Post by unlawflcombatnt on Dec 4, 2010 16:09:25 GMT -6
In the excerpts below, the falsehoods about letting the tax cuts for the top 2% are exposed.
These excerpts are especially interesting to me, since I've been making identical arguments for the last 5 years. It's nice to find a larger organization with almost identical views--even using nearly identical wording in many cases.
from Citizens for Tax Justice (CTJ)
(Regarding the expiration of the Bush tax cuts on the top 2%)
"3. A person who receives his income from a business he owns would have to receive over $250,000 (or over $200,000 if unmarried) in net profits in order to lose part of the tax cuts under President Obama’s (sic) plan.
Imagine a small business person whose sole income is from the business she owns. Her business has gross receipts for the year of $400,000 but her net profit is only $50,000. Some mistakenly believe this person will pay higher taxes underPresident Obama’s (the House's) plan.
The income tax applies to income. If your income is from a business you own, your income consists of the net profits of that business. Net profits are what you have left after you’ve paid wages to your employees and you’ve paid your other expenses.
The person in the example above would be nowhere near losing any portion of her tax cuts under...[the House's] plan.
4. In order to hire people, business owners need customers, not tax cuts.
Businesses hire employees if there is a demand for the goods or services that the employees will produce. As explained above, a business person is not taxed on the money he or she pays to employees, because that is deducted and not included as part of taxable income. This means there is no reason why a higher income tax rate would reduce a business person’s incentives to hire and create jobs.
Some have argued that business owners will be less likely to invest in equipment or other capital needed to expand a business and create jobs because capital purchases are made with after-tax money. But for small businesses, taxes are not what stands in the way of capital investments. If a small business owner wants to expand operations by purchasing new equipment, they typically benefit from small business “expensing.” This means they pay taxes on money used to purchase equipment.
Another claim made by many Republicans in Congress is that businesses will not invest and hire people if they are uncertain about how much taxes they will have to pay in future years.
This is a nonsensical argument, since not extending the Bush tax cuts for the rich will create at least as much certainty as extending them.
Businesses hire people if they believe that will result in profits for the business owners. It would be irrational to turn down a profitable opportunity just because your tax on the profit may be 5 percentage points higher.
For example, let’s say that a small business person knows that after using all available tax breaks she can keep 80% of whatever additional profits are generated, and 20% will be paid in taxes. If the Bush tax cuts for the rich expire, and this business person is among the 2.1% who are rich enough to lose some part of their tax cuts, then perhaps she can only keep 75% of their profits from a new investment. If a promising investment opportunity presents itself, would she pass it up because she will only keep 75% of the profits, instead of 80%? That would be irrational.
It is quite rational, however, for business people to pass up opportunities to invest and hire more workers if there is little chance of profit because no one is buying whatever the business produces. For many businesses, that’s the current, unhappy situation: a lack of customers. And income tax cuts for the rich won’t solve that problem.
Wealthy people tend to save a much greater proportion of their income than low- and middle income people. For this reason, the Congressional Budget Office (CBO) concluded that making permanent all the income tax cuts, including those for the richest taxpayers, was the least effective policy option for creating jobs.
Congress can and has taken measures to boost consumer demand by putting money in the hands of struggling families who will spend it right away. Unfortunately, Republicans in Congress did everything in their power to block these programs and even the “moderate” Republicans who voted for some of them caused them to be whittled down significantly.
5. Claims that the richest 2.1% account for a 1/4 of all consumer spending are incorrect. In the last couple months, a new rationale for extending the income tax cuts for the rich has appeared. Proponents of tax cuts for the rich decided that they agreed with us that what businesses really need is customers and that means that maintaining strong consumer demand is key to helping small businesses thrive.
But they then claimed incorrectly that those few taxpayers rich enough to lose some portion of the Bush income tax cuts under Obama’s plan make up 25% of consumer spending. So, they argued, tax cuts must be extended even for the very rich in order to avoid a significant drop off of consumer spending. In fact, anti-tax voices pushing this argument were so persuasive that they got 31 House Democrats to sign a letter citing this 25% figure and calling for an extension of the income tax cuts even for the very rich.
The assertion that the richest 2.1% of taxpayers account for 25 percent of consumer spending is not just wrong; it is impossible. In 2011, the richest 2.1% of taxpayers will account for about 21% of total pretax cash income. But their share of total personal consumption is certainly not higher than their share of total income. In fact, it is considerably lower, because they save a much higher portion of their after-tax income than less well-off
Americans.
