Do Tax Cuts for the Richest 2% Help or Hurt You? Read the Surprising Answer Here

By Liam McGonagle on November 17, 2010 in News 30

Kudos once again to the fine team and readership at disinformation. Their comments continue to be extremely thought provoking. This article, chart and supporting calculation in the attached workbook are in resonse to their many insightful questions about inept Republican tax and economic policies.

I get pissed when some dipwad tries to pull a fast one on me, as should we all. The responsible conduct of business requires a level of trust that is decisively undermined when we’re lied to. And while there is a time and place for everything, the place for bullshit is the weekend pintfest at a local pub, not in debates about income tax policy. That’s why the fundamental dishonesty of Republican’t talking points has me so fired up.

The specific steaming pile that currently has me cheesed off is EGTRRA. No, it’s not some type of horrible fat-free egg substitute; it’s the ironically named Economic Growth and Tax Relief Reconciliation Act of 2001. The bit that’s currently in play right now is the Republican hijacking of economic recovery effots in order to renew tax cuts for the country’s fattest 2%. And that just can’t be allowed to happen. ‘Cause not only will it not result in any improvement in the real economy, it’s been proven to actually steal from the middle class to benefit the uber-rich.

It’s ironic that faux populist, bankster-financed hangnails like Paul Ryan (R-WI) and senator elect Ron Johnson (R-WI) try to saddle Dems with the title of “Wealth Re-distributors” when the evidence to the contrary is all around. You don’t have to get into a pissing match over which cable news network talking head has the biggest gnarlies—just look at the data for yourself. Here’s how.

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ItsAllBullshit

This is exactly why politics are bullshit. You pick one side and point out all of their wrongs will completely ignoring “your” side. Most of these banks don’t favor one part over the other. What about Goldman Sachs? They get top positions along with Monsanto in any D OR R administration.
- Liam_McGonagle
  
  Thanks for commenting.
  
  While I feel you have hit upon a very valid point, it’s possible that a very useful and potentially productive distinction between the two parties could get lost there: One step forward is much, much, much better than three lightyears back.
  
  Dodds and Frank’s bill obviously did not do everything that needs to be done. But it did some things. It established the derivatives trading exchanges, and established the principle of government oversight over credit rating agencies. That’s not nothing.
  
  But, as should be clear if you have read anything written by or about the nascent Republican dim bulb in the House, Paul Ryan, that he is against even those first, tentative measures. He wants to take us back to the Stone Age of wide open financial gangsterism. Read about it here–especially in the footnotes.
  
  http://dystopiadiaries.blogspot.com/2010/11/would-henry-i-have-castrated-goldman.html
  
  I’m not gonna spend a lot of time trying to rain on your parade, but the situation, much like the numbers underlying that table, is pretty clear. One side is absolutely worse than the other.
  - myth_slayer
    
    You finally got ONE thing correct, McDouche, but then you go and:
    
    Dodds and Frank’s bill obviously did not do everything that needs to be done. But it did some things. It established the derivatives trading exchanges, and established the principle of government oversight over credit rating agencies. That’s not nothing.
    
    Bullcrap!!! Major and monstrous loopholes were designed in that bill (some of those on the pages handed to Franks by a Goldman Sachs lobbyist, and former Franks staffer, who directed Franks to put them in without any changes, and Franks did so):
    
    Monster Loophole #1: No actual oversight of credit derivatives, and that ICE US Trust is financed and owned by the same crew who financed and own all other exchanges and pricing operations — InterContinental Exchange (plus other ICE subsidiaries), Markit Group, DTCC, Climate Exchange PLC, ELX Futures, etc., etc., etc.
    
    Monster Loophole #2: Allowing for proprietary trading (banks taking that free Fed Bank monies, and those TARP bailout funds, and just using it for speculation and foreign investment, and NOT lending); and,
    
    Monster Loophole #3: Allowing private equity firms (private banks) to take energy companies private and thereby avoid regulation (Enron all over again, and JPMorgan Chase, one of the crew and usual suspects, paid over $5 billion in this past decade in litagation brought on by their fraud in that matter).
    
