE NOT ACTUAL WORKERS MAKING ANY MONEY, RUSH YOU IDIOT! I'm sorry, but even our paltry minimum wage brings people in far above $5,121 a year.

So when Rush makes the statement that is the headline of the article that carries his "forever" chart, saying, "Only The Rich Pay Taxes - Top 50% Of Wage Earners Pay 96.03% Of Taxes," he is including all "wage earners," which basically means anyone who earned a couple dollars the previous year. For example, a kid gets a job at Christmas working part time in a record store for a week or two. That is one of the people Rush counts. Yes, all of the part-time teenage help - all of the week-or-two-at-Christmas workers, all of the kids who earn a few bucks over the summer when school is out - Rush is pretending these people are the same as regular, full-time workers. Yes, he insults them as people who, "don't want to improve themselves." A college kid who works during his or her vacations doesn't want to improve themselves. AND, they somehow should be included when comparing how much the first 50% of us pay in taxes as opposed to the rest.

Remember, his whole argument is a complaint about the first 50% of tax filers. He is using the millions of people who work a short bit here to run up the numbers, so he can reach that first 50% by using all sorts of people who aren't really part of the actual, full-time work force.

And he doesn't just use these part-time workers. Anyone who is unemployed but collected at least one unemployment check has to file a return. Guess what, Rush counts you as the bottom 50% of wage earners.

Guess who else? Grandma who got a little bit of retirement cash or a few hundred dollars interest from a savings account. Yep, Rush is counting her among that lazy, non-self respecting first 50%.

As you can see, Rush uses the term "wage earners" to try and make it seem he is talking only about real workers. The first clue to any thinking person would be the fact that he says that by the top 50% he means anyone who earns just $26,000 or more. That amount is so low it should ring a bell for any thinking person. But we know Bush/Limbaughians just want to hear what allows them to keep their right-wing views and not what is useful or accurate.

So, included in this first 50% are lots of people who owe nothing after the standard deduction. That, Rush, drives the average way down and, as you know, completely distorts what percentage we average American workers actually pay in taxes compared to the rich.

What are the actual numbers like? I thought you'd never ask. I'll use the same year Rush has there just for kicks, 2000.

Let's first say the simple fact that makes clear how stupid and dishonest Rush's statement is: of all people who filed returns (all wage earners, as Rush used,) the top 50% of wage earners made about 95 percent of taxable income.

You see, Rush used the adjusted gross income to lower that percentage to 87%, but even so, look at the big furious premise - people who earned 87% of the money paid 96% of the taxes. Hey, if you put it that way, doesn't sound so bad, right? But of course he didn't, he said, "Top 50% of wage earners pay 96% of taxes."

But in all honesty, the number he uses - 87% - is bunk. Adjusted gross income is the number before you get your standard deduction - you know, that measely $6,000 or so they allow you to deduct for expenses. Everyone gets to deduct that, but for the people who shouldn't be included at all - the people earning just a couple hundred at Christmas or a little over the summer - that helps take them out of the measurement.

So, you get to people who earned something that is taxable. (This is misleading, too, but more on that in a second.) Of the taxable income, the top 50% of wage earners makes right about 95% of it. And what percent do they pay in taxes? Right, right about that 96.4% figure Rush uses.

So, folks, here is the massive inequity Rush is so fired up about that he will leave up on his sight "forever": People who earn 95% of the taxable income pay 96.4% of the taxes. Hey, that's sound pretty fair, huh?

But wait, what about that horrible, lazy, unambitious 50% of "wage earners" who are taking advantage of the rest of us?

Yes, while Rush switches numbers to try and make it seem one group of us is unfairly keeping our money while the other pays all of the taxes, in reality Rush just changes from comparing apples to oranges, as usual, to create this illusion.

Yes, about 50% of the nation pays only about 4% of the taxes, but, Rush, they make only about 5% of the taxable money.

50% of the nation makes only 5% of the taxable income. What a headline that could be! Half the nation completely used and abused as virtual slaves by the other half. If rush were a lying liberal instead of lying right-winger he could make that case, which would be no more accurate.

But instead, Rush tries to bury this 50% of the nation that, combined, makes less than 5% of the taxable money, saying they only pay 4% of the taxes even though they are 50% of the people numbers-wise. He knows he is misleading, and now you know he is lying, and now everyone knows why you are either with the Bush/Limbaughians or against them: because if you don't question what they say, their dishonest chop logic and comparing apples to oranges, you think they are always right; if you do look into things and get at the truth and facts, you see they are pathetic lying scum who craft dishonest propaganda to get you to somehow support things that are in your worst interest.

The reality, folks, is even these numbers - corrected by us so they follow the tax stats accurately - don't show anything at all. Because all these stats use to start with is "adjusted gross income." Note the word "adjusted." Yes, all of those income adjusting deductions worked into the tax return reduce the amount shown here to begin with. So, none of these numbers have anything to do with how much people are actually earning - it only has to do with how much is left after they have exploited all the tax loopholes.

