Friday, September 3, 2010

Lies and Damn Lies

The First Dope is constantly fighting against the dreaded “Tax cuts for the wealthy”. So let’s do some arithmetic.
Bush cut the tax rates for middle income people by substantially more than they did for the highest bracket. The higher bracket went down from 39% to 35% (Less than a 10% reduction.) At the lowest level, the Bush reduction lowered the rate from 15% to 10%. That is a 50% reduction in their tax liability. (This is for the people who actually pay taxes. Almost 50% of the people don’t pay anything.)

The Democratic spin is that the wealthy got a bigger tax cut. They analyze this by saying that a guy making $500,000 a year with no deductions pays $175,000 ($500,000 x .35) instead of $195,000 ($500000 x .35). He gets a $20,000 tax cut. The guy who makes $60,000 pays $9000 at 15% and $6000 at 10% so he only saves $3000. So the “wealthy” guy saves more in absolute dollars than the middle guy. Mr. Wealthy Guy makes about 8 times what the other guy does but paid 22 times what the middle guy pays before the Bush tax cuts. After the tax cuts, he still makes 8 times the salary but after the Bush tax cuts he pays 29 times the taxes.
It is of course impossible for the middle class guy to save $20,000 on the tax cuts because he never would have paid that much. Tax cuts in the progressive system that we have can never favor the little guy in absolute dollars unless we just redistribute everything.
The Dems have been spinning this for years but the whole “tax cuts for the wealthy” thing is a statistical lie.

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