    Your heart appears to be in the right place, but you are still a low information commenter and blogger, as Dodd is multi-generational corrupt, his daddy spawned well and true, and Chris’s wifey is on the Chicago Mercantile Exchange, etc., and Franks is equally corrupt.
    
    Nixon, Carter, Reagan, Bush, Clinton, Bush, Obama: the banksters’ choice.
- Untitled-01
  
  So you don’t like what your politicians are doing, and your reaction is DO NOTHING. Yeah. That’s really going to accomplish ANYTHING. How about instead of complaining about the system which, I admit, is corrupt, you actually DO SOMETHING about it?
ItsAllBullshit

This is exactly why politics are bullshit. You pick one side and point out all of their wrongs will completely ignoring “your” side. Most of these banks don’t favor one part over the other. What about Goldman Sachs? They get top positions along with Monsanto in any D OR R administration.
Liam_McGonagle

Thanks for commenting.

While I feel you have hit upon a very valid point, it’s possible that a very useful and potentially productive distinction between the two parties could get lost there: One step forward is much, much, much better than three lightyears back.

Dodds and Frank’s bill obviously did not do everything that needs to be done. But it did some things. It established the derivatives trading exchanges, and established the principle of government oversight over credit rating agencies. That’s not nothing.

But, as should be clear if you have read anything written by or about the nascent Republican dim bulb in the House, Paul Ryan, that he is against even those first, tentative measures. He wants to take us back to the Stone Age of wide open financial gangsterism. Read about it here–especially in the footnotes.

http://dystopiadiaries.blogspot.com/2010/11/would-henry-i-have-castrated-goldman.html

I’m not gonna spend a lot of time trying to rain on your parade, but the situation, much like the numbers underlying that table, is pretty clear. One side is absolutely worse than the other.
5by5

Drawing false equivalencies between the two parties is dangerous too.

There are real differences not just in opinions, but in outcomes. In particular, all economic groups from the very wealthy to the very poor do well under Democratic Administrations. Better, in fact than under Republican ones. During the last 60 years of both Democratic and Republican Administrations break down as follows:

The Income Growth Rate under Democratic Administrations

The Top 95th Percentile (ie. the richest Americans) = Incomes rose 2.1%
80th Percentile = Incomes rose 2.4%
60th Percentile = Incomes rose 2.5%
40th Percentile = Incomes rose 2.5%
The Bottom 20th Percentile = Incomes rose 2.6%

The Income Growth Rate under Democratic Administrations

The Top 95th Percentile (ie. the richest Americans) = Incomes rose 1.9%
80th Percentile = Incomes rose 1.4%
60th Percentile = Incomes rose 1.7%
40th Percentile = Incomes rose 0.8%
The Bottom 20th Percentile = Incomes rose 0.4%

The point blank of it is, EVERYBODY does better economically under Demoratic Administrations than under Republican ones.

That’s not mere supposition or “theory”, that’s a historical reality.

They also balance budgets. Neither Nixon, Ford, Reagan, Bush 1, or needless to say Bush 2 did that. But Jimmy Carter, and Bill Clinton did.

So why are you worse off than you were 40 years ago? Because for the last 28 of those 40 years, Republicans have been given the reigns of power, and they have proceeded to screw things up. NOw they’re going to try to roll back the New Deal entirely. Not fix it — destroy it. In a misguided attempt to move us back not to the 1950′s (which enjoyed their legendary prosperity thanks to four terms under Roosevelt, leaving behind a legacy of a strong nation) but they want to go all the way back to the Gilded Age of the Robber Barons.