So even though it all sounds pretty fair once we get past Rush's lies and see that people who earn 95% of the money pay about 96% of the taxes, this actually is not the case. Because the investor class - the richest among us - get all sorts of deductions before we start to figure who has what percentage of the income. Yes, the biggest tax cuts for the wealthy take their wealth off of the table even before it gets to these stats, making it all seem nicer on paper. And don't forget, corporate and business tax cuts are not included in this at all.

In addition - and this is the really juicy part that is used endlessly by the right wing and the left - the measurements of "top 10%" and such are always misleading.

For example, we told you before, in straightening out Rush's numbers, that the top 10% of tax filers earn $92,754 or more. We always hear talk like that. The top 1% earn $292,913 or more. These are, in fact, the numbers run on the IRS' website. BUT, as Rush did, these numbers include all those part time kids filers and what not - the top 10% means only the top 10% of returns filed, regardless of whether those returns had any taxable income or not. The figure means nothing.

What it pretends to mean - and makes most of us think it means - is by "top 10%" we mean people who earn 10% of the money in the nation. That is what we all assume they are saying. But, that is not the case. They tell us the people in the top 10% of wage earners are those who make $92,754 or more. The reality is that the top 10 percent of the wealth is earned by people who make right about $2,000,000 or more. Note all of the zeros.

Yes, 10% of the cash each year is made by people earning over $2 mil. That "top 10%" stat on the IRS's or Rush's website simply counts numbers of pieces of paper filed. For example, if 100 people filed, the 10 highest returns would be the "top 10%." If the top 9 people earned $10 million each, but that tenth person earned only $5,000, the stat would read, "top 10%" of filers earned $5,000 or more. The stat means nothing, and has nothing at all to do with who earns 10% of the money in the nation.

No, 10% of the money is earned by people with AGI's over $2 mil. 25% of the money is made by people who earn about $200,000 or more. (Remember, AGI is even a lowered measure that counts money after deductions, but go with it for Rush's sake anyway.)

So why do people use that "top 10%" "bottom 10%" lingo? Because it makes it easy to mislead people for the sake of making a point.

Which leads us to our grand finale. Remember the point Rush was trying to make? He was trying to make it seem that people who earn half the money are the people who earn $26,000 or more and pay 96.4% of the taxes. Remember, the "top 50% of wage earners pay 96.4% of the taxes." He, of course, used the bogus statistic that counts pieces of tax return paper but means nothing in terms of who earns what percentage of the wealth.

No, Rush, 50% of the money is not earned by people making $26,000 or more. Even if you go by AGI, which already allows for people to make it seem like they earned less than they did, you have to get up to people who earn about... ready?... $90,000 to get to who earns half of the money each year. That's right, it is not people earning over $26,000 who earn 50% of the money (and yet are unfairly hit with 96.4% of the taxes, as Rush cried.) Nope, 50% of the money in the 2000 year Rush used was made by people who earned $90,000 or more. I guess Rush didn't really mean "thousandaires" but "hundredthousandaires."

Just to keep you from getting confused, remember, Rush used a cumulative number and compared apples to oranges.

He made sure to never mention actual numbers except the one he used to try and make it seem like he was talking for all of us, that $26,000 figure that was the mid-point for filers. He chose that point because it was the most misleading, as most of the money earned, due to heavy top end skewing, lies above that point, and so the total for the top 50% of filers seems much bigger for those at the bottom of that half because the very top runs up the numbers so high.

Then, after unloading this meaningless, misleading $26,000 number, he immediately bounced back to using numberless percentages (i.e. 50% of people, 96.4% of taxes, top 25% earn 67%.) He left out the actual figures of who the top 25% who earned 2/3 of the money last year are, etc.

His overall goal was to create the illusion that people who did only half the earning paid 96% of the taxes. In reality, he simply showed - in a misleading way - that people who earned 95% of the taxable money paid 96% of the taxes. Furthermore, he accidentally showed that 50% of the nation's tax filers make less than 5% of the nation's money.

And now we have filled in the actual facts for you and taught you how to not be misled by IRS-speak about "top 10%" or "bottom 25%" anymore. The reality is that 33% of the money in 2000 was made by people who each took in - after adjustments which reduced their reportable income - over $200,000. And people who made over $2,000,000 a piece accounted for 10% of the money. 50% of the money was made... by people who earned over $90,000 - not people who made over $26,000.

In fact, people who Rush tried to lump in - you know, the average folk that earned between $25,000 and $50,000 that year - only made 18% of the money - even though they were 25% of the people who filed taxes. That doesn't sound horribly fair, does it?

So by Rush's numbers, this middle 18% of wage earners made only 16% of the money, while the lower fifty percent of "wage earners" (i.e. anyone who filed a tax return) took in only 5% of the nation's taxable income. People making $50,000 or less - 68% of the nation - seem to be getting screwed, only making 21% of the money. If you want to play games with numbers, that is.

Now, Rush, feel free to keep that story posted on your website "forever," as you said you would. It will live as a testament to your permanent dishonesty, a state apparently even rehab couldn't fix.

