Despite what you may read in the press, the overall effect of the President's previous round of tax cuts was to make the tax system more progressive, not less progressive. In other words, those with high incomes end up contributing a higher percentage of tax revenues after the cuts than they did before the cuts.
Regarding the current round of tax cuts, I would like to see an analysis of the expected net effect on progressivity (not that I am advocate for progressivity). While some provisions make the system more progressive, others make it less progressive, but what is the net effect on progressivity? Walt Warnick -----Original Message----- From: [EMAIL PROTECTED] [mailto:[EMAIL PROTECTED]] Sent: Monday, January 13, 2003 8:51 AM To: [EMAIL PROTECTED] Subject: Re: Tax cuts and US citizen responses In a message dated 1/13/03 7:33:09 AM, [EMAIL PROTECTED] writes: << Can anyone explain why ordinary Americans are not objecting to tax cuts (such as dividend tax cuts) that will only favour the top percentiles of the wealthy ? Koushik >> In absolute terms, the tax cut would favor those with higher incomes (rather than "the wealthy") because those with higher incomes pay much larger absolute amounts of actual taxes. The top half of the income distribution in the US pays almost 100% of the taxes. If the government cuts the amount by which it taxes everyone by the lesser of his or her actual tax and, say $1,000 to simplify, the people paying $1,000 and above will obviously get much larger tax cuts than those paying less than $1,000. Proprotionally, however, everyone playing $1,000 or less gets a larger percentage tax cut (100%) than everyone paying more than $1,000. Someone paying $100,000 a year gets only a 1% tax cut. With my low income--let's say I'd have to pay $200 in tax otherwise--I get a 100% tax cut, which pays for weeks of groceries for me, I don't care that someone who pays $100,000 in taxes get times as large a tax cut as I do. Someone might say, "hey, the rich got a tax cut five times as large as yours" to try to get me angry, but meanwhile I get my100% tax cut and buy my groceries. I'm reasonably happy. If I compare myself at all with the person paying $99,000, I'm envious not of his or her 1% tax cut, but of his or her ability to earn so much income that he pays more in taxes than I earn in income. As a CPA tax-professional at the now-imfamous Arthur Andersen back in the 1980s I often prepared tax returns for clients who paid more in taxes than I earned in salary. :) David Levenstam