That’s a BIG difference.
5by5

Drawing false equivalencies between the two parties is dangerous too.There are real differences not just in opinions, but in outcomes. In particular, all economic groups from the very wealthy to the very poor do well under Democratic Administrations. Better, in fact than under Republican ones. During the last 60 years of both Democratic and Republican Administrations break down as follows:The Income Growth Rate under Democratic AdministrationsThe Top 95th Percentile (ie. the richest Americans) = Incomes rose 2.1%80th Percentile = Incomes rose 2.4%60th Percentile = Incomes rose 2.5%40th Percentile = Incomes rose 2.5%The Bottom 20th Percentile = Incomes rose 2.6%The Income Growth Rate under Republican AdministrationsThe Top 95th Percentile (ie. the richest Americans) = Incomes rose 1.9%80th Percentile = Incomes rose 1.4%60th Percentile = Incomes rose 1.7%40th Percentile = Incomes rose 0.8%The Bottom 20th Percentile = Incomes rose 0.4%The point blank of it is, EVERYBODY does better economically under Demoratic Administrations than under Republican ones.That’s not mere supposition or “theory”, that’s a historical reality.They also balance budgets. Neither Nixon, Ford, Reagan, Bush 1, or needless to say Bush 2 did that. But Jimmy Carter, and Bill Clinton did.So why are you worse off than you were 40 years ago? Because for the last 28 of those 40 years, Republicans have been given the reigns of power, and they have proceeded to screw things up. NOw they’re going to try to roll back the New Deal entirely. Not fix it — destroy it. In a misguided attempt to move us back not to the 1950′s (which enjoyed their legendary prosperity thanks to four terms under Roosevelt, leaving behind a legacy of a strong nation) but they want to go all the way back to the Gilded Age of the Robber Barons. That’s a BIG difference.
- Untitled-01
  
  There’s a huge typo in here that totally undermines your whole post. Read it again.
  - 5by5
    
    LOL. Thanks — That’s what happens when you post on 3 hours of sleep.
- Belcat
  
  I totally agree with you, though someone could argue that the Democrats might have been elected while the country is richer. Never the less, the rich usually get rich by selling stuff to the poor, so if the poor have no money, then the rich have a harder time getting rich… this is something that seems to elude them.
  - 5by5
    
    Actually, kinda no on that count too. Democrats usually come in after a Republican train-wreck and clean things up.
Untitled-01

There’s a huge typo in here that totally undermines your whole post. Read it again.
Untitled-01

So you don’t like what your politicians are doing, and your reaction is DO NOTHING. Yeah. That’s really going to accomplish ANYTHING. How about instead of complaining about the system which, I admit, is corrupt, you actually DO SOMETHING about it?
Belcat

I totally agree with you, though someone could argue that the Democrats might have been elected while the country is richer. Never the less, the rich usually get rich by selling stuff to the poor, so if the poor have no money, then the rich have a harder time getting rich… this is something that seems to elude them.
5by5

Actually, kinda no on that count too. Democrats usually come in after a Republican train-wreck and clean things up.
5by5

LOL. Thanks — That’s what happens when you post on 3 hours of sleep.
5by5

LOL. Thanks — That’s what happens when you post on 3 hours of sleep.
MoxAmok

All your data proves is that while most people’s wages have steadily increased at a rate below inflation, the ultra-rich have increased their earnings at a rate well above inflation (though I believe your 2% estimates are suspect). There is no discernible change at the time that the tax cuts went into effect. You are pointing to a weak, inaccurate correlation and claiming it’s proof of causation. If the tax cuts are not extended, you will not see the change you are expecting, because the fed is continuing to devalue our currency at a rate higher than the average annual raise.

My prediction is that if the tax cuts are not extended, we will see more of the ultra-rich finding tax loop-holes or decreasing their earnings, and actual tax receipts will go down, the opposite of the phenomenon that occurred during the Harding, Reagan, and Kennedy presidencies.
MoxAmok

All your data proves is that while most people’s wages have steadily increased at a rate below inflation, the ultra-rich have increased their earnings at a rate well above inflation (though I believe your 2% estimates are suspect). There is no discernible change at the time that the tax cuts went into effect. You are pointing to a weak, inaccurate correlation and claiming it’s proof of causation. If the tax cuts are not extended, you will not see the change you are expecting, because the fed is continuing to devalue our currency at a rate higher than the average annual raise.

My prediction is that if the tax cuts are not extended, we will see more of the ultra-rich finding tax loop-holes or decreasing their earnings, and actual tax receipts will go down, the opposite of the phenomenon that occurred during the Harding, Reagan, and Kennedy presidencies.
- Liam_McGonagle
  
  1. This is total income information from all sources, not just wages. Read carefully, look at data in the linked workbooks.
  
  2. Re: 2%: D’uh. Read the footnotes–these are clearly conservative estimates that skew toward a LOWER average income for the richest segment. The actual situation is much worse than I portray in the chart, though it’s not possible to say by what magnitude. I state that in note within the chart and two other occassions within the narrative.
  