And don't bother trying to run stories using those IRS statistics again to try and show how your "millionaires" made only 13% of the income but paid 19% of the taxes - we all know that the 13% you are talking about is "adjusted gross income" and doesn't measure actual intake of money. The only number that is inescapably accurate is that 100% of The Moderate Independent readers know you are completely full of it.

Lyle O Ross

Aug 14 2008, 01:15 PM

BTW - just to make sure you get the point, the article only really starts getting interesting when they get to this point:

What it pretends to mean - and makes most of us think it means - is by "top 10%" we mean people who earn 10% of the money in the nation. That is what we all assume they are saying. But, that is not the case. They tell us the people in the top 10% of wage earners are those who make $92,754 or more. The reality is that the top 10 percent of the wealth is earned by people who make right about $2,000,000 or more. Note all of the zeros.

How anyone in their right minds could convince themselves that the top 10% in this country only make about $100,000 is beyond me.

Lyle O Ross

Aug 14 2008, 01:18 PM

nope, it means that the buyers think the value is there relative to value they could receive elsewhere in the world. Undervalued is different from worthless.

Excellent point.

Nonetheless, I think you'll agree, the purchasing of those "goods" only came about because they were undervalued because the $ isn't worth a whole lot these days (please don't point out it's value has improved recently, I already know). And then go on to the "why isn't the dollar worth a whole lot these days question."

sandalman

Aug 14 2008, 02:11 PM

Lyle O Ross

Aug 14 2008, 02:26 PM

the problem with those kinds of statements, Lyle, is that "isnt worth a whole lot" and "these days". is highly relative. "worth a lot" compared to what, and when? it sure buys a whole lot more pickup truck, but less euros and yen, than 6 months ago. the opposite is true for 18 months ago. your question cannot be answered until you set some guidelines.

I think you answered your own question Pat. What else would it be but relative to other values, the historical value of the dollar, the yen and the euro and it's "old" purchasing power.

Go back to the initial premise, "American" companies are being purchased by investors with non-American capital. That would be because of the decreased relative value of the dollar. It still leaves the question you didn't address... Why is the dollar worth less?

And if you're asking why is Lyle asking this, the U.S. is only the shiznitz if the dollar regains it's value. If the end result is a lower dollar value going down the road, the U.S. isn't shiznitz, and neither was that investment. One has to wonder if the Chinese and Saudis who own so much of our government in U.S. currency are asking themselves this question.

sandalman

Aug 14 2008, 02:34 PM

Lyle O Ross

Aug 14 2008, 02:40 PM

BTW Alacrity, the reason you get Robert in India has nothing to do with earnings, it has to do with Profit. When Bid Business wants to make "more" money, the move your job to India so they can pay Robert $10,000 instead of Rahiv (a native born American) $25,000. The fact is that this transition has nothing to do with taxes or anything else than increasing profits, obviously, given that Dell plays the tax system as well as anyone (see below). Again, the real reason is that this move allows them to pay Mr. Dell a whole lot more money than they would have otherwise. Of course that means that you and I get crummy service but hey, Dell made more bucks. BTW - how much do he and his buds make?

Dell, the world's largest personal computer maker, said fourth-quarter profit dropped 11 percent because of tax costs. For the three months ended Jan. 28, the company reported earnings of $667 million, down from $749 million in the comparable period a year earlier. Sales rose 17 percent, to $13.46 billion, short of Dell's $13.5 billion forecast. The quarterly results, released after financial markets closed, included a tax charge of 11 cents per share, which Dell said it took in anticipation of bringing home $4.1 billion in foreign earnings. The Texas company will be taxed on those earnings, although under a special one-year exemption passed by Congress last year, it will pay 5.25 percent instead of the usual rate of 35 percent on income earned in the United States. For the full year, Dell said it earned $3.04 billion, compared with $2.65 billion in 2003. Revenue rose to $49.21 billion from $41.44 billion.

Lyle O Ross

Aug 14 2008, 02:43 PM

why is the dollar less ... than when?
why is it worth less ... for buying what?

how do you figure that american companies are being bought with non-American capital? you mean they are using Euros and Yen and RMB? or that they are using USDs that they earned through trade?

besides, there can be more than one shiznitz. this aint a zero sum game.

YAWN! You're right, it's not a zero sum game, unless you aren't rich. For the majority of Americans it has meant lower relative value and a whole lot more difficulty in feeding their families. But that isn't what you're arguing now is it Pat...

sandalman

Aug 14 2008, 02:56 PM

i not arguing anything at all. i'm trying to figure out your question so that i can :)

Lyle O Ross

Aug 14 2008, 05:50 PM

Warren Buffett, the third-richest man in the world, has criticized the US tax system for allowing him to pay a lower rate than his secretary and his cleaner.

