From CNN:
Income Level: <$50K
Tax Returns: 15.2 million
Dividend Income: $26.9B
Dividend $/Return: $1,769.74
Income Level: $50K - $100K
Tax Returns: 10.0 million
Dividend Income: $27.1B
Dividend $/Return: $2,710.00
Income Level: $100K - $200K
Tax Returns: 4.8 million
Dividend Income: $23.8B
Dividend $/Return: $4,958.33
Income Level: > $1 million
Tax Returns: 200,000
Dividend Income: $25.4B
Dividend $/Return: $127,000.00
Yup, thats some stimulus alright. The politician-owning classes will be stimulated beyond all belief.
There will be trickle-down; perhaps I can get a job as a skipper on one of the new yachts.
And please spare me the class warfare rhetoric. The proposal you see above is class warfare; by being so stupidly slanted, the GOP is opening the door to class warfare; their protests ring a bit hollow.
And for me, the biggest issue is that this takes a sharp serrated knife to the thin stands of legitimacy that most of us feel.
16 thoughts on “YEAH, I’M STIMULATED, ALRIGHT”
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Incredible! I’ll just shift all my assets from tax free munis to dividend paying stocks. /sarcasm
THAT is the centerpiece of his economic plan?! My guess is it feels like a smack in the face to many, many households out there. Including mine.
Funnily enough, I don’t think shovelling more money into the pockets of the rich is the primary motivation for this plan (it’s merely, shall we say, a fringe benefit). The primary motivation is to boost the stock market. The only two really reliable ways to do that, in the short term, are to cut the capital gains tax, or this dividends approach. Another way is to raise taxes on interest income, shifting the balance toward equities, but this would make the game too obvious.
Paul Krugman wrote in late 1993 in his book “Peddling Prosperity”, something like “As the disappointing economic news of the late 80’s/early 90’s wore on, conservatives developed a near-mystical faith in the ability of a capital-gains tax cut to energize the economy”. Tout ca change. . .
For all their hatred of trial lawyers, it’s clear that Bush’s economic policy is crafted by people who think like lawyers, or at the very least like fuzzy majors. That is, it’s not crafted by people who have a quantitative model of the economy, and use that model to make policies. It’s crafted by people who choose their policies for political, ideological and emotional satisfaction, and then justify the policy with whatever plausible arguments they can cook up, just as long as it can pass muster on the talk shows.
Thus the reasoning for this dividend policy goes like so: 1) It will boost the stock market 2) which will make CEO’s and investors happy 3) which will cause them to stop laying off people, and to spend more money, especially on investments 4) which will boost the economy short-term 5) which will boost the economy long-term
6) which will boost government revenues in the long term
7) which will solve all our problems, including the problems of budget deficits.
What’s wrong with this kind of thinking? It is purely deductive, with no attention paid to the actual magnitudes of the different variables. In other words, it’s economic policy as made by know-it-all fuzzy majors.
“It’s crafted by people who choose their policies for political, ideological and emotional satisfaction. . . .”
Jeez. If we could only find a rational, selfless, unemotional and ideological nuetral economist, who had a spiff ever-true qualitative economic model — then things would be swell!! Hmm. Hey –Maybe we could get Paul Krugman!!
Meanwhile, the CNN link doesn’t work.
I cannot help but notice that only 30 million or so tax returns are included. Even if every single one were a family, that’s still only 60 million taxpayers out of 280 million citizens. I find it remarkable that all taxes would be paid by less than 1 in 4 citizens, yet inevitably there is a call to soak the rich. Sounds like the few people paying taxes (self included) are getting soaked.
I’m just wondering — are dividends taxes elsewhere as part of the regular income tax in addition to the current dividend taxes, or not?
Could somebody refer me to a primer on all this taxation stuff? I hear phrases like capital gains, dividends, brackets, etc, etc. thrown around, and I must confess I’m rather clueless about it all.
Dividends are taxed at the corporate level, before they are paid out to individuals. Thus, when an individual also has to pay taxes on them, “double taxation” arises. I would prefer to eliminate double taxation at the corporate level – this would do more to correct the economic distortions created by our current tax system, which heavily favors debt – but this is politically unsavory to people who like to run around whining about the evil corporations that are the economic engine of our country.
AL, the current tax system is already class warfare, so any change in it is going to also be class warfare. The “rich” already pay taxes so disproportionately that, as you must know, it is impossible to give tax relief that does not go to the rich. Your line of argument is a line of argument for no tax relief at all. Spare me please, redistribution in the guise of tax relief schemes like “negative income taxes” and the like – redistribution is still redistribution regardless of how much lipstick you smear on it, and still has the same negative economic effects.
“it is impossible to give tax relief that does not go to the rich”
Really? How about cutting payroll taxes for starters? Increasing the standard deduction? Reducing the marriage penalty? Any of these things (and many others I’m sure) would not “go to the rich”.
It’s true that certain upper income taxpayers foot a big part of the bill, and thus would receive most of the benefit from certain kinds of tax relief, but I think it is not accurate to say that any tax relief benefits the rich.
Jeff: This is only talking about taxes on dividends, not the entire tax burden.
