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TAXES: Perceptions & solutions

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posted on Aug, 5 2004 @ 01:16 PM
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“The bigger things get, the better the small scale wisdoms apply”. That’s my poetic license on the “More things change….” folk wisdom that most of us apply to our everyday lives. In this case, I’m applying it to the TAX CUT mythology of our present administration and how it dovetails with the record DEFICITS we and our children are being forced to endure.
 

While none of us would go on a massive shopping spree on Tuesday if we were laid off on Monday, that, in essence, is what has happened with our government: ideological tax cuts that benefit the top tier income earners + corporate tax revenues slashed or abolished have cut the federal operating budget, while massive increases in spending have pushed us to historic height of deficit…..with no let up in sight.

To start, we will examine what the current administration had inherited, what they’ve implemented, how it was marketed, where the reality of those actions diverge, and finally, the remedies being proffered by the Kerry team.

INHERITED: This president inherited a record budget surplus of $236 billion in 2000 and a projected surplus of $5.6 trillion over ten years & an economy that generated an average of three million jobs a year during the two Clinton administrations.

Congressional Budget Office

CLAIM: “The government has taxed too much, it’s your money” – George Bush.

ACTION: 1st round of tax cuts. Later, in a 2nd round, he advocated tax cuts as a way to boost the economy in a recession. It is not clear how these two claims are consistent, nor is it evident what economic philosophy would support such claims; meaning, opposite outcomes are expected from the same action

RESULT:
· Last year's deficit reached $375 billion, breaking the record of $290 billion set under President Bush's father in 1992.
· CBO projects that the record will be broken again this year, with the deficit climbing to $477 billion.
· The $5.6 trillion surplus CBO projected three years ago is now a $2.9 trillion deficit over that same decade, a $8.5 trillion reversal. The reversal climbs to nearly $10 trillion if you include the impact of the President's proposal to make his tax cuts permanent.
· We have gone from saving the entire Social Security surplus to spending every penny.
· The $5.6 trillion surplus that Bush inherited would have allowed us to essentially eliminate the public debt by 2008. Instead, CBO now projects that we will have $5.6 trillion in debt held by the public at the end of that year.
CLAIM: "91 million taxpayers received, on average, a tax cut of $1,126. Since the President took office, 109 million taxpayers have received, on average, a tax cut of $1,544. Without the fiscal measures implemented under President Bush, there would be as many as 2 million fewer jobs for American workers today."
RESULT: 80% of taxpayers would receive less than $1,083, and half would receive $100 or less. The handful of millionaires who would get about $90,000 artificially inflates the average.
Citizens for Tax Justice
Center on Budget & Policy Priorities

The average tax cuts Americans received in the past three years were more than offset by
cost increases elsewhere, especially for such priorities as housing, medical care and
higher education. Moreover, the vast majority of taxpayers received less than the average
tax cut. And all of this happened at a time when millions of new jobs – the promised
benefits of the tax cuts – have failed to materialize. By any measure, the short and long term costs of the tax cuts outweigh any of its purported benefits.
To get a better idea of what the Bush tax cuts mean in real terms, taxpayers not only
should look closely at their tax filings, but also at their overall expenditures. When they
do, they will see that the Administration’s three tax cuts came at the expense of funding
many essential programs, for which the taxpayer is now footing the bill. These tax cuts
came at a time when housing, education, and medical costs, among other items, rose
sharply. In fact, the cost of these three items alone rose twice as much as the average
taxpayer received in tax cuts. 8% of the tax cuts translated into increased spending in
higher education, more than 80% for higher housing costs, and 130% for greater health
care costs.
Center for American Progress

Add to this very bleak picture the fact that a record number of municipalities & states are teetering on bankruptcy because of the lack of funds from the Fed, thus causing a skyrocket increase in everything THEY CONTROL ( school tax, property tax, booze tax, retail sales tax, etc.) , and a ‘tax burden’ on the middle class is an understatement.