Speaking at a $4,600-a-seat fund raiser in New York for Senator Hillary Clinton, Mr Buffett, who is worth an estimated $52 billion (�26 billion), said: �The 400 of us [here] pay a lower part of our income in taxes than our receptionists do, or our cleaning ladies, for that matter. If you�re in the luckiest 1 per cent of humanity, you owe it to the rest of humanity to think about the other 99 per cent.�

Mr Buffett said that he was taxed at 17.7 per cent on the $46 million he made last year, without trying to avoid paying higher taxes, while his secretary, who earned $60,000, was taxed at 30 per cent. Mr Buffett told his audience, which included John Mack, the chairman of Morgan Stanley, and Alan Patricof, the founder of the US branch of Apax Partners, that US government policy had accentuated a disparity of wealth that hurt the economy by stifling opportunity and motivation.

The comments are among the most significant yet in a debate raging on both sides of the Atlantic about growing income inequality and how the super-wealthy are taxed.

They echo those made this month by Nicholas Ferguson, one of the leading figures in Britain�s private equity industry, when he criticized tax rates that left its multimillionaire venture capitalists �paying less tax than a cleaning lady�.

Last week senior members of the US Senate proposed to increase the rate of tax that private equity and hedge fund staff pay on their share of the profits, known as carried interest, from the 15 per cent capital gains rate to about 35 per cent.

Lloyd Blankfein, the chief executive of Goldman Sachs, acknowledged in an interview yesterday that there were justified concerns about the huge profits generated by private equity firms and that he worried that income inequality was �poisoning democracy�. He also said that he would be voting for the Democrat candidate at the next election. Mr Blankfein is the highest-paid executive on Wall Street, earning $54 million last year.

Mr Buffett, who runs the investment group Berkshire Hathaway and is widely regarded as the world�s most successful investor, said that he was a Democrat because Republicans are more likely to think: �I�m making $80 million a year � God must have intended me to have a lower tax rate.�

Mr Buffett said that a Republican proposal to eliminate elements of inheritance tax, which raises about $30 billion a year from the assets of about 12,000 rich families, would broaden the disparity between rich and poor. He added that the Republicans would seek to recover lost revenue by increasing taxes for the less prosperous.

He said: �You could take that $30 billion and give $1,000 to 30 million poor families. Or should you favor the 12,000 estates and make 30 million families pay an extra $1,000?�

sandalman

Aug 14 2008, 05:57 PM

while i share Mr Buffet's concerns, this always seems funny. he complains about the disparity between his tax rate and his secratary while earning $46,000,000 against his secretary's $60,000.

gotcha

Aug 14 2008, 07:43 PM

FairTax; Americans for Fair Taxation

What is the FairTax plan?
The FairTax plan is a comprehensive proposal that replaces all federal income and payroll based taxes with an integrated approach including a progressive national retail sales tax, a prebate to ensure no American pays federal taxes on spending up to the poverty level, dollar-for-dollar federal revenue neutrality, and, through companion legislation, the repeal of the 16th Amendment.

The FairTax Act (HR 25, S 1025) is nonpartisan legislation. It abolishes all federal personal and corporate income taxes, gift, estate, capital gains, alternative minimum, Social Security, Medicare, and self-employment taxes and replaces them with one simple, visible, federal retail sales tax administered primarily by existing state sales tax authorities.

The FairTax taxes us only on what we choose to spend on new goods or services, not on what we earn. The FairTax is a fair, efficient, transparent, and intelligent solution to the frustration and inequity of our current tax system.

The FairTax:

Enables workers to keep their entire paychecks
Enables retirees to keep their entire pensions
Refunds in advance the tax on purchases of basic necessities
Allows American products to compete fairly
Brings transparency and accountability to tax policy
Ensures Social Security and Medicare funding
Closes all loopholes and brings fairness to taxation
Abolishes the IRS

For more information, visit FairTax.org (http://www.fairtax.org/site/PageServer). Be sure to check out the FairTax calculator... :)

Pizza God

Aug 14 2008, 08:12 PM

Yep, his secretary paid $18,000
Mr Buffet paid $8,142,000 in taxes

most of Mr. Buffet's income is in Dividends. They are taxed at a rate of 15% flat tax.

Boy, I sure wish I could pay $8 million in Taxes. I would sponsor every disc golf tournament in the country
:D (and right it off my taxes :o)

What is funny about Mr. Buffet is that he is real good about buying up business and selling off there assets. He also does not care about the "Death Tax" because he has already stated he will not be giving his money to his family (He has already taken care of them) He is giving it away.

Pizza God

Aug 14 2008, 08:16 PM

Pizza God

Aug 14 2008, 11:47 PM

I.O.U.S.A is opening soon. I wish I could attend the opening show, with Warren Buffet and others. Tickets are only $12.50 at the 2 Dallas theaters near me they are showing it. I even saw a promo for it at the dollar theater the other day.

This is VERY on topic

<object width="425" height="344"><param name="movie" value="http://www.youtube.com/v/HBo2xQIWHiM&hl=en&fs=1"></param><param name="allowFullScreen" value="true"></param><embed src="http://www.youtube.com/v/HBo2xQIWHiM&hl=en&fs=1" type="application/x-shockwave-flash" allowfullscreen="true" width="425" height="344"></embed></object>

gotcha

Aug 15 2008, 09:06 AM

Fair Tax = Bad idea.

