Think The Rich Have it Good Now? LOOK AT THE COMING BOUNTY FOR THEM

[berni_mccoy]

I've DISSECTED the the Bush tax advisory panel's PLAN for NEXT YEARS TAX CODE CHANGES (you can read an article about it here: http://www.nytimes.com/2005/10/18/politics/18cnd-tax.html?ex=1130299200&en=17871d7f1318f9e1&ei=5043&partner=EXCITE )

This plan is THE ANTITHESIS of Robin Hood.

Here's what the changes will mean to us all:
(I'll keep score: good things = 1 point, bad things = -1 point)

The alternative minimum tax, a steep levy faced by an increasing number of middle-income taxpayers, would be abolished.

No poor and very few middle class pay this. ATM is reserved for collecting sudden gains from Stock Options / Equity investments made typically by Upper Middle and Upper class investors.
1 For the Rich, 0 For the Poor.
========================================

The tax break on home mortgages would be sharply limited, especially for expensive houses.

This will prevent first-time home buyers from entering high-population markets (like New England, California and many more markets in high-population areas across the nation) since the new law will lower the limit to $300,000 mortgage. A large percentage of first-time home-buyers (unless they are rich) borrow at between 250 and 450 to buy their first home. Not surprisingly, these areas tend to vote heavily democratic. And we know the Upper class consists mostly of republicans. The wealthy (top 5%) first time home buyers don't need to borrow this much money to buy a house regardless of location. They will not be affected.
1 for the Rich, -1 For the Poor.
========================================

No deduction would be allowed for state and local income and property taxes.

I can't imagine who this will affect more? The rich guy who has no state income (majority dividend based -- wait till you see what's coming below) and who already can easily afford to pay property taxes on his mansion and yacht or the poor guy who now has to be taxed TWICE for his income?
1 for the Rich, -2 for the Poor.
========================================

Employer-paid health insurance premiums above $5,000 a year for an individual and $11,500 for a family policy would be treated as income to workers and taxed accordingly.

Ok, this one really gets me. There are VERY FEW health care plans that cost less than this. The average middle class worker is now going to have another $2000 / year taken out of his taxes to pay for his health care. WHO'S THAT GOING TO HURT?!?!?
1 for the Rich, -3 for the Poor.
========================================

All taxpayers could deduct charitable donations, but only to the extent they exceeded 1 percent of a taxpayer's income.

This forces everyone to give at least 1 percent or nothing. Sorry charities, but you just lost a lot of donations (that could help the poor).
1 for the Rich, -4 for the Poor.
========================================

Personal exemptions and deductions and credits for children would be eliminated and replaced by a credit of $1,600 for a single person, $3,200 for a couple, $1,500 for each child and $500 for each other dependent.

This one is hard to say which way it will turn out... the poor will likely pay more, but so will the rich (if they can no longer itemize deductions).
0 for the Rich, -5 for the Poor.
========================================

The six tax brackets ... would be replaced by four, with a low bracket of 15 percent and a top rate of 33 percent. The top rate now is 35 percent.

Bad, bad and bad. Poor lowest income bracket is 10%. These people will now pay more (especially since they do not get a standardized deduction) and the Rich will get a 2% break at the top.
1 for the Rich, -6 for the Poor.
========================================

The two plans differ on ... investment income.
One would eliminate taxes on dividends entirely, lower the top capital gains rate to 8.25 percent on the sale of stock in American corporations and tax interest income at the same rate as wages and salaries.

The other plan would have a 15 percent rate on dividends, interest and capital gains. The rate now is 15 percent on dividends and capital gains, and interest payments are taxed like earned income.

Either plan is a BOON for the RICH. They either pay NOTHING on dividend income and see nearly a 50% reduction in capital gains taxes OR they pay the MINIMUM income tax on dividends, interest and capital gains. How much do poor/middle class make on these types of investments? Oh yeah, NOTHING.
2 for the Rich, -6 for the Poor
========================================

So there we have it, a shift in wealth by ROBBING the POOR 6 TIMES and splitting the BOOTY with the RICH.