  3. So you’re trying to say that the high-powered tax attorneys of uber-rich are so lazy that they’re leaving literally millions of dollars on the table? Additional dollars that they’re already perfectly capable of saving their clients, absent any additional legislation? Does that sound reasonable to you? Do you think those people got uber-rich by being so careless? Or that their high-powered tax attorneys got to be high powered tax attorneys by being lazy slobs?
  
  4. So now the right wing’s gonna switch 180 degrees and say, “Oh, when the numbers don’t go our way we totally deny any connection between tax policy and the health of the private sector?” I guess they can do that if they want, but they’d look like even stupider hypocrites than they did before. Though I admit I didn’t think such a thing was possible.
  
  5. I don’t know what you mean by the uber-rich “decreasing their earnings”–do you mean criminal tax evasion? Or do you mean to indicate that you think they’re actually so stupid that they’d try to call the chairman of the NYSE and tell him to go easy on reporting those Dow Jones prices, just so’s they can meet their taxable income targets?
  
  I believe the thing that makes more sense, the thing that you can’t bring yourself to say, is that without these EGTRRA provisions, the income disparity between the median return filer and the top 2% would DEcrease. Which I think everyone outside the top 2% and their toady clients would agree is a good thing.
  
  Finally: This chart shows exactly what the facts of the situation are: the average income of the median return filer DEcreased by 17% while the average income of the richest 2% INcreased (at least) by 32% during the EGTRRA regime as compared to the Pre-EGTRRA regime. Connect the dots.
  - MoxAmok
    
    1. Thanks for correcting that; I did review your data, analysis, and conclusions quite extensively and simply misspoke when I used wages instead of income, though for most Americans they are more or less the same.
    
    2. I know you disclaimered the 2%, so I didn’t make it a sticking point, but the fact that the estimated 2%-income more than doubles between 2003 and 2004 calls the precision of your final analyses into question.
    
    3. & 5. Since you posted this article, I’m assuming you have some background in economics, even if it’s autodidactic. You’ve probably heard of the Laffer Curve. I believe that if we are not already past the apex, we are at least at a point where the slope is modest, meaning higher tax rates won’t generate similarly higher rates of revenue. Yes, there’s a multitude of factors contributing to this, including legal and illegal tax evasion. Though a larger factor than criminal activity is simply the fact that when you tax something you get less of it. Politicians understand this when it comes to cigarettes, tanning, carbon, etc., but most seem to think it doesn’t apply to labor and investment, though empirical evidence points to the contrary. Most importantly, this still occurs with the ultra-rich, even though the tax increases may not have much effect on their day-to-day.
    
    4. The right can blow whatever steam they want. I stand for liberty, and neither the right nor left want to offer me that. They are both statist institutions that are by-and-large interested only in sustaining their incumbencies.
    
    My argument was this: there’a a rather steady decrease in income across the years you sampled. This is primarily due to pretty steady inflation over the same period. To point to the top of the line and say, “pre-EGTRRA” and point to the bottom and say, “post-EGTRRA” is incredibly misleading. If EGTRRA has caused any increase in income disparity, it is likely very modest and wouldn’t show up within the precision that your data allows.
    
    Please let me say, I understand the wealth of the ultra-rich is exploding. And most are doing it in a number of ways that, when not criminal, are at least morally reprehensible. But they are not doing it by getting Obama to extend their tax-cuts. EGTRRA (stupid name I agree) did many things beside lowering taxes on rich. I think we should continue many of those things indefinitely (get rid of marriage penalty, get rid of estate and gift taxes, and more) and work on cutting waste, not increasing taxes, to close the deficit.
    - Liam_McGonagle
      
      #2. Re: 2%. This is basic mathematics, Mox. There’s no way the average income for the 2% could be any lower than what I’ve portrayed here. In this universe, 3*$2+2*$50 averages to $21.2 a head, and 2*$50 averages to $50 a head; $50 is always gonna be a larger number than $21.2. God, did I actually really need to tell you that out loud?
      