I posted the reasons on another thread once. Sounds good, but it sounds too good to be true. It won't work.

I favor a flat tax before the Fair Tax. (Russia and Georgia both have flat taxes, and both were doing rather well before this last week)

You are definitely entitled to your own opinion, Pizza.... :)

~ ~ ~ ~ ~ ~ ~ ~

How Clinton and Bush slowed economic growth

By Raymond Richman, Howard Richman, and Jesse Richman
web posted August 11, 2008

United States economic growth has slowed in recent years because of a surprising fall in business investment. Normally
when businesses make increased profits, they increase their investment. However, even though U.S. businesses have been making increased profits in their competition with foreign businesses since the dollar began falling in 2002, they have been reducing investment.

Partly, businesses have been doing so because the Clinton and Bush administrations permitted the foreign government currency manipulations that have made many past investments unprofitable, and they don't expect the next administration to do any different. But there is another reason: Presidents Clinton and Bush adopted incredibly destructive capital gains tax cuts.

Clinton and Bush were among the victims of the mistaken economics idea that cutting or eliminating capital gains taxes leads to prosperity. In fact, the exact opposite is true. Cutting other taxes increases economic growth, but cutting capital gains tax rates gives taxpayers an increased incentive to consume their assets, thus making the country poorer .

The capital gains tax cuts enacted in 1997 and 2003 under Clinton and Bush have reduced American savings and investment so much that American economic growth has slowed from about 3% per year to about 1% per year.

Flat Tax Blindness

The chief advocates of capital gains tax cuts have been the proponents of the Flat Tax. Even though Steve Forbes lost the Presidential primaries when advocating the Flat Tax in 1996, his mistaken ideas are marching on.

Flat Tax advocates are a curious combination of economic insight and economic blindness. They are insightful when they claim that the capital gains tax normally double-taxes income, but are blind to the fact that only taxation of reinvested capital does so. They correctly understand that accrued capital gains represent increased future income, but they are blind to the fact that the future income is being consumed if the capital and its gain are consumed. Instead of recommending, as we do, that capital gains be taxed at the same rate as other income when capital is consumed but go untaxed when the capital is reinvested, they recommend that capital gains be untaxed in every situation, a recommendation that encourages the consumption of capital.

Flat Tax advocates contend that lowering the capital gains tax rate encourages reinvestment because investors know that their capital gains from the new investments would be subject to low rates of taxation. But they are blind to the fact that reinvesting capital mainly produces interest, dividends, rents, and/or profits, all of which are taxed at ordinary income tax rates. (Although dividends are currently taxed at the same low rate as capital gains, their actual rate is higher since they are first taxed as corporate profits.) When capital gains are taxed at a rate lower than the future income produced by reinvested capital, people pay higher taxes if they reinvest the gain than if they consume it. As a result, when capital gains tax rates are reduced, people have an increased incentive to consume their capital.

Homeowners Consume their Capital

America has not always been victimized by bad capital gains tax ideas. From 1951 to 1997, whenever a homeowner sold his or her primary residence to buy another residence, the capital gains tax was deferred until the second home was sold. As a result, our nation experienced a long real-estate boom during which homeowners kept adding to their wealth.

But in 1997, President Clinton ended that rollover, instead he reduced the capital gains tax to zero on most home sales. No longer did homeowners have any tax liability when they sold their homes without buying another. They could consume the entire sales price without paying any tax at all.

This new provision encouraged people to consume the value of their homes. Although it is hard to know whether the speculation that it encouraged started the real estate bubble, economist Thomas Palley points out that "the easing of the capital gains rules occurred close to the beginning of the bubble." During the bubble, homeowners consumed their capital by increasing the amount that they borrowed on their increasing home equity and then spending the proceeds on consumption. When the bubble burst they often found themselves facing loss of their homes and of the capital that they had invested in those homes.

Investors Consume their Capital

In 2003, congress passed President Bush's recommendation for a reduction in the capital gains tax from a maximum rate of 20% to a maximum rate of 15%, giving investors a greater incentive to realize their capital gains and consume their capital. This had the same effect upon investors that President Clinton's 1997 capital gains tax elimination had upon homeowners.

When he signed this tax cut into law, Bush proclaimed, "The top capital gains tax rate will be reduced by 25%, which will encourage more investment and risk-taking, and that will help in job creation." The opposite is true.

Bush's advisors appear not to have realized this, but corporate managers did. Their bonuses take the form of options whose value depends on capital appreciation. If they had believed what Bush said, they would have invested their retained earnings in order to increase future production and profits. Instead they opted to create capital gains artificially by buying back their corporations' own stock.

Obviously, society ought to prefer the reinvestment of retained earnings which creates job opportunities, increases efficiency, and leads to technological advance and long-term growth. Buybacks accomplish none of these benefits. They amount to a misallocation of invest able funds to consumption.

The following graph shows that stock buybacks by our nation's 500 biggest corporations began increasing in response to Bush's 2003 capital gains tax cut and have been increasing ever since.

