Editor's Message - Federal Income Tax Cuts (Pearl Johnson)|
Millionaire Tax Breaks
Center on Budget and Policy Priorities (Aviva Aron-Dine & Joel Friedman)
Affordable Shelter (Jackie Parnell)
Mayor Wants Rail (Charles Carole & Pearl Johnson)
Light Rail Costs in Comparison to Population Size
Voter Service (Arlene Ellis)
President Piilani Kaopuiki has relinquished her President’s Message column to members of the Honolulu Board. This space will rotate among various Board members.
Federal income tax cuts
We all suspected that President Bush’s tax cuts benefit the rich far more than the middle class and poor. Now the New York Times has completed a study of Internal Revenue data which tells us how well the rich have done.
Congress cut taxes on dividends and capital gains 3 years ago. The Times analyzed IRS figures for 2003, the latest year available and the first that reflects the tax cuts on investments. Among the findings:
“Among taxpayers with incomes greater than $10 million, the amount by which their investment tax bill was reduced averaged about $500,000 in 2003, and total tax savings, which included the two Bush tax cuts on compensation, nearly doubled, to slightly more than $1 million.
“These taxpayers, whose average income was $26 million, paid about the same share of their income in income taxes as those making $200,000 to $500,000 because of the lowered rates on investment income.
“Americans with annual incomes of $1 million or more, about one-tenth of 1 percent of all taxpayers, reaped 43 percent of all the savings on investment taxes in 2003. The savings for these taxpayers averaged about $41,400 each. By comparison, these same Americans received less than 10 percent of the savings from the other Bush tax cuts, which applied primarily to wages, though that share is expected to grow in coming years.
“The savings from the investment tax cuts are expected to be larger in subsequent years because of gains in the stock market.”
On May 22, Bush signed the tax-cut reconciliation bill which extends the tax cut on investments. The bill omitted more that a dozen tax-cut provision that were in both the House- and Senate-passed reconciliation bills, such as the extension of research and experimentation tax credit and higher-education tuition deduction. These provisions expire this year. The investment tax cut was not slated to expire until 2008.
However, the self-imposed $70 billion limit of the bill would not allow for extension of both types of cuts and Congressional leaders concluded that continuation of the other expiring tax provisions would not be filibustered. Subsequent passage of these popular tax cuts will increase the deficit.
The conclusion of the NY Times: “There have been three tax cuts for individuals under President Bush. The top tax rate on compensation was trimmed twice and is now 35 percent, from 39.6 percent when President Bush took office. Most compensation also faces a 1.45 percent Medicare tax, which is matched by the employer, making the effective federal tax rate on high earners 37.9 percent.
“Then, the top rate for most investment income was reduced to 15 percent in 2003, from the 39.6 percent for dividends and 20 percent for profits on asset sales that were in effect when Mr. Bush took office.
“A result is that the wealthiest Americans now pay much higher direct taxes on money they work for than on money that works for them.”
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