      #3. You’re late to the party. That Laugher garbage has been discredited in my first two blogposts.
      
      http://dystopiadiaries.blogpsot.com/2010/11/return-of-doctor-weird-and-laugher.html
      
      http://dystopiadiaries.blogspot.com/2010/11/fail-files-vol-i.html
      
      Not that it had never been done before–the CBO trashed that shit in 2005. See the item #4 in the Recommendations section of the first linked article.
      
      #4. So now you’re saying that $499,000 is LESS than $338,000? That’s a “steady decrease in income accross the years” sampled? Sorry, but in this universe $499,000 is a larger number than $338,000.
      
      I know these basic mathematic principles like quantity must vary from planet to planet or at least between physical universes. The mundane realities of 4-dimensional time-space must shock a being used to the rarified atmosphere of an 11-dimensional world. So don’t let me rush you. Take your time.
      
      But no more remedial for you ’til you learn that $1<$2. That is the first lesson you have to demonstrate mastery over before I spend any more time on this.
Anonymous

1. This is total income information from all sources, not just wages. Read carefully, look at data in the linked workbooks.

2. Re: 2%: D’uh. Read the footnotes–these are clearly conservative estimates that skew toward a LOWER average income for the richest segment. The actual situation is much worse than I portray in the chart, though it’s not possible to say by what magnitude. I state that in note within the chart and two other occassions within the narrative.

3. So you’re trying to say that the high-powered tax attorneys of uber-rich are so lazy that they’re leaving literally millions of dollars on the table? Additional dollars that they’re already perfectly capable of saving their clients, absent any additional legislation? Does that sound reasonable to you? Do you think those people got uber-rich by being so careless? Or that their high-powered tax attorneys got to be high powered tax attorneys by being lazy slobs?

4. So now the right wing’s gonna switch 180 degrees and say, “Oh, when the numbers don’t go our way we totally deny any connection between tax policy and the health of the private sector?” I guess they can do that if they want, but they’d look like even stupider hypocrites than they did before. Though I admit I didn’t think such a thing was possible.

5. I don’t know what you mean by the uber-rich “decreasing their earnings”–do you mean criminal tax evasion? Or do you mean to indicate that you think they’re actually so stupid that they’d try to call the chairman of the NYSE and tell him to go easy on reporting those Dow Jones prices, just so’s they can meet their taxable income targets?

I believe the thing that makes more sense, the thing that you can’t bring yourself to say, is that without these EGTRRA provisions, the income disparity between the median return filer and the top 2% would DEcrease. Which I think everyone outside the top 2% and their toady clients would agree is a good thing.

Finally: This chart shows exactly what the facts of the situation are: the average income of the median return filer DEcreased by 17% while the average income of the richest 2% INcreased (at least) by 32% during the EGTRRA regime as compared to the Pre-EGTRRA regime. Connect the dots.
Anonymous

You finally got ONE thing correct, McDouche, but then you go and:

Dodds and Frank’s bill obviously did not do everything that needs to be done. But it did some things. It established the derivatives trading exchanges, and established the principle of government oversight over credit rating agencies. That’s not nothing.

Bullcrap!!! Major and monstrous loopholes were designed in that bill (some of those on the pages handed to Franks by a Goldman Sachs lobbyist, and former Franks staffer, who directed Franks to put them in without any changes, and Franks did so):

Monster Loophole #1: No actual oversight of credit derivatives, and that ICE US Trust is financed and owned by the same crew who financed and own all other exchanges and pricing operations — InterContinental Exchange (plus other ICE subsidiaries), Markit Group, DTCC, Climate Exchange PLC, ELX Futures, etc., etc., etc.

Monster Loophole #2: Allowing for proprietary trading (banks taking that free Fed Bank monies, and those TARP bailout funds, and just using it for speculation and foreign investment, and NOT lending); and,

Monster Loophole #3: Allowing private equity firms (private banks) to take energy companies private and thereby avoid regulation (Enron all over again, and JPMorgan Chase, one of the crew and usual suspects, paid over $5 billion in this past decade in litagation brought on by their fraud in that matter).

Your heart appears to be in the right place, but you are still a low information commenter and blogger, as Dodd is multi-generational corrupt, his daddy spawned well and true, and Chris’s wifey is on the Chicago Mercantile Exchange, etc., and Franks is equally corrupt.