I hope Americans welcome this like they welcomed Bush's Social Security Reform. Funny part about the whole plan? It won't make a signficant revenue difference to the gov't (see the article above). My only question is, WHY DO THIS AT ALL IF IT ISN'T GOING TO INCREASE or DECREASE REVENUE TO THE GOV'T? The answer is of course: Rob from the poor to feed the rich.

[AllyCat]

1. Berni...thanks for posting this.

I read a blurb in our local paper saying eliminating the mortgage interest deduction had died. Apparently not. Of course, our local paper really likes Bush, even here in liberal Madison.

Time to get yellin' folks! Who approves this next? Does it go to Congress? If so, we need to carpet them with complaints.

[MadHound]

2. I've been screaming about this for the past couple of weeks.

And I think that we should adapt that 'Pug mantra that this is, in effect, A TAX INCREASE!

And you're correct, this is going to help ruin the middle classe. And apparently either this administration hasn't read its history, or they don't care. Either way, they're disregarding the historical fact that a strong middle class acts as an extremely effective buffer between the rich and the poor, and that when the middle class is significantly weakened or eliminated, the popluation revolts, usually quite bloodily, for they have absolutely nothing left to lose.

[Atman]

3. They're filling their vaults to ride out the coming world depression

They are causing it, make no mistake. But that is part of the plan. I lost a lot of bookmarks after a recent hard drive crash, but one was a very compelling piece about the PNAC architects' vision for changing the world. It will be long, and it will cause intense human suffering. BUT, they reason, all great social change has involved years of intense social suffering. They are fully expecting, planning for, a global cataclysm which will shake modern democratic ideals to the very core. They know it will be hard.

For us, it will be hard. It won't be hard for those holed up behind their compound walls, with stores of gold and cash and the means to survive it.

That is why Bush is so steadfastly against even considering a repeal of the tax cuts. To do so would undermine the first goal by helping to correct the vehicle by which they hope to bring about this massive societal change; wealth. Or lack thereof. Reliance on government as anything but a defense against invaders. All else, in their view, should be left to private industry or charity. As long as there is any money left in "the system," they cannot hope to bring about their envisioned change. And as long as they have all the money that once fueled what they perceive to be the downfall of society (welfare, etc), they will both be able force said change and ride out the inevitable social upheaval.

They MUST be stopped. Or get ready to deal. It's gonna be rough.

[LynzM]

4. Not sure you're right on AMT

From what I've read, it USED to be for the rich, but as overall income levels go up and the standard for AMT hasn't changed, more people are forced to pay it. Someone out there know more about this than I do, please?

[mtnester]

6. We have faced AMT for the last 3 years, and we are by no means

rich...we are VERY middle class

[pitohui]

11. agreed

AMT also affects the middle class now, i know someone who pays the AMT who is far from rich, well, now he's lost everything due to katrina but even before that he was struggling

it don't pay to be a small businessman, better to find a job if you are at all employable, i'm just sayin

[berni_mccoy]

8. Here are the Top 10 Items that cause AMT liability

http://www.fairmark.com/amt/topten.htm

In short:
Exemptions
Standard Deduction
State and Local Taxes
Interest on Second Mortgages
Medical Expenses
Miscellaneous Itemized Deductions
Various Credits
Incentive Stock Options
Long-Term Capital Gains
Tax-Exempt Interest
Tax Shelters

I can see small biz people getting hit and some middle class, but majority middle class and poor are not likely to have these items. Most (over 75%) don't itemize or take advantage of these items.

[pitohui]

12. yes it's owning a biz that hurts my friend

the rich, who own stock in large businesses, have no intention of allowing any small businessman to break into their ranks, the horatio alger days are over

[Extend a Hand]

25. We got stuck with AMT last year

completely on earned income. We have very little invested out side of retirement accounts.

Worse still, since we both work in IT our jobs are not very secure-- much work at our company has already been outsourced.

[SheilaT]

5. While I'm not affected,

I keep on reading that the ATM keeps on nailing more and more middle class people, even though it's original intent was to make sure the very rich actually paid some fair share of taxes.


