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Putting numbers to the "largest tax increase in history"
Posted by: McQ on Saturday, April 14, 2007

We're seeing a lot of talk about "the largest tax increase in history" from Republicans. They're talking about the Democrat budget and the impact of their refusal, in some cases, of extending tax cuts and, in others, their changes to the tax code.

Below is a video in which Sen. John Thune (R-SD) lays out the impact in dollars and cents. I encourage you to watch it. It's about 6+ minutes. If you don't have the time, let me hit the high points for you:

  • The marriage penalty returns. Average impact? About $1,360 per married couple.

  • The standard deduction ($3,300) will be cut to zero for some depending on their income.

  • If you're a senior living on dividend income, your tax is going to go from 15% to 39.6%. And if you also are living on some capital gain income, that tax goes from 15% to 20%.

  • 20 million more families will be forced on the Alternative Minimum Tax.

  • If you use the credit for Child and Dependent Care, that is being slashed by 31%.

  • The Child Tax Credit is being cut from $1,000 to $500 (these, btw, are credits many of our lower ranking military use).


Then there's the Tax Rate Shedule.

The 10% bracket, that used by many low income families, is gone. Now, at a minimum, everyone is in the next tax bracket. And that bracket goes from 25% to 28%. The 28% bracket rises to 31%, the 33% bracket goes to 36% and those in the present 35% bracket see their taxes increased to 39.6%.

So what the Democrats are proposing impact married people, seniors and low income families very heavily. Of course when these folks all struggle, they'll then blame the economy and try to think of inventive ways to further intrude in our lives to make things better.

Thune's staff figured the impact of these tax increases on what he calls the "typical South Dakota" family. I would assume by that he means "average". Bottom dollar impact is $2,596 more in taxes on the same income.

Can you afford that?

 
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N0, I can’t afford it...which is why I didn’t vote Democrat in the last election.
 
Written By: steverino
URL: http://steverino.journalspace.com/
Republicans want to control your Life, Democrats your Finances. The Jackass is in charge, so hold on to your wallets.
 
Written By: James E. Fish
URL: http://faroutfishfiles.blogspot.com/
So what the Democrats are proposing impact married people, seniors and low income families very heavily.
Republican propoganda! They only want to tax the rich (those very same rich who were the only ones to benefit from Bush’s tax cuts). I guess there’s lots of rich couples and seniors out there.
when these folks all struggle....
I’ll turn around and tell them that since they voted for it in the last election, STFU and go on welfare. Or vote smarter next time.
 
Written By: shark
URL: http://
Gets hard to raise the defense budget by $100 billion every year and keep cutting taxes, don’t it?
Run into a logical problem eventually. Thus, our shiny new budget deficit, and the concomittant new $2 trillion or so on the national debt, which you would be equally happy to snark about if fiscal sanity was not being restored.


"their changes to the tax code."

This is Jon Thune’s interpretation of predictions of what the Democrats might do, right? That would explain some of the outright misrepresentations, such as the Alt Min Tax, which no one has any intention, unfortunately, of letting stay as is.
 
Written By: glasnost
URL: http://
Republicans want to control your Life, Democrats your Finances.


Is this for real? Whoever controls your finances controls your life.
 
Written By: Come on, please
URL: http://
How do we smarten up those childish-thinking, naive simpletons,who "think" they are "liberals" but don’t understand that the "democratic party has been taken over by SOCIALISTS !

If they COULD think beyond the tip of their noses, thay would understand that TRUE liberalism and conservatism are one and the same !

Each values the INDIVIDUAL and abhors subsuming him to the social group. The Constitution and Bill of Rights are sacred to them.

Socialistic trends want to "re-interpret" the constitution at the expense of the individual.

And, it is proven that tax cuts generate more income for all, including the gov’t !

Deficits come from overspending that produces increased debt.

So, wake up dummies !
 
Written By: Richard Cancemi
URL: http://
Gets hard to raise the defense budget by $100 billion every year and keep cutting taxes, don’t it
Sure, this is rich coming right before you accuse Thune of "misrepresentations"....
 
Written By: shark
URL: http://
If they COULD think beyond the tip of their noses, thay would understand that TRUE liberalism and conservatism are one and the same !
horse crap. This is a serious misunderstanding of what liberalism and conservatism are. You are correct about the position of those who call themselves "liberal", but that doesn’t make liberalism = conservatism.
 
Written By: Adam Selene
URL: http://www.thelibertypapers.org/
Actually Glasnost, it’s a proven fact that lowering taxes increases federal revenue. Even Kennedy saw it. It’s why the Reagan years saw the lagest increase of low to middle and low to high income ever.

And looking at the numbers, it turns out that I, working about 16 hours a week during the school year at 9.65 an hour (I do get a full 40 in when we go on break, but still) am among the rich.

I’m glad they told me. And here I thought I was surviving on the graces of my parents while I get my degree...

I’m RICH I tell you... At least according to the Dem’s numbers.

This bill will need approval by bush, right? Please tell me it will...
 
Written By: Scott
URL: http://
Scott -
Actually Glasnost, it’s a proven fact that lowering taxes increases federal revenue.
Are you familiar with the Laffer curve? You do realize that you can be on the left side of that curve, right?

I mean, if you cut federal taxes to zero, would you increase federal revenue?
No?
Then let’s talk about how you know which side of the curve you’re on.
 
Written By: Bryan Pick
URL: http://www.qando.net
Lets put it like this...

Raising the BASE MINIMUM from 10% to 28% isn’t "on the left side of the curve".

The most useful method for gaging is to look at federal revenue for the past couple of years. Has it increased (while we were cutting taxes), or has it increased and then decreased during those years?

You of cource have to adjust for the economic body-blow that was Katrina, but I’d think it would be a simple exercise...

