In a new report, Citizens for Tax Justice (CTJ) finds that the "Budget Plan Approved by the House Deals with Tax Policy in a More Responsible Way than the Senate Version" (Mar. 20, 2008). "For a nation facing a stalled economy, a healthcare crisis, and a war entering its sixth year, it's hard to imagine how lawmakers can justify giving priority to new tax cuts for the affluent. The House-Senate conference commmittee that takes up the budget resolutions should reject the choices that the Senate has made." Id.
- The House bill provides reconciliation instructions that would make it easier to offset any AMT relief provided, but the Senate assumes any AMT patch would be deficit-financed, even though AMT relief benefits the best-off fifth of familes in America (excluding the one percent at the very top, who pay tax under the regular tax system at higher rates). If the AMT is deficit financed, it will mean that middle-class Americans will bear a significant share of the debt burden to pay for the relief for the wealthiest Americans in the upper quintile.
80% of Americans have incomes of less than $88,000, and the AMT patch extended into 2008 provides no tax relief at all for most in this group, and only a small tax cut for those who do get AMT relief--those in the very middle quintile who earn $32,000 to $52,000 would see an average tax cut of a little more than $650, and those in the fourth quintile who earn $52,000 to $87,000 would see an average tax cut of a little more than $900.
In contrast, Americans 5% just under the top 5%, with average $147,000 in income, get an average of $2,514 from AMT relief. The next 4%--those just under the wealthiest Americans who end up mostly paying regular tax--have an average income of $249,000 and receive an average AMT tax cut of $4,417.
- The Senate intends to cut the estate tax even more for the few extraordinarily wealthy families that are subject to the tax, paying for it with unpredictable budget surpluses.
"This would be a boon for the very wealthiest Americans but would provide no benefit whatsoever to 99 percent of all taxpayers."
The Senate plans to finance the huge cut in taxes for the very wealthiest multi-millionaire families in this country how?--by using Social Security surpluses! The Senate legerdemain assumes that after 2012, the surpluses won't be needed to pay for the other Bush tax cuts and the war in Iraq.
Now, folks, the Senators can't be serious. Or else they are going about this budget plan the way they went about approving Bush's tragic idea of invading Iraq in the first place--with their eyes closed and their nostrils pinched. Read my post on Stiglitz and Bilmes' calculation of the likely costs of the Bush war in Iraq--in the best case scenario, it's $3 trillion--enough to make up for the much lamented future shortfall in Social Security funds.
CTJ provides a state-by-state graph showing the extraordinarly small percentage of estates in 2005 and in 2006 that owed any estate tax upon the death of the owner. That's worth looking at.
I noticed a National Association of Manufacturers blog recently pushing estate tax repeal. The author of the blog item claimed that the small percentage of estates owing tax was due to the fact that only a small percentage of the population died each year--completely warping what the facts show. Folks, if you are confused, let me state it clearly. The fact that less than 1% of estates pays any estate tax in this country, under current law, means that fewer than 1 out of every 100 deaths will result in any estate tax liability.
- The Senate plan cuts taxes on better-off Social Security recipients, reducing revenues that are needed to shore up benefits for the future while benefiting only seniors who are well off to start with.
As CTJ explains, the government increased the taxation of Social Security benefits in 1993, in order to "treat Social Security more like other retirement income such as pensions and IRA distributions. For most retirees, the vast majority of Social Security benefits are income that has never been taxed."
It's only the best off seniors that are required to pay tax on 85% of the benefits. Again, CTJ has a useful chart, showing that Seniors in the $200,000 or higher income range are the ones that get the largest tax cut ($2,600) while seniros with incomes less than $50,000 get a tax cut of only $300 to $400.
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