KERRY SOLUTION:
INHERITED: GAO: “ Most corporations do not pay taxes, and of those that do, 95% pay less than 5 percent of their income in taxes.”
Current tax laws allow companies to defer paying U.S. taxes on income earned by their foreign subsidiaries, providing a substantial tax break for companies that move investment and jobs overseas. Today, under U.S. tax law, a company that is trying to decide between locating production or services in the United States or in a foreign low tax haven is actually given a substantial tax incentive not only to move jobs overseas, but to reinvest profits permanently, as opposed to bring them back and re-invest in the United States.


ACTION: The preamble to individual tax relief is to identify & remedy the billions lost at the corporate level FIRST:
• Eliminating deferral so companies are taxed the same whether they invest abroad or
at home. John Kerry will eliminate all of the complications in the current Subpart F
regime and replace them with a simple system: companies will be taxed on their foreign
subsidiaries profits just like they are taxed on their domestic profits. The new system will
apply to profits earned in future years – it will not be applied retroactively to profits
already earned abroad.
• Promoting America’s competitiveness in a global economy. The Kerry-Edwards plan
will allow companies to defer the income they earn when they locate production in a
foreign country that serves that foreign country’s markets. This will ensure American
companies can compete in international markets. For example, if you want to open a
hotel in Bermuda, a bank branch in Shanghai to service the Chinese market, or a car
factory in India to sell cars in India, you can still defer your foreign income. But if you
open up a call center in India to answer calls from outside of India or re-locate abroad to
sell cars back to the United States or Canada you must pay taxes just like call centers and
auto manufacturers in the United States.
• Close abusive international tax loopholes. John Kerry is proposing to end abuses that
allow American companies to escape taxes by taking advantage of complicated
international tax rules. These abuses include “corporate inversion” where an American
company moves its headquarters to a tax haven like Bermuda to avoid taxes, certain types
of cross-crediting that encourage companies to shift income and jobs to low-tax havens,
restricting tax avoidance through hybrid structures, and other abuses.

ACTION: Cut Corporate taxes to stimulate economic growth

5
• Cut the corporate tax rate by 5 percent. The Kerry-Edwards proposal will not increase
the deficit or corporate taxes by one dime. All of the savings from ending tax breaks will
go towards lowering the corporate tax rate from 35 percent today to 33.25 percent – a 5
percent reduction.
• Cutting taxes for more than 99 percent of taxpaying companies. By ending tax
incentives to move jobs overseas and using those funds to lower the corporate tax rate the
Kerry international tax reform will increase investment and hiring by American
companies. An analysis of IRS data shows that more than 99 percent of corporations
paying corporate income taxes would see their taxes reduced by the Kerry-Edwards
proposal.
• Lowering the tax differential with foreign countries. The tax differential between
U.S. corporate rates and foreign corporate rates have grown over the last two decades.
The Kerry-Edwards proposal would begin to narrow that gap again.
The Kerry-Edwards One-time Holiday to Encourage Companies to Reinvest their Foreign
Profits in America: The Kerry-Edwards plan will unlock billions of profits that are stuck
abroad, encouraging American companies to bring their profits back to America and re-invest
them to jump-start the economy. This holiday will work to increase investment because it is part
of a comprehensive plan to transition to a new system that eliminates deferral and the associated
incentives to keep profits overseas.
• More than $639 billion of American profits are stuck abroad. At the end of 2002
American companies were keeping $639 billion in profits abroad, avoiding having to pay
taxes on this money. This is up sharply from $403 billion in profits in 1999. [CRS, “Tax
Exemption for Repatriated Foreign Earnings,” 10/22/2003]
• Encouraging companies to bring that money back to America with a one-year, 10
percent tax holiday. The Kerry-Edwards plan will encourage companies to bring that
money back and invest it in the American economy. For a one-year period only, John
Kerry will provide companies with a special low rate of 10 percent on any profits they
reinvest in the United States for companies with a domestic reinvestment plan. This rate
will only apply to repatriations in excess of average repatriations over a base period.
• Increasing investment. By ending future incentives to keep profits abroad and
combining this with an appropriate transition that provides a one-time tax holiday this
would increase investment and stimulate the American economy, helping to re-start job
growth.
• Paying for the New Jobs Tax Credit. The tax holiday would result in an immediate
revenue gain which would offset much of the cost of the New Jobs Tax Credit – another
boost to job growth in America.