In 2007, our 500 largest corporations were actually paying out more than they took in. They earned $587 billion in profits while paying out $589 billion for buybacks and another $246 billion for dividends . The result was a drop in investment by United States corporations, relative to peers in Germany, Japan and elsewhere. As a result of lack of investment, American economic growth slowed to a snail's pace.

Clueless Presidential Candidates

Republican voters know that something is wrong with the conventional Republican economic prescriptions. Instead of voting for the establishment Republican candidates in the primaries, they gave the most votes to political maverick John McCain and to FairTax advocate Mike Huckabee. But ever since McCain won, he has been moving quickly to adopt the Republican establishment's economic recommendations. Although he originally voted against Bush's capital gains tax cut, he quickly became a capital gains tax cut convert and even began advocating the Flat Tax as the ultimate tax reform.

Senator Obama's answer is simple but wrong. If elected, he plans to raise the maximum capital gains tax rate to 25%. Although this might stop some investors from consuming their capital, it would cause the government to consume a greater proportion of our nation's capital stock and future income whenever investors sell one stock to buy another. Even if capital stock is not sold, it would be locked into poor quality investments, making it less available to new growing sectors of the economy.

The Effective Solution

There is an effective tax reform alternative that would jumpstart the stagnating American economy. True consumption taxes (e.g. the FairTax, the Value-Added Tax, and the USA Tax) give capital gains an efficient treatment. They tax consumption, not the part of income that is saved. As a result they encourage people to add to their savings and thus build our country's future income. Consumption taxes encourage a society to accumulate capital whereas capital gains tax cuts encourage a society to consume it.

The treatment that consumption taxes give to capital gains is especially sensible. Any capital that is consumed is taxed. Any capital that is reinvested goes untaxed. Thus capital gains are taxed at the same rate as other income, but only if consumed. Gone would be the incentive for corporations to buy back their shares of stock. Gone would be the incentive for homeowners to consume the value of their homes.

Consumption tax systems are the ideal for maximizing savings and capital accumulation. In the 2008 presidential primaries, Governor Huckabee advocated completely replacing the entire income, payroll, inheritance, and capital gains tax system with a simple 23% sales tax, the FairTax. The result would be a tremendous increase in American savings and investment.

But it is also possible to incrementally improve the current income tax system. In 1951, President Truman improved the income tax for homeowners by giving them a tax deferment when they bought one home with the proceeds from selling another. Truman's idea could easily be applied to income producing assets (e.g., stocks, bonds, and rental properties).

As recent experience shows, the Flat Tax is wrong on capital gains. Lowering capital gains tax rates tends to cause investors to consume their capital instead of reinvesting it. Simply raising capital gains tax rates is not the answer because doing so locks capital into bad investments and causes the government to consume capital whenever it is rolled over into new investments.

In our just published book, Trading Away Our Future, we advocate replacing our entire current tax system with a consumption tax. But we also advocate incremental ways to improve our current system. As a first step, whoever is elected president should raise capital gains taxes to the same rate as other income is taxed, but defer capital gains taxes whenever one income-producing asset is rolled-over into another.

Dr. Raymond Richman is professor emeritus of public and international affairs at the University of Pittsburgh with a PhD in economics from the University of Chicago. The three Dr. Richmans represent three generations of social scientists from the same family and are co-authors of the 2008 book, Trading Away Our Future: How to Fix Our Government-Driven Trade Deficits and Faulty Tax System Before It's Too Late.

Americans For Fair Taxation ~ FairTax.org (http://www.fairtax.org/site/PageServer)

gotcha

Aug 15 2008, 09:31 AM

Where do your tax dollars go? Check out this informative web page (http://www.wallstats.com/) and blog on Death & Taxes. :)

Lyle O Ross

Aug 15 2008, 11:35 AM

Very nice poster! Thanks!

BTW - I don't know if a flat tax is the answer, but I'm sure it couldn't be worse than what we currently have.

Lyle

ANHYZER

Aug 15 2008, 11:36 AM

http://icanhascheezburger.files.wordpress.com/2008/04/funny-pictures-hitman-monkey-drowns-boy.jpg

Lyle O Ross

Aug 15 2008, 11:40 AM

I do like a consumption tax, as long as it is structured well enough with enough foresight to cover the gross gifts given to big business.

ANHYZER

Aug 15 2008, 11:53 AM

http://images.icanhascheezburger.com/completestore/2008/8/15/izindamsgbr128632856091677128.jpg

Lyle O Ross

Aug 15 2008, 12:24 PM

BTW - speaking of how a loss of big business investment has killed our country's competitiveness, go to the outrageous gas thread and read about Dutch oil independence and how they are now an exporter of other energy technologies... and how America exports none.

ANHYZER

Aug 15 2008, 12:36 PM

http://images.icanhascheezburger.com/completestore/2008/8/15/irlyizscienti128632882003726880.jpg

Lyle O Ross

Aug 15 2008, 03:19 PM

sandalman

Aug 15 2008, 03:28 PM

does he follow you around, or do you precede him around?