Would you be happy if the mortgage interest rate deduction were pegged to some percentage of the local median home price? Quite frankly, that deduction has enabled the huge bubble in home prices, and it's a benefit that someone who doesn't have an interest-heavy mortgage gets. Like me. My home is paid off. How un-American.

Personally, I would like to see a lot of simplification of the tax code. It should not take hours and hours or (what we do) sending off the paperwork to an accountant because, quite frankly, my time is worth something.

Of course, such simplification will never take place unless all Representatives and Senators are required to fill out their own returns themselves. No help from H&R Block, just the 800 number for the IRS and let them take their chances with that.

[berni_mccoy]

9. I'm all in favor of Tax Code Reform

As long as the POOR and MIDDLE CLASS are not DESTROYED.

I think it should be simple and straightforward as there are WAY TOO MANY loopholes and special-cases. But these only favor the wealthy.

The wealthy PAY TOO LITTLE TAXES AS IT IS.

[Extend a Hand]

26. I've always thought that it's grossly unfair

that corporations pay taxes on profits(revenue-expenses).
and individuals pay taxes on income (revenue).

[progressivebydesign]

16. Mortgage deductions do NOTHING to affect home affordability.

Just like the stupid ideas that health care can be paid for thru tax deductions, a mortgage deduction each year is usually eaten up by taxes on your wages... it has no bearing on day to day, month to month, affordability.

Why do people care so much about what other people pay for their houses? I honestly think it's jealousy.

Before people start looking to hurt the middle class (hint: the ones that can swing vote for us), why not look at where the tax weaknesses really are (hint: offshore tax shelters for the corporations).

Our party gets NOWHERE with the type of thinking that penalizes anyone living above minimum wage. Perhaps no one has realized that in many, many, areas a house over 300K is a starter home for most families. This will not reduce the housing prices, it will basically put more people into the streets.

[berni_mccoy]

19. Again, I fail to see your point

I pay interest on a mortgage, and I certainly see a difference in my tax return when I include the interest I pay. So I would disagree with your point that it 'disappears.' That could happen for some people, but not the majority. How the deduction affects your day-to-day affordability depends on your unique finances.

No one here is looking to hurt the middle class (or ANYONE for that matter). What is being said is that the ADMIN is trying to TAKE from the NON-WEALTHY and GIVE to the WEALTHY.

I agree, 300K IS A STARTER HOME PRICE IN MANY AREAS (especially CA and New England). And if people can't use the interest deduction, guess what will happen? PEOPLE WILL NOT BUY HOUSES. That in turn will have an impact on the housing market. I don't disagree that it will create a lot of homeless.

[SheilaT]

22. Oh, yes they do.

Otherwise, why would people max out on a home payment. Because you can deduct (a portion) of the interest. It's what made us a nation of home owners after WWII, when it was introduced, and it drives home loans and housing prices even today. If people did not get back some of their house payment as a tax refund or offset, they would not be able to afford so huge a house payment. It's quite simple. Over and over again the entire rationale for buying is for the tax deduction.

Trust me, I do not care what others pay for a house. I only care if, when the day comes we move to a Blue State, that we'll be able to afford to purchase a home of some kind. And my idea of affording is NOT that we take out as large a loan as possible so we can deduct (a portion) of the payment's interest.

Either the bubble will burst and it will be very painful for many people, or the price of housing will go up and up, until spending a full 50% of one's income for housing will be seen as normal.

[Skidmore]

7. Yo, Dem leaders, you need to get your proverbial tushes

on the road in your districts during the Rs little break and hammer the hell out of this topic. Get down and do some town meetings. Why the heck doesn't the DNC buy an hour of prime TV time to discuss this topic. Bet we'd get plenty of viewers. I'd rather see a large chunk of money go for that than promoting Lieberman's campaign.

[Greyhound]

10. Anyone taking bets on how many of 'our' DINO's are going to vote

in favor of this latest affront?
...and the beat goes on...

[SammyWinstonJack]

13. All of them? Well most of them anyway.

Screwed over once again. :grr: When the interest on cc and finance charges were eliminated during the reagan/bush years, wasn't the congress under democratic control? If so, how did those changes get through, because they were most definitely a tax increase for the middle class and working poor.