RESULT: A cut in Middle Class taxes while experiencing, per above, a dramatic increase in job creation, thus expanding the tax base & spurring consumer consumption. With this comes a proposal of At Least $250 Billion In Tax Cuts For Health Care, Child Care, and Education. By closure of corporate tax loopholes and use some of the money gained from repealing Bush's tax cuts for the wealthiest Americans - families making over $200,000 a year - to pay for tax credits without increasing the deficit by one dime. The Kerry-Edwards tax cuts include:
· A tax credit on up to $4,000 of college tuition
· A tax credit to help small businesses and vulnerable workers pay for health care and buy into John Kerry's new Congressional Health Plan.
· A tax credit on $5,000 of child care expenses
Create a New Jobs Tax Credit. Research has demonstrated that new jobs tax credits increase employment. The Kerry-Edwards New Jobs Tax Credit will cover an employer's share of payroll taxes for net new jobs created in manufacturing, other businesses affected by outsourcing, and small businesses. The credit will be available in 2005 and 2006. For example: a medium-sized manufacturing company employs 1,000 workers. If this company hires an additional 100 employees at $40,000 each - bringing the total number of employees to 1,100 - it would receive a tax cut of 3,060 per worker, or $306,000 total. This would roughly offset the additional cost of health care premiums, which have risen about $2,700 under President Bush.
I’ve found the Kerry plan to be sound, taking a top down view to recapturing lost operational revenues, while at the same time spurring growth.

John Kerry Website



[edit on 8-8-2004 by Valhall]




posted on Aug, 5 2004 @ 03:44 PM
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Originally posted by Bout Time
“The bigger things get, the better the small scale of wisdoms apply”. That’s how I’m applying it to the TAX CUT mythology of our present administration and how it dovetails with the record DEFICITS we and our children are being forced to endure.
ideological tax cuts that benefit the top tier income earners + corporate tax revenues slashed or abolished have cut the federal operating budget, while massive increases in spending have pushed us to historic height of deficit…..with no let up in sight.


INHERITED: This president inherited a record budget surplus of $236 billion in 2000 and a projected surplus of $5.6 trillion over ten years & an economy that generated an average of three million jobs a year during the two Clinton administrations.


CLAIM: “The government has taxed too much, it’s your money” – George Bush.

ACTION: 1st round of tax cuts. Later, in a 2nd round, he advocated tax cuts as a way to boost the economy in a recession. It is not clear how these two claims are consistent, nor is it evident what economic philosophy would support such claims; meaning, opposite outcomes are expected from the same action



The worst budget crisis in half a century has forced states across the county to scrimp for savings in a style reminiscent of the Great Depression.

Together, the 50 state governments are facing deficits of $30 billion this year and $82 billion next.

In Massachusetts, the state cut health coverage for 36,000 of its poorest residents and slashed nearly 50 percent of the beds at detox facilities.

Oregon has shortened the school year by 14 days, and is cutting prescription drugs benefit for people with schizophrenia and mental illness.

In San Francisco, planned cuts include the suspension of cost-of-living adjustments in aid to the disabled and seniors, limiting dental care for Medi-Cal recipients and cutting $250 million each from money sent to counties and cities.

In New York City, Mayor Bloomberg plans to close eight firehouses next month. The firefighters union has won at least a temporary reprieve from the city's plan to cut staff at 49 engine companies. This comes in light of the Sept. 11 attack on the World Trade Center, in which 343 firefighters died.