Lyle O Ross

Aug 15 2008, 03:41 PM

You're right, maybe it's you he's following around. In which case you guys should take it to PMs, some of those pictures are a little strange... :)

ANHYZER

Aug 15 2008, 04:08 PM

So David, do you follow me around because you have a crush on me?

Sorry Lyle, I don't bat from that side of the plate. Your life-partner would be ashamed of you if he knew you were flirting online...

We currently live in a country that has so much debt that we are in some part owned by countries that never act in our best interests (China and Saudi Arabia). We are involved in a war that we can't really win and that our military and intelligence agencies recommended we stay out of. Our technological prowess is being surpassed by our competitors. Our national infrastructure is falling apart and millions are going jobless. And you think I'm dumb for knowing about this and wanting to do something about it...

No, I think you're wasting time feigning your omniscience of world problems and your contrived solutions to those problems on a FRISBEE MESSAGE BOARD!

Alacrity

Aug 15 2008, 04:58 PM

playtowin

Aug 15 2008, 05:06 PM

Rush Limbaugh, a multi-millionaire

UNDERPAID!

playtowin

Aug 15 2008, 05:23 PM

Yes he does occasionally tell fact and there are times that his commentary borders on truth

Since when is 98.7% of the time considered "occasionally?" :confused:

Kinda like "there are times" when a two foot putt is missed? I'll listen to that kinda "entertainer" any time.

Mega disc golf dittos!

Pizza God

Aug 15 2008, 07:44 PM

So David, do you follow me around because you have a crush on me?

Far from being an expert on everything, I try my best to be informed because when I'm not I might come away with the impression that Rush Limbaugh, a multi-millionaire, is telling me the truth when he tells me he is being taken advantage of by the poor in the tax code.

On the other hand, one should ask, where does David stand in such a situation? Is that he is one of those who isn't rich but has bought into this lie? Or is he one of the rich who knows better but supports the position because it is in his best interests to do so?

We currently live in a country that has so much debt that we are in some part owned by countries that never act in our best interests (China and Saudi Arabia). We are involved in a war that we can't really win and that our military and intelligence agencies recommended we stay out of. Our technological prowess is being surpassed by our competitors. Our national infrastructure is falling apart and millions are going jobless. And you think I'm dumb for knowing about this and wanting to do something about it...

I have to agree with just about everything in this post, including the part about Dave :D

I favor a flat tax (actually I prefer NO income tax) over what we have now. I feel everyone should donate the same percentage no matter how much they make.

You make $1000 per year, you owe $100

You make $1,000,000 per year, you owe $100,000

That seem fair to me.

of course the way it is right now.

You make $8500 (in taxable income) you pay -$1,441. (and I will be getting that $1200 stimulus package check by the 15th)

You make $1,000,000 in taxible income, you pay $380,000.

That is what I call a Robin Hood plan. Rob Peter to pay Paul (or Bryan in this case) Sorry Peter.

Lyle O Ross

Aug 18 2008, 12:03 PM

Then why do you take pictures of yourself in funny outfits and post them after my posts? Seems a little bit like you have a fascination with my posts Dave...

sandalman

Aug 18 2008, 12:07 PM

sometimes posts are just cluttering the way and the next guy posts anyway in an effort to move the thread along.

ANHYZER

Aug 18 2008, 12:22 PM

Lyle O Ross

Aug 18 2008, 12:51 PM

Lyle,

I have got to tell you, while some "conservatives" listen to Rush as if he is speaking the utter truth, there is a very large group of us, and yes I would consider myself a conservative, that consider him no more, or less, than an entertainer. Yes he does occasionally tell fact and there are times that his commentary borders on truth, but the only person I see here saying anything about him is you. I personally don't care for him and you give him credit by arguing his points. He is not a journalist, but then again there are few news reporters today that don't lean in one direction of the other. Oh for the days of somewhat middle of the road newsmen (and women) that reported facts and let the viewer draw their own conclusions.

Please do not use Rush as a reference to argue against conservatism, because there are some of us that feel that belittles your own arguments. He is an entertainer, period. I don�t take him serious as a conservative, neither should you.

Let me begin by saying I understand where you're coming from Alacrity and I would never put you in the category of someone who would believe Rush; that said, I will refer you to Player's post below. Rush carries a great deal of weight, as does Bill O'Reilly, and a lot of other news hacks. That these guys influence a significant portion of America's viewpoint can't be denied.

America's news organizations are pretty poor these days, one only has to look at the Daily parodies of their best news stories to realize this is true.

On the other hand, take the table presented above. That table shows up not just on Rush's web site, but is used by every conservative think tank this side of the moon. The all present it in the same way, that is, completely out of context in a fashion that says the rich pay more than they should. They never tell you that the numbers in that table need to be viewed in terms of AGI or that they include every person who filed a tax return even if they made $1,000 on a part time college job. All of them present it as if everyone below $26,000 a year is taking advantage even though that is a misrepresentation. In my book, that doesn't put them on a whole lot better footing than Rush.

