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Macro Economics
Not Impressed with Tax Break

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By putnid
February 8, 2010

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Reducing the capital gains and dividend tax rates to 15% reduced the overall tax burden on all of America by about $35B per year. Who saved some money? Well, if you're in the middle class, it saved you about $40. That's right, 40 whole dollars. Impressed? I'm not. If your adjusted gross annual income is $1M+, you saved about $4,000. If your AGI is $10M+ you saved about $400,000 (these are gov't estimates). Yeah, maybe letting people who earn more than $10M per year keep a few extra $100K led to wholesale economic growth from coast to coast. You think? The economic data tell us otherwise. During the eight years of the Bush administration, the era that ushered in generous tax cuts for America's wealthiest, the "supply-side' tax cuts resulted in some net 2 million jobs. The job growth didn't even come close to matching population growth.

So much for "Supply-Side" economic theory.

The Bush administration allowed the repatriation of foreign profits at a tax rate of 5%. More than $100 Billion dollars flowed back into the U.S. Net impact? The same 2 million jobs number net net. Not nearly enough to match population growth.

So much for "Supply-Side" economic theory.

Maybe, just maybe, we've gasped on fumes as so many Americans monetized home equity - to the tune of 100's of Billions. After all, the standard of living for the middle class has been dropping for more than a decade. People needed a bit more cash. Don't believe me? The Census Bureau and BLS and the Federal Reserve have noted the decline of America's middle class for a great many years.

Does anyone STILL believe that making a bunch of multi-millionaires a little bit richer can lead to economic growth in the face of all the economic data that argue otherwise?

I wasn't impressed with my $40 tax break, particularly since my health insurance premiums increased by $50/month. It now costs me $50 to fill up my car and I'm staring at a National Debt of $11 Trillion+ that will, most certainly, lead to more and more tax increases in the future (along with necessary cuts in Medicare/Medicaid and social security).

Oh, and I forgot to mention that more and more of my tax dollars go to paying for interest on all that debt (and a lot of it is going overseas - so that foreigners can turn around and buy more of MY country's assets).

Anyway, that's my point of view. I'm just a middle class working shlub. What do I know?