Thursday, September 9, 2010

Ending the Bush Tax Cuts for the Wealthy

The Bush tax cuts are set to expire at the beginning of the year and the bombs are starting to fall in the political war over this issue.  Democrats want to let them expire for those making over $250,000 while extending them for everyone else.  Republicans want to extend them for everyone.  So, essentially, the argument is whether or not to extend the tax cuts for the very wealthy.  The two top marginal tax rates would go from 33% and 35% to 36% and 39.6%, respectively.

A second area of disagreement also has to do with taxing the wealthy, this time in the form of capital gains, which are disproportionally slanted towards the rich.  Those rates would go from 15% to 20%, and eventually to 23.8%.

Read up on the issues from both sides here, here, here, and here.  Another excellent resource is the Center on Budget and Policy Priorities, which lays out the argument for how letting the tax cuts expire for the wealthy and extending them for everyone else will reduce the deficit ($300 billion per year), almost universally benefit small businesses, and spur the economy and job growth.

 President Obama has come out forcefully with a plan to allow the tax cuts to expire for the wealthy and to extend them for the poor.  Here is the best and simplest argument I've seen for his plan, from Salon:
Not only did the wealthiest Americans benefit the most from the anything goes Wall Street boom years, but they paid the smallest price for the economic collapse. While millions of Americans lost their jobs and their homes, they sailed right through. By calling for the repeal of the Bush tax cuts for the wealthy, Obama is putting down a political marker, and declaring that the rich must pay their fair share of the burden. Here's a message anyone can understand: I'm going to raise taxes on the rich and spend money directly creating jobs through infrastructure investments.
Remember, even with the expiration of the tax cuts for the wealthy they will be paying a lower tax rate than during the Reagan years, so save the cries of socialism.  This country became great because of the work of the lower and middle classes.  If we want to regain some of that greatness we have to secure them first by creating jobs and opportunities for them, and this move is a way to do that.  We've covered this issue a little bit before here.

Over the past 30 years, however, after decades of convergence in income distribution, the gap between the rich and poor is getting bigger and bigger.  That means America is less free because those poor have fewer and fewer meaningful opportunities to make their lives, and the lives of their families, better.  It also means America is much less righteous.  That might seem like a statement out of crazy land, but look at these principles from the Book of Mormon:

2 Nephi 9:30 - But wo unto the rich, who are rich as to the things of the world. For because they are rich they despise the poor, and they persecute the meek, and their hearts are upon their treasures; wherefore, their treasure is their god. And behold, their treasure shall perish with them also.

2 Nephi 9:42 -  And whoso knocketh, to him will he open; and the wise, and the learned, and they that are rich, who are puffed up because of their learning, and their wisdom, and their riches—yea, they are they whom he despiseth; and save they shall cast these things away, and consider themselves fools before God, and come down in the depths of humility, he will not open unto them.

Jacob 2:13-14 - And the hand of providence hath smiled upon you most pleasingly, that you have obtained many riches; and because some of you have obtained more abundantly than that of your brethren ye are alifted up in the pride of your hearts, and wear stiff necks and high heads because of the costliness of your apparel, and persecute your brethren because ye suppose that ye are better than they.  And now, my brethren, do ye suppose that God justifieth you in this thing? Behold, I say unto you, Nay. But he condemneth you, and if ye persist in these things his judgments must speedily come unto you.

Helaman 6:17 - For behold, the Lord had blessed them so long with the riches of the world that they had not been stirred up to anger, to wars, nor to bloodshed; therefore they began to set their hearts upon their riches; yea, they began to seek to get gain that they might be lifted up one above another; therefore they began to commit secret murders, and to rob and to plunder, that they might get gain.

3 Nephi 6:10-12 -  But it came to pass in the twenty and ninth year there began to be some disputings among the people; and some were lifted up unto pride and boasting because of their exceedingly great riches, yea, even unto great persecutions; For there were many merchants in the land, and also many lawyers, and many officers.  And the people began to be distinguished by ranks, according to their riches and their chances for learning; yea, some were ignorant because of their poverty, and others did receive great  learning because of their riches.