Wrharper: I think one part of the idea is that when dividends are no longer taxed twice, more companies will have dividends; double-taxing is a commonly-attributed cause of the decline of dividend payouts… and the stabilising effects that’s likely to have on the stock market seem good, at least to me. (Now, whether or not such a tax cut will, in fact, have that effect is uncertain, but the analysis I’ve seen all seems likely and plausible.)
Odd how nobody’s mentioning the $3,000 payout to unemployed people to cover training, childcare, and moving expenses. I guess benefiting “the rich” (and the <50k, and the 50-100k, and…) is more important a negative than providing capital to unemployed people so they can get jobs is a positive.
My issue isn’t necessarily the issue of double-taxing dividends (heck, I’m incorporated, that could substabntially work to my advantage), as it is that you have to look thoughtfully at the impacts of any changes in the tax code.
One issue is that we have accepted a certain amount of progressivisim in the tax code as legitimate, and to the extent that we are modifying the code in such a way as to distort the progressivism substantially, it’s a pretty meaningful issue.
Another is that the relative ‘tax expenditure’ that goes to different income classes needs to be looked at carefully. In this case, the Administration went whole-hog to the high end of the spectrum.
$3.6 billion for the unemployed and close to $100 billion for investors…that’s the issue.
A.L.
Giving a Capital Gains tax rate reduction, would give an incentive to CEOs to sepculate in their own
company’s stock (that they receive in compensation in lieu of a salary increase. )
Making the tax cuts in dividends instead will encourage making the company more profitable , rather
than having inflated speculative stock prices.
That’s my take on what this is trying to accomplish.
> Really? How about cutting payroll taxes for starters?
Go for it. Shatter the illusion that SS benefits are somehow tied to contributions. And, while you’re at it, push SS further into “doesn’t add up”.
Then watch it disappear.
I personally think that that would be a good thing, but somehow I doubt that many of the advocates of cutting payroll taxes have that goal in mind.
Mr. Harper:
Tax relief for the non-rich:
>Really? How about cutting payroll taxes for starters? Increasing the standard deduction? Reducing the marriage penalty? Any of these things (and many others I’m sure) would not “go to the rich”.
Well, actually they would go to the rich, as well as others, because the rich would be able to benefit from all of them. Plus, increasing the standard deduction and reducing the marriage tax penalty would benefit only those who pay income taxes, which is an increasingly narrow class of high wage-earners (in short, the “rich”). We are to a point where a very significant fraction of this country pays no income taxes at all, making all income tax relief “class” based and biased toward “the rich” by definition.
All that tax relief for investors (which include a majority of the people in this country via their retirement plans, don’t forget) translates into more investments, which in turn translates into more jobs for those further down the ladder.
Mr. Hartin:
I believe I misunderstood you and/or didnt get my point across. I agree that any tax reforms I can think of would benefit the rich since they pay most of the taxes. (Although we might not agree on what “rich” means) What I was really trying to point out is that there are ways of changing the overall taxation scheme that would have more of an impact on low and middle income earners than say, eliminating the dividend tax. I like the idea of that reform actually, but I think it was ridiculous to make that the centerpiece of a new economic plan.
I do find it rather disturbing that so many people pay so little (or nothing) in taxes. Personally, I dont think that sends the right message about what we ALL should contribute to keep our society running. In tax year 2000, the people with the bottom 50 percent of AGI paid about 4% of income tax vs. making about 13% of total AGI. While Im sure there are some other considerations, those numbers trouble me.
Mr Freeman:
Im not necessarily saying it would be good policy, only that it might be possible. I think SS is a train wreck waiting to happen, and since the gov. seems to treat SS revenues like any other money, why not throw them into the mix here?
Im not really sure what you mean by Then watch it disappear.
I can’t believe this. Bush is doing nothing but pandering to the rich. This elimination of the tax on the Investor side of dividends will do nothing for me. I don’t even own stock. How dare those people who do own, or can afford to buy stocks which pay dividends get a cut and I don’t! This can’t pass, its unfair!
I’m also pissed at all those car manufacturers coming out with new cars. I’m not going to utilize *any* of them, so why are they making them? Their just pandering to those rich folks who can buy such things. Damn them!
Mr. Harper, I am baffled. On the one hand, you agree that it is a bad thing that so many pay so little in taxes, while on the other hand you support tax relief that would only increase this problem by reducing the tax burden of those who already pay relatively little in taxes.
Calling Bush’s proposal “class warfare” is analogous to claiming that the US is declaring war on Al Quaeda. The class warfare was declared by those who created and support the current progressive/disproportionate tax system. The whole damn tax system now is class warfare (and consciously so by those who support the estate tax, the redistributionist state, and high marginal rates); anything you do with it will therefore also be class warfare.
Mr. Hartin (I hope that’s correct, I just assumed you were a Mr.)
You might be baffled because I never used the words class warfare, nor did I say that I supported reducing taxes on low to mid wage earners. I said it was possible, not necessarily desirable. (Although I’m basically for reducing taxes on everybody) No point in defending arguments I didn’t make.
As I pointed out in my previous comment, I AM appalled that the Administration would make a proposal like this the centerpiece of a growth/jobs plan. First, I’m not convinced it will work, and second, it LOOKS like pandering to the rich, even if it is not. Republicans in general already have an image problem with many voters, why compound it?