We estimate that the 2.1% of taxpayers who are rich enough to lose part of their Bush tax cuts under the Obama plan are responsible for only about 8% of total national consumer spending."
These excerpts are especially interesting to me, since I've been making identical arguments for the last 5 years. It's nice to find a larger organization with almost identical views--even using nearly identical wording in many cases.
from Citizens for Tax Justice (CTJ)
(Regarding the expiration of the Bush tax cuts on the top 2%)
"3. A person who receives his income from a business he owns would have to receive over $250,000 (or over $200,000 if unmarried) in net profits in order to lose part of the tax cuts under President Obama’s (sic) plan.
Imagine a small business person whose sole income is from the business she owns. Her business has gross receipts for the year of $400,000 but her net profit is only $50,000. Some mistakenly believe this person will pay higher taxes under
The income tax applies to income. If your income is from a business you own, your income consists of the net profits of that business. Net profits are what you have left after you’ve paid wages to your employees and you’ve paid your other expenses.
The person in the example above would be nowhere near losing any portion of her tax cuts under...[the House's] plan.
4. In order to hire people, business owners need customers, not tax cuts.
Businesses hire employees if there is a demand for the goods or services that the employees will produce. As explained above, a business person is not taxed on the money he or she pays to employees, because that is deducted and not included as part of taxable income. This means there is no reason why a higher income tax rate would reduce a business person’s incentives to hire and create jobs.
Some have argued that business owners will be less likely to invest in equipment or other capital needed to expand a business and create jobs because capital purchases are made with after-tax money. But for small businesses, taxes are not what stands in the way of capital investments. If a small business owner wants to expand operations by purchasing new equipment, they typically benefit from small business “expensing.” This means they pay taxes on money used to purchase equipment.
Another claim made by many Republicans in Congress is that businesses will not invest and hire people if they are uncertain about how much taxes they will have to pay in future years.
This is a nonsensical argument, since not extending the Bush tax cuts for the rich will create at least as much certainty as extending them.
Businesses hire people if they believe that will result in profits for the business owners. It would be irrational to turn down a profitable opportunity just because your tax on the profit may be 5 percentage points higher.
For example, let’s say that a small business person knows that after using all available tax breaks she can keep 80% of whatever additional profits are generated, and 20% will be paid in taxes. If the Bush tax cuts for the rich expire, and this business person is among the 2.1% who are rich enough to lose some part of their tax cuts, then perhaps she can only keep 75% of their profits from a new investment. If a promising investment opportunity presents itself, would she pass it up because she will only keep 75% of the profits, instead of 80%? That would be irrational.
It is quite rational, however, for business people to pass up opportunities to invest and hire more workers if there is little chance of profit because no one is buying whatever the business produces. For many businesses, that’s the current, unhappy situation: a lack of customers. And income tax cuts for the rich won’t solve that problem.
Wealthy people tend to save a much greater proportion of their income than low- and middle income people. For this reason, the Congressional Budget Office (CBO) concluded that making permanent all the income tax cuts, including those for the richest taxpayers, was the least effective policy option for creating jobs.
Congress can and has taken measures to boost consumer demand by putting money in the hands of struggling families who will spend it right away. Unfortunately, Republicans in Congress did everything in their power to block these programs and even the “moderate” Republicans who voted for some of them caused them to be whittled down significantly.
5. Claims that the richest 2.1% account for a 1/4 of all consumer spending are incorrect. In the last couple months, a new rationale for extending the income tax cuts for the rich has appeared. Proponents of tax cuts for the rich decided that they agreed with us that what businesses really need is customers and that means that maintaining strong consumer demand is key to helping small businesses thrive.
But they then claimed incorrectly that those few taxpayers rich enough to lose some portion of the Bush income tax cuts under Obama’s plan make up 25% of consumer spending. So, they argued, tax cuts must be extended even for the very rich in order to avoid a significant drop off of consumer spending. In fact, anti-tax voices pushing this argument were so persuasive that they got 31 House Democrats to sign a letter citing this 25% figure and calling for an extension of the income tax cuts even for the very rich.
The assertion that the richest 2.1% of taxpayers account for 25 percent of consumer spending is not just wrong; it is impossible. In 2011, the richest 2.1% of taxpayers will account for about 21% of total pretax cash income. But their share of total personal consumption is certainly not higher than their share of total income. In fact, it is considerably lower, because they save a much higher portion of their after-tax income than less well-off
Americans.
We estimate that the 2.1% of taxpayers who are rich enough to lose part of their Bush tax cuts under the Obama plan are responsible for only about 8% of total national consumer spending."