[Lasher]

14. I like this format

berni,

The AMT skeptics in this thread have a point, but overall your content is very good. I particularly like the way you've laid this out: sort of a bullet item, explaination, and score scenario. I was able to quickly pick up on the key points without having to pore over a 15 page mini-novel. I appreciate that.

I seek to convey ideas in a similar manner, and will probably emulate your style to some degree.

[progressivebydesign]

15. This is total bullshit!! Until they address corp welfare!!

I'm sick of so many people here that equate owning a decent home as
"being rich" and somehow worthy of scorn. Is it that so many are jealous of hard working people who own nice homes? Is that it? Why is there such delight in hurting people?

Those tax proposals hurt MIDDLE AMERICANS.. the ones that Clinton won elections by fighting for. I honestly don't understand the mindset around here... I honestly don't. These tax proposals will hurt the teachers, nurses, firefighters, police, grandmothers, grandfathers, single parents, blue collar, and white collar.

Why must people here engage in class warfare? I didn't realize that I had to live in someone's garage to qualify as being liberal.

[berni_mccoy]

17. What are you talking about? How am I waging Class Warfare?

I agree with you. This tax proposal by the Bush admin hurts the middle class. It also hurts the poor.

I also agree that you don't need to be poor to be liberal. In fact, I'm in the upper middle class and I own a nice home; and I got where I am through hard work. I've also been poor.

I'll dig up some stats on the political breakdown of the upper class.

[AllyCat]

18. I fail to see how anyone here is advocating hurting the middle class

It seems that the OP has pointed out how these breaks will hurt the poor and middle classes, but used "rich" and "poor" because it's a nice neat analogy for keeping score.

Has anyone here said anything about owning a home as being rich?? I don't see a post here stating that. I think we're all in agreement here PBD.

[bluedawg12]

21. Good point about corporate taxes and schemes to avoid them

here is an interestng thing about Cheneyburton and tax havens.

http://www.halliburtonwatch.org/about_hal/taxhaven.html

>For decades, the U.S. tax code has encouraged companies like Halliburton to transfer the location of its subsidiaries from the United States to foreign countries. This is one reason why only thirty-six of Halliburton's 143 subsidiaries are incorporated in the United States and 107 subsidiaries (or 75 percent) are incorporated in 30 different countries.<

They can't abolish state tax write off's because that would be double taxation.

And, home interest write off's are important to off set other taxes.

Go after the big corporations who avoid and evade taxes.

[trekbiker]

20. this tax plan has no chance.. even the repugs

would never vote for any of this in an election year. Eliminating the home mort deduction and double taxation on state inc tax (no fed duduction) is political suicide. this and bush's SS plan are DOA.

[natrat]

24. political suicide would be something that would put the

incumbent beyond striking distance of a chalenger. IE if it's far enough away they cant throw it with electronic fraund. Note this proposal would adversely effect blue areas. In the red areas it would'nt put things to far out of diebold reach. my theory anyway

[sinkingfeeling]

23. Man, won't this put the 'economy' in the dumper! First, it will be an

overall tax increase to those in the middle and lower income brackets. The workin' Joe will have 'income' added from being taxed on company healthcare. No deductions for all those state & local taxes, including personal property and property taxes. No deduction for the mortgage interest (that some middle class folks have been getting their buying power from via equity loans). Giving up personal exemptions. All in all, the average middle class family could see there taxable income almost double!

With no way to finance big ticket items and increased taxes, I would think they'll be staying out of the malls and maybe even out of Wal-Mart. In certain areas, they will be killing off the housing starts since people will not be able to afford the homes.

Guess, we'll just have to start a few more wars to keep the 'economy' rolling along.

[berni_mccoy]

27. It doesn't look good for the working class

I truly believe the republicans feel that the working class is living with TOO HIGH a standard of living. They believe they own too much (despite the ownership society bullshit that was thrown around for SS reform), and they believe the working class takes too much vacation.

The rich won't be happy until they can have servants that are paid with room and board and maybe a little allowance to let them buy a trinket or two for their childrend at Christmas time.