Nixon, Carter, Reagan, Bush, Clinton, Bush, Obama: the banksters’ choice.
MoxAmok

1. Thanks for correcting that; I did review your data, analysis, and conclusions quite extensively and simply misspoke when I used wages instead of income, though for most Americans they are more or less the same.

2. I know you disclaimered the 2%, so I didn’t make it a sticking point, but the fact that the estimated 2%-income more than doubles between 2003 and 2004 calls the precision of your final analyses into question.

3. & 5. Since you posted this article, I’m assuming you have some background in economics, even if it’s autodidactic. You’ve probably heard of the Laffer Curve. I believe that if we are not already past the apex, we are at least at a point where the slope is modest, meaning higher tax rates won’t generate similarly higher rates of revenue. Yes, there’s a multitude of factors contributing to this, including legal and illegal tax evasion. Though a larger factor than criminal activity is simply the fact that when you tax something you get less of it. Politicians understand this when it comes to cigarettes, tanning, carbon, etc., but most seem to think it doesn’t apply to labor and investment, though empirical evidence points to the contrary. Most importantly, this still occurs with the ultra-rich, even though the tax increases may not have much effect on their day-to-day.

4. The right can blow whatever steam they want. I stand for liberty, and neither the right nor left want to offer me that. They are both statist institutions that are by-and-large interested only in sustaining their incumbencies.

My argument was this: there’a a rather steady decrease in income across the years you sampled. This is primarily due to pretty steady inflation over the same period. To point to the top of the line and say, “pre-EGTRRA” and point to the bottom and say, “post-EGTRRA” is incredibly misleading. If EGTRRA has caused any increase in income disparity, it is likely very modest and wouldn’t show up within the precision that your data allows.

Please let me say, I understand the wealth of the ultra-rich is exploding. And most are doing it in a number of ways that, when not criminal, are at least morally reprehensible. But they are not doing it by getting Obama to extend their tax-cuts. EGTRRA (stupid name I agree) did many things beside lowering taxes on rich. I think we should continue many of those things indefinitely (get rid of marriage penalty, get rid of estate and gift taxes, and more) and work on cutting waste, not increasing taxes, to close the deficit.
Liam_McGonagle

#2. Re: 2%. This is basic mathematics, Mox. There’s no way the average income for the 2% could be any lower than what I’ve portrayed here. In this universe, 3*$2+2*$50 averages to $21.2 a head, and 2*$50 averages to $50 a head; $50 is always gonna be a larger number than $21.2. God, did I actually really need to tell you that out loud?

#3. You’re late to the party. That Laugher garbage has been discredited in my first two blogposts.

http://dystopiadiaries.blogpsot.com/2010/11/return-of-doctor-weird-and-laugher.html

http://dystopiadiaries.blogspot.com/2010/11/fail-files-vol-i.html

Not that it had never been done before–the CBO trashed that shit in 2005. See the item #4 in the Recommendations section of the first linked article.

#4. So now you’re saying that $499,000 is LESS than $338,000? That’s a “steady decrease in income accross the years” sampled? Sorry, but in this universe $499,000 is a larger number than $338,000.

I know these basic mathematic principles like quantity must vary from planet to planet or at least between physical universes. The mundane realities of 4-dimensional time-space must shock a being used to the rarified atmosphere of an 11-dimensional world. So don’t let me rush you. Take your time.

But no more remedial for you ’til you learn that $1<$2. That is the first lesson you have to demonstrate mastery over before I spend any more time on this.
Pingback: Should Republicans Consider Hedging Their Bets On Paul ‘Speedy’ Ryan? | Disinformation
Liam_McGonagle

Keeping you up-to-date:

Slight revision to stats–see updated post at http://dystopiadiaries.blogspot.com/2010/11/do-tax-cuts-for-richest-2-help-or-hurt.html

See explanation of revision at item #2 at http://dystopiadiaries.blogspot.com/p/addenda-updates-revisions.html
Liam_McGonagle

Keeping you up-to-date:

Slight revision to stats–see updated post at http://dystopiadiaries.blogspot.com/2010/11/do-tax-cuts-for-richest-2-help-or-hurt.html

See explanation of revision at item #2 at http://dystopiadiaries.blogspot.com/p/addenda-updates-revisions.html