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A REAL Tax Plan vs
Dimwit's Whiney Rich Boy Welfare

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Listening to the dimwitted George Bush trying to explain his tax cut on the campaign trail provided millions with comic relief. However, listening to him as the future appointed resident of the Oval Office recklessly and irresponsibly suggesting that the economy was in or headed towards a recession in one last attempt by the Republicans to blame Clinton was frightening. Did such talk mean he disagreed with Fed Chairman Allan Greenspan? Alternatively, was this just an assurance to his whiney rich boy supporters that he would grant them more welfare? Moreover, why the need for rich boy welfare after Greenspan already lowered interest rates? Moreover, yes dubya's tax plan is nothing more than whiney rich boy welfare. As Al Gore pointed out over 44% of his proposed tax cut goes to the top 1% income earners. The rest of the 66% of us with luck may get a larger enough cut for a soda.

But before this economy plunges into the dismal depths of a recession due to an inept fool running the country lets look at a what is needed in the way of tax reform to get this country back on track and continue the prosperity of the Clinton years. First lets look at the sad state of economic disparity within our boarders. We truly are a country of haves and have-nots. A glance at the campaign funding shows both candidates spending over a half billion dollars roughly. Obviously that kind of money came largely from the rich, the poor and what remains of the middle class are incapable of coughing that kind of money up.

No other major industrialized country has a larger disparity in wealth than does the United States. In fact, the disparity between the rich and poor in the major industrialized nations of Europe and including the Scandinavian countries continues to shrink. On the other hand, the gap between the rich and poor continues to widen in the United States. That was not the case a few short decades ago. The disparity between rich and poor fell from a high point in the late 1920s until the mid 1970s. Only in the late 1970s did the gap begin to widen and from the 1980s onward, the pace quickens.

Obviously more than one factor for the different changes in the disparity in the United States and the other industrial nations are at work. One large factor is the difference in the amount of unionization in Europe. Europe is much more fully unionized. Further union membership in the U.S. peaked in the late 1950s during a period when the wealth gap was closing in this country. The amount of unionization is not merely a difference in cultures. European countries have no anti-union laws like Taft-Hartley or right to work states.

In addition, here we can see the effects of right wing politics. Both the right to work laws and the Taft-Harley Act were products of the Republican Party. Both also are linked closely to native fascist of the time. Hartley was an avid supporter of fascism right up to the day Pearl Harbor was bombed. Moreover, the right to work laws were largely due to the lobbying efforts of the Christian American, a group of native fascist formed around the wealthy Kirby family of Texas.

Europe as a whole is much more liberal than the United States. As is Canada, a country in which the right wing likes to tell out right falsehoods. One bit of nonsense any right winger is quick to point out; is that the average wage in Canada is lower than it is in this country. While that is true in one sense, it distorts the true. The real truth is buried in the distribution of incomes of Canada and the United States. Equally true is the fact that the bottom fifty percent of Canadians enjoys a higher income than the bottom fifty percent of Americans.

Several other factors for reaching the bottom of the wealth disparity in the mid 1970s need to be alluded to. This bottom followed closely on the heels of Nixon's wage and price freeze. It coincided with the Supreme Court ruling that money was a form of free speech. Prior to this time the court from the 1930s on was liberal mined, but starting with Nixon appointees the court has taken a sharp turn to the right. Of course, the massive tax bonanza for the rich under Reagan's dummy side economics resulted in the quickening pace of the widening wealth disparity.

As I write this the evening news is replete with reports of crisis of rising energy prices with prices rising 50% or more over year ago levels. In the east and Midwest there are reports of shortages of natural gas with the average home owner paying 50% or in some 70% more than they did a year ago to heat their homes. In California, there is a crisis in a shortage of electric power with spot prices up over 1000%. Yet California's power usage is down 7% from a year ago and all evidence points to a manufactured shortage. A shortage that occurred because of a crisis in a lack of regulation whereby generating companies are free to price gouge. Interesting one of the power generating companies guilty of price gouging is Enron, the former employer of the appointed vice president, Dick Cheney.

Here in Oregon, my Democratic Senator Wyden has after three years obtained emails between senior executives of British Petroleum. The emails details how they deliberately sold Alaskan crude oil at a loss in Asia to create a false shortage of oil and gasoline on the west coast to force prices up even higher. One should note that Oregonians are already paying the highest price for gasoline of any state. Early this summer there was another false shortage of unleaded gas in the upper Midwest. In effect, the energy companies see the future administration of Bush-Cheney that will kindly look the other way as they gouge the consumers.

And why not Bush wants to cut taxes on both corporations and the whiney rich. Thus, their ill-gotten gains will be taxed at a much lower rate. In short, Bush's tax plan is nothing short of rich boy welfare as the table below shows.

Income Bracket

Average Tax Cut

Under the Bush Plan

< $13,600

$42

< $24,400

$187

< $39,300

$453

< $64,900

$876

< $130,000

$1447

< $319,000

$2253

> $319,000

$46,072

One can see quickly that the Bush plan is skewed towards the rich. As to how this plan would stimulate the economy remains unclear. In fact with most Americans, receiving less than $500 the claim is ludicrous. Moreover, such a plan would only widen the disparity gap and eliminate the budget surplus.

One additional factor should be noted before looking at a tax plan to stimulate the economy. Its entirely reasonable to assume that the amount of money available for all investments is largely a fixed quantity for any given time period. That is the sum total of money available for investments in stock, bonds and real estate is essentially a fix quantity over a short time span. Thus by paying down the national debt one removes from the total investment market a large portion of the market freeing money for investments in stocks or other markets that create jobs. Curiously the dimwit's tax plan is coming out at a time in which the yield of relatively safe 20-year treasury bonds will be plunging over the next five years. These bonds issued between the years 1980 and 1985 yielded in access of 10%. Presently the yield on long treasuries is only about 6.7%. A point now exists to take advantage of paying down the national debt to reap huge interest rate savings. By merely continuing to pay down the debt, investment money will be forced to be put into job creating investments.

However, there is one plan that could spur the economic growth, and still maintain the budget surplus. Lets call it the REAL plan for REAL Americans, those that work hard to raise their families and build the country. The table below reveals the dynamics of the REAL Plan. Note that the tax data came from the 1997 returns the number of returns is in thousands all dollar figures are in millions. Note that under such a plan all households meaning single filers and married filers would be treated the same. No deductions other than a single household deduction of $50,000 are allowed. Also all household income would include all bonds, no income would be excluded or treated differently.

TAX BRACKET

NUMBER OF

RETURNS

97 EFFECTIVE

TAX RATE

97 TAXES

COLLECTED

PROPOSED

RATE

TAX

SAVINGS

TAX

INCREASES

< $10,000

9994

4.2%

$2525

0

$2525

0

< $20,000

15722

6.7%

$15779

0

$15779

0

< $30,000

16357

8.3%

$33662

0

$33662

0

< $50,000

22620

10.