There are many, many others just like this.  One of the overarching themes of the Book of Mormon is that when a society becomes stratified between the rich and the poor, the rich will become prideful and wicked and push the poor down further and further until they are ripe for destruction.  This is where we are inevitably headed unless we make the decision, as a society collectively, to narrow that gap voluntarily.  Extending the Bush tax cuts for the poor and letting them expire for the wealthy is a step in the right direction.


Architect said...

The income tax is an attempt at social policy by creating a law that treats individuals unequally based on not just their income, but how they make that income. Ronald Reagan and Milton Friedman championed the idea of using the income tax to redistribute income from the rich to the poor. They modified the income tax so that the bottom third of income earners dropped off the tax rolls. Last year about 60 million people did not file income tax returns.

The income tax is a violation of Due Process and Equal Protection. It unnecessarily divides citizens into classes.

Mosiah 11
3 And he laid a tax of one fifth part of all they possessed, a fifth part of their gold and of their silver, and a fifth part of their ziff, and of their copper, and of their brass and their iron; and a fifth part of their fatlings; and also a fifth part of all their grain.
6 Yea, and thus they [the king and his priests] were supported in their laziness, and in their idolatry, and in their whoredoms, by the taxes which king Noah had put upon his people; thus did the people labor exceedingly to support iniquity.

One can easily look at some of the expenditures of tax dollars by our federal government and draw a direct parallel to King Noah(unjust wars, research that provides porn/alcohol to its subjects, paying people to NOT work, and bailouts of politically connected businesses).

The simplest solution is to ABOLISH the federal income tax and reduce the federal budget accordingly. Since the income tax brings in only a fraction of the total money required to run the government, they would not have to cut much. We are also in a recession with the majority of businesses and individuals making less money, some tax relief would be a great help. Additionally, we as a society can use the 30+ hours we were spending on filing an income tax return to take a vacation. With the income tax gone, there will be plenty of new capital for new businesses and we could finally afford solar power without subsidies from our taxed dollars!

Remember that Robin Hood took from the government to give to the people, because TAXES were too high.

Please stop asking the government to make the rich poor. It is much better to remove barriers that stand in the way of the poor getting rich. Each tax on income is a barrier for the poor.

Iliana said...

I was prepared to hear fact based argument in favor of Obama but instead got scripture references very biasedly used to support nonsense? I actually think Architects scrips are very iron clad in comparison. Notice your scrips use the word, "some". SOME rich become greedy, etc. I don't know if I agree with complete abolishment of income tax, but I certainly don't think the role of government is to lower the rich and raise the poor. Your Salon quote really sits with me wrong. As if the rich must "pay" for being rich and perhaps not feeling the wrath of the recession to the extent of others. That the govn't must bring them down so they can feel the same pain as others. Nonsense. I agree that there needs to be changes in the ability of all to get a good education and thus prepare themselves to choose whatever profession they like, having earning power beyond those who struggle with poverty. I just really don't think this is the way. Who wants the government to ENSURE their success? I don't. I don't want someone makeing descisions for me that I am more than capable of making and dealing with. I know I'm not all intellectual like you or your readers, and don't have solid numbers or historical quotes, but my opinion is in stark contrast to yours.

Jacob S. said...


The income tax is certainly not unconstitutional. The Due Process clause doesn't mandate that everyone always be treated exactly the same way. There are certain distinctions that require a higher level of scrutiny than others, such as race, gender, or religion, but income is not a protected class. As such the government only needs a rational basis for making distinctions, of which there are dozens in this case.

But that's all moot anyway because the 16th Amendment explicitly allows the income tax. It's hard for something to be unconstitutional when there is a specific constitutional amendment allowing it.

AS for the Mosiah quote, I agree that if taxes are merely used to support a bureaucratic class to keep and support their many wives and concubines, idolatry, and other offensively wicked practices then it would be wrong. I completely agree that the starting of all of our unjust wars (just about everyone one we get involved in, by the way) was a waste of our tax dollars. I don't agree that we are paying people not to work, study after study shows that unemployment benefits do not discourage people from looking for and getting jobs. But anyway, look at where most of the federal budget is spent by clicking here: national security and programs for the care for the old and poor. I would hardly equate that with what King Noah was doing.