In the past 30 years, starting with Carter, we have taken out most of the laws put in place during the early part of the last century that were meant to protect us from the misbehaviors of big business. It isn't a conservative liberal thing, both parties have played significant roles in this with Bill Clinton playing the biggest role. As a consequence, big business has taken the same advantages they took back before those laws were passed. It seems stupid to repeat the same mistakes over again.

Your tip for the day, look at the cover of the NYT today. I haven't read the article in detail but the Supreme Court apparently is going to allow companies to price fix and collude again, something not allowed since 1911. Za in particular needs to read this article since it is going to have a huge impact on small retailers.

Lyle O Ross

Aug 18 2008, 01:00 PM

Seems a little bit like you have a fascination with my posts Dave...

Not fascinated by your writings at all. Please stop being anal about this...Does your life-partner know about your oral fixation with my post?

Yes, but I'm not the one dressing up in funny outfits, taking pictures of myself and then posting them directly after your posts. Nor do I need Pat to defend my posts... If you're bored by my posts or think they're stupid, then take a pass on reading them.

Lyle O Ross

Aug 18 2008, 01:27 PM

BTW Alacrity - here's a view for you: The interviewee is a Viet Nam war vet, very conservative. He talks about our addictions to power, money and spending. He doesn't think to highly of either party (or at least it seems that way) and I would have to agree with him.

http://www.pbs.org/moyers/journal/08152008/watch.html

Lyle O Ross

Aug 18 2008, 01:40 PM

BTW - the reason that Cent thinks I'm a know it all is because I tend to listen to guys like Mr. Bacevich, and I bring their opinions here. That doesn't make me a know it all, it simply means that I like to go to the expert and I tend to rely on them. It bugs me that our current President does not. That he some how thinks his personal opinion has more value than the research and experience of an expert worries me. It worries me because quite far from our President setting the tone in this, he is simply a product of his environment. All too many American's are just like him.

ANHYZER

Aug 18 2008, 01:54 PM

BTW - the reason that Cent thinks I'm a know it all is because I like Mr. Bacevich.

http://images.icanhascheezburger.com/completestore/2008/8/18/mrbacevicht128635521281949031.jpg

Pizza God

Aug 18 2008, 02:09 PM

Za in particular needs to read this article since it is going to have a huge impact on small retailers.

Lyle, you are going to have to provide a link. I was unable to find the article.

playtowin

Aug 18 2008, 05:14 PM

Obama quotes the bible:

"I THINK AMERICA'S GREATEST MORAL FAILURE IN MYLIFETIME HAS BEEN THAT WE STILL DON'T ABIDE BY THAT BASIC PRECEPT IN MATTHEW [Mt. 25 31-46] THAT WHATEVER YOU DO FOR THE LEAST OF MY BROTHERS, YOU DO FOR ME." (actually "did not do for the least of these, you did not do for me" in Mt.)

All that on the heals of a pathetically liberal voting record that mandates public funds for killing the least among us. Doesn't add up... "Death and Taxes" indeed.

BTW Lyle, can I simply ask you why you're quoting 2nd Kings 20:1 in your signature?

CAMBAGGER

Aug 19 2008, 04:20 PM

What version is that PTW? ;)

kkrasinski

Aug 19 2008, 04:34 PM

BTW Lyle, can I simply ask you why you're quoting 2nd Kings 20:1 in your signature?

Investigate his link, the answer is there.

playtowin

Aug 19 2008, 09:03 PM

What version is that PTW? ;)

It's NIV, which conveys the same thought as your beloved KJV: "Inasmuch as ye did [it] not to one of the least of these, ye did [it] not to me."

Whenever I quote that verse, I mess it up too. In fact just a few days ago a friend of mine who has done a very special thing for a young Korean girl basically said to me "I can't say if I am doing something for God or not." I said to him "sure you can, because Jesus said "whatever you do to for the least of these you've done to me." It's a verse that often gets misquoted in casual discussions. But the verse actually says "whatever you DID NOT DO." Subtle, but different.

As per the point of the post, I was just pointing out how insane the logic is behind Obama's support of killing babies. For him to call himself a Christian while running for pres and to be so blind to what the bible says on the subject is beyond ignorance. At some point it becomes relativism and outright defiance. And for what? It leads one to ask "when he say's 'Jesus is my redeemer,' does he really mean it?" That's ultimately between him and God, but such examples as this make me seriously ill to think of him as the leader of the greatest country in the world.

BTW, I really appreciate the lightheartedness of your post. Please don't try to suck me back into a discussion on versions again? ;) I gave you more evidence that say's the KJV isn't the only version God wants us to read than you obviously cared to study. :eek: LOL, Peace...

CAMBAGGER

Aug 20 2008, 12:16 AM

I was just messin with ya. I know we disagree, I've left it at that. We definately agree on Obama, that is absolutely rediculous.

That verse is just one of many that constantly get mis-quoted. Another one is when everyone talks about when the "Lion will lay down with the Lamb" in God's future Earthly kingdom. The bible actually says the Wolf will lay with the Lamb. (Isa 11:6 and 65:25)