Unless you look forward to getting corn-holed by the taxman... I know that I, for one, would rather avoid it if at all possible...

And as for the Laffer Curve, have the democrats heard of it? I know I’ve taken Econ 110 (with a professor I swear to god is at the LEAST a socialist) and seen the curve, but I fail to see how jacking up tax-rates to what has got to be pre-Reagan levels will place your placement on the curve at the relative maxima.

And if the Cruve was so 100%, wouldn’t congress just compute the next year’s curve, and set rates to that point, and only change it if that point changed?

Something tells me the Laffer Curve is less a reality than it is a theoretical model. I also don’t think it’s you’re usual bell-curve either. I suspect a true Laffer would be shifted towrds origin by a noticable margin...
 
Written By: Scott
URL: http://
Raising the BASE MINIMUM from 10% to 28% isn’t "on the left side of the curve".
I think McQ made a mistake here and skipped the 15% bracket that IIRC has always been there.
Gets hard to raise the defense budget by $100 billion every year and keep cutting taxes, don’t it?
Bout as hard as it will be to enact the gambit of 100 hour legislation.

But we can ignore that spending because it’s the good kind, right?
 
Written By: Ryan
URL: http://
The most useful method for gaging is to look at federal revenue for the past couple of years. Has it increased (while we were cutting taxes), or has it increased and then decreased during those years?
No, looking at whether tax revenues happened to increase since last year doesn’t reliably tell you what side of the curve you’re on. After all, the economy keeps growing.

Let’s take a hypothetical country (Dale likes to use Kaplokistan, so I’ll adopt it) in Years 2000 and 2005. In 2000, the total income of Kaplokis is $1000, and the effective tax rate is 10% of income, so the government collects $100.
The idea behind a tax cut to increase federal revenue has several aspects, like increased collections from people not cheating on their taxes, but the most important one probably is that lower taxes lead to greater economic growth. Let’s accept that as True for our back-of-a-napkin model.
Now, let’s say the projected income growth of Kaplokistan over 5 years is a very respectable 5% a year at current tax rates.

YEAR ............. INCOME.............. REVENUE
2001 .............. $1050..................... $105
2002 .............. $1102.50 .............. $110.25
2003 .............. $1157.63 .............. $115.76
2004 .............. $1215.51 .............. $121.55
2005 .............. $1276.28 .............. $127.63

Now let’s say that a tax cut down to 9.4% will somehow increase income growth to an incredible 7.5% per annum.

YEAR.............. INCOME .............. REVENUE
2001 .............. $1075 .................... $101.05
2002 .............. $1155.63 .............. $108.62
2003 .............. $1242.30 .............. $116.77
2004 .............. $1335.47 .............. $125.53
2005 .............. $1425.62 .............. $134.01

Now, there are a few things you can say about Kaplokistan at a 9.4% tax rate. You can say they’re richer, and join me in toasting the increased prosperity of the Kaplokis. You can say that if they maintain this growth rate, that after a few years tax revenues will be higher than in the 10% tax rate Kaplokistan, and even that after five years (again, maintaining that growth rate) the tax cuts will "pay for themselves."

But you cannot say that tax revenues increased each year because of the tax cut in Kaplokistan. Despite achieving an incredible growth rate, they still managed to collect less total revenue over the first four years.

YEAR ..............CHANGE IN REVENUE w/ TAX CUT
2001 ............................ -$3.95
2002 ............................ -$1.63
2003 ............................ +$1.01
2004 ............................ +$3.98
2005 ............................ +$6.38

If you say that tax cuts will increase revenues next year, what you’re really saying is not that "revenues will be higher next year than they are this year." Note that absolute tax revenues increased from year to year under either plan, thanks to continued economic growth. Instead, you’re saying that "revenues will be higher next year than they would have been without a tax cut."

And if you just say, "tax cuts lead to higher revenue," without specifying a time period, that does people little good. It’s more noise than signal. So be specific about what you mean.
 
Written By: Bryan Pick
URL: http://www.qando.net
Why is it desirable to maximize federal tax revenues? Should that even be a goal?
 
Written By: Mark A. Flacy
URL: http://
It’s not my idea of a good goal for government, but it’s often used as a selling point to all the rent-seekers, to get them to go along with it.
 
Written By: Bryan Pick
URL: http://www.qando.net
You know, as much as I dislike paying taxes, I think there is a benifit to maximizing federal revenue while minimizing the tax rate, though there’s something to be said about the Govt learning to live below it’s means for once... The budget shouldn’t account for every penny they take in. Leave a lil breathing room for national emergencies why don’t you...
 
Written By: Scott
URL: http://
No, looking at whether tax revenues happened to increase since last year doesn’t reliably tell you what side of the curve you’re on. After all, the economy keeps growing.
That’s the whole point to the Laffer Curve: that lowering the tax rates will grow the economy in such a way that the aggregate revenues are greater than what they would have been without the cut. The economy may or may not have grown without the cut in tax rates.

To determine what side of the curve we’re on, the questions we should be asking are whether the economy has grown more than it would have, and whether the resulting revenue is higher than it would have been without the delta in growth.
 
Written By: steverino
URL: http://steverino.journalspace.com/
"such as the Alt Min Tax, which no one has any intention, unfortunately, of letting stay as is. "
Unfortunately? You think it’s just fine the way it is? Screw you glasnost.
 
Written By: Aardvark
URL: http://
From the info provided, those who invested for retirement above the 401k caps will have a rude awakening since they will pay a flat tax rate higher than they will for the standard 401K which will be taxed at the standard income rate. The economy has managed to hum along through a few shocks which should have caused it to dump. I guess the Democrats will screw it up and blame Bush.
 
Written By: AMR
URL: http://

 
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