Now, there is tax relief proposed to those that need it most. Obama is proposing extending the tax cuts to the poor and middle class and cutting small business taxes, and cutting taxes for business that are engaging in research and buying equipment. Those are the people that need the help.

And I'm going to say something harsh here and I'll probably immediately regret using this tone, but you are delusional if you think raising the marginal tax rate by 2% will make the rich poor. That is just empty rhetoric with no basis in reality. The rich are not becoming poor because of taxes. The rich are getting richer and the poor are getting poorer, by every objective standard, because of our tax system. Our economy and tax system are deliberately set up to favor the rich over the poor, and anytime anyone wants to level the playing field there is suddenly an outpouring of support for the rich. They really have us brainwashed.

Finally, what programs would you support cutting if we repealed the 16th Amendment and abolished the income tax? Would you cut Social Security, Medicare, and Medicaid? What would you propose to replace those programs? Remember that before they were enacted the majority of retired people were living in poverty and the old and poor had no opportunity for meaningful health care. What would you do with those people? How would you support the huge standing army and defense budget? How would you pay veterans benefits? How would you build and maintain roads, railways, and public transportation? Hey, I don't like to pay taxes either, but I understand that as public policy we need them for our nation to function smoothly and efficiently.

Jacob S. said...


As I read the Book of Mormon, one of the great societal sins that causes trouble over and over is the widening gap between the rich and the poor and the subsequent pride and vanity that result. The rich inevitably become power hungry and oppress the poor and cause problems. I am happy to be shown that I am wrong. Next, I see that exact thing happening in America. Not every rich person fits the mold, but the vast, vast majority do, according to the Book of Mormon. Again, I am happy to be proved wrong on this point.

So now we've been warned about this societal ill. We know the consequences if we let it get out of hand, so what are we going to do about it? Are we going to perpetuate a system that rewards being rich or are we going to help change the system to one that creates equal opportunity for all, and rewards hard work over simply having a lot of money? I think Obama's plan is a step in the right direction. There are plenty of nice, factual links in that post that show this plan will reduce the deficit significantly while not hurting the rich too much while benefiting those that need it most. But the point of the post was that I think we're headed in the wrong direction as a nation and the consequences are pretty ugly if we go too far.

Architect said...

As the recent ruling against Proposition 8 showed, being part of the Constitution is no protection against being unconstitutional. Remember that three times the income tax was declared unconstitutional. Our country went over one hundred years without an income tax. It was the the progressive movement that thought it would improve the situation of the poor to tax the rich. We still have poor, but at least they aren't starving.

Politicians at the federal level receive LIFE PENSIONS after serving a single term. Many government workers need work only twenty years before receiving LIFE PENSIONS. Life pensions or continuous charity should not be the realm of taxpayer dollars. Our previous politicians promised much more than they should have. Instead of life pensions, lump sum payments would make it harder to hide the costs and force the politicians to budget for their lump sum payments. Charity should be the domain of private associations, religion, unions, and businesses not tax dollars. Otherwise people are forced through tax dollars to give to charities that they would not voluntarily send their hard earned money to.

Providing targeted tax relief is merely dividing citizens. It is unequal treatment. How much better would it be to remove the income tax and all its loop holes, special favors, subsidies, and set asides? It is seventeen thousand pages or so. It is the most expensive tax to administer. It barely brings in enough money to pay for the tax courts, employees and pensioners of the IRS!

At one time in our history, economic liberty was considered a fundamental right.

Now before we can make any cuts, we need to clear out our debts. ~40 % of the budget is servicing our debt. Harry Browne's presidential campaign explained that liquidating federal assets and lands could raise the necessary funds to purchase annuities to cover obligations like Social Security.

With the books cleared we can talk about cuts. The CATO institute is an authority on the size of and scope of federal government. The National Taxpayers Union has some good ideas. Citizens Against Government Waste is a great source.
Stop cash payments to foreign governments and international organizations (many are anti-USA). Let the leases on our foreign military bases expire and bring our troops home. If a project takes place in a state, it is the responsibility of that state. Any federal land that falls in a state should be operated by that state and be state property (Washington DC excepted). The federal government was a creation of the states and should complement the states, not dominate them.