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President Obama may hand Republicans their first victory on tax cuts for the rich without a fight

by rescuetruth on November 11th, 2010

From the looks of things in Washington, President Obama is well on his way to literally hand over an extension of the Bush tax cuts for the millionaires and billionaires of America.  Meanwhile, our economy is teetering by with sky-high debt and a large deficit.  These people must really be suffering for them to be complaining this much about a 3% increase in taxes.

Income inequality is by far the biggest threat to our democracy, and our nation’s wealth.  A June CBO study indicated that the income gap between the top 1% and lower-to-middle wage earners more than tripled in the last 30 years.  While on paper our tax structure is considered to be progressive, we have what most will agree is an extremely regressive tax structure, which seeks to reward those with the most money.  The Bush tax cuts have only contributed to this ailment.

As stated in “Debunking Misleading Republican Ideas,” the average change in net income from 2006-07 for the bottom 20% of wage earners was a measly $800 dollars compared to $88,800 for the top 1%.  During the inaptly named “economic expansion” under the Bush administration, two-thirds or 66% of income growth went to the top 1%.  Instead of rewarding hardworking Americans, our system funneled millions and billions of dollars into the pockets of the wealthiest Americans—the real elites.

Billionaire investor Warren Buffett has repeatedly called for more lower and middle class tax cuts, while also advocating for tax increases on the top 2%.  Buffett famously pointed out a major discrepancy in his effective tax rate when compared with the rate his secretary pays.  Warren Buffett says much of this has taken place within the past ten years, severely tilting the many new benefits to the richest Americans.

Average Tax Rates

  • Warren Buffett: 17.7%
  • Average for his Office: 32.9%
  • Personal Note: As a percentage of my income, I pay more in taxes than Warren Buffett, who agrees is problematic and unfair.

The way in which social security taxes are applied also provides a huge tax incentive to the rich.  For example, if you earn $50,000 a year, you pay 6.2% of your wages toward social security withholding, and your employer matches that amount.  If you earn $2 million dollars, you only pay 6.2% on the first $106,800 dollars, leaving $1,893,200 dollars which is not subject to the 6.2% social security tax.

Extending all of the Bush tax cuts will cost roughly $3.9 trillion dollars over the next decade.  The tax cuts for the rich will cost roughly $700 billion dollars over that same period.  A Washington Post article said the Republican plan to extend tax cuts for the rich will add $36 billion to the deficit next year alone.

The burden can’t fall on the middle class, but instead must fall on the people who can afford it.  It must fall on those who have been benefiting from bankrolling the congressmen who implement regressive tax policies that solely benefit the rich.  Can any Republican really look at us with straight face and claim to be a deficit hawk?

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From → Economics, Politics

  • Joestrosser

    social security tax is a massive tax on the rich and middle tax and is not regressive, but extremely progressive, even for middle and low income people. Do yourself a favor and see just how much a lower middle class person contributes. 6.5%, actually 13%(employer match) for 50 years for a person making 50k for 45 years is 292K collectected by uncle Sam. Using a conservative 6% return over 45 years yields over a million. You’re smart, so figure just how much $$$ the government rakes in on a person making 50k per year on social security versus what it pays out. It is a gross redistribution of wealth on lower middle income people let alone on the rich.

    Eliminate social security!

  • Joestrosser

    I do agree tube extremly rich have all kinds of bogus tax shelters that lower their effective tax rate. However don’t kid yourself with self pity that you pay too much on taxes versus buffet. Please show out of pocket tax in conjunction with percentage. It shows a more meaningful picture.

    Just simply remove government intervention on all the rich tax breaks. The trigram debt commission attacks the mortgage interest deduction yet doesnt address the issues of why buffet has a lower effective tax rate! Ugh and shy? F@@k the middle class!

  • Joestrosser

    Last point.

    How awesome would it be if 6.5% of my salary and a company match up to 105k went into my 401k. Awesome! No redestributive social security needed. No class warfare argument available. Please eliminate social security, it’s welfare!

  • Joestrosser

    Democrats control the house and senate by huge margins. Any vote on taxes before next January will be won or by them, not republicans. Dems will own it, not republicans. Americans rejected Dems massive deficits and government intrusion into their daily lives. 5 trillion of debt since Pelosi and the Dems took Congress in 2007. They rsn the country like California who know has an unfunded pension liability of $500 billion and an anyal deficit of $70 billion. Yikes!