Bloomberg also plans to layoff more than 4,500 municipal workers. In response to the budget cuts, over 10,000 residents and union members protested in front of City Hall yesterday.

* Lillian Roberts, executive director of union DC37 speaking at the rally.
* Greg Speeter, executive director of the National Priorities Project.
* Stephen Cassidy, President of the Uniformed Firefighters Association.
* Meizhu Lui, executive director of United for a Fair Economy.

source: democracynow.org ---- True fair and balanced news. NO bias reporting.

All this hype about bush giving tax cuts to the wealthy and kerry giving tax cuts to the middle class and hikes to the wealthy is ridiculous, thats like cleaning off one dirty face then hitting a new clean one with a new mud pie.
Why does anybody have to suffer? Ifyou want to keep the economy going at a steady pace without hiking taxes you need to cut, for everybody.
Instead of tending to the basics, government has grown into a bloated conglomerate of political services that gets larger every year -- with no end in sight.

For example, politicians spend millions of dollars to urge people not to smoke -- while spending more millions to subsidize tobacco farmers. They send billions overseas for foreign aid -- while the federal deficit swells. They spend millions to subsidize public art -- while working families struggle to pay their taxes.

Politicians also run trains, bail out savings and loans, construct houses, sell insurance, print books, and build basketball courts -- you name it! But the fact is, every service supplied by the government can be provided better and cheaper by private business.

All over the world, governments are busy selling airlines, power plants, housing, and factories to private owners. Where inefficient government bureaucrats lost money and squandered tax dollars, hard-working private owners now make profits and create new jobs. Why can't we do the same thing in America?

Military expenses are over $250 billion a year! A large percentage of this is spent overseas to defend wealthy countries like Germany and Japan -- who then wallop us in international trade. Let's take them off military welfare. We can defend America better and save at least $100 billion a year in taxes.

Stop Bailing Out Industry

No one has the right to cover his losses at taxpayer expense -- and yet wealthy corporations demand exactly that. The federal government has bailed out railroads, banks, and other corporations with your tax dollars. This must stop!
Replace Welfare: Cut Taxes

The bulk of your welfare tax dollars goes to pay the handsome salaries of well-educated welfare workers. The poor get little from government welfare except meager handouts and a cycle of despair. Let's get government out of the charity business. Private charities and groups do a better and more efficient job of helping the truly needy get back on their feet.
Why An Income Tax?

Before 1913, federal income taxes were rare and short-lived. America became the most prosperous nation on earth. The U.S. Government did not try to police the world or play "nanny" to everyone from cradle to grave. People took responsibility for themselves, their families, and their communities. That is how the founders of America thought it should be. And it worked. It can again! more

Nobody likes taxes, some call it a necessary evil, but I believe it's a myth, created by those who wish to fill their over bloated pockets, we've been lied to over and over again, this lie about taxes that creates all these wonderful programs is bologne. The government doesn't need to babysit us anymore then we need to babysit others who make decisions we may not agree with, I don't understand why people find it so ridiculous to take personal responsibility for themselves, their community, and family like stated above.
I don't think this is such a ridiculous idea, it worked before, doesn't nevada have no state tax? I thought it did. We work everyday to support ourselves, at the end of the week we get our own hard working money deducted from our paycheck and don't see nearly half of it again when it comes to tax time.

people don't even have a say in where it's going! Wouldn't you rather know where your money is going especially if it's in your own community or pocket? It should be your say, not the governments. We need to stop relying on what the government tells us, each year they make it more and more complicated for people to understand so they just stop paying attention and go with it.
It shouldn't be this way. Put up and shut up? Since when did we adopt this mentality? And since when did taxes become such a difficult idea to grasp? Whatever happen to the kiss method (keep it simple stupid)??
I'm sorry, but I dont' want to be on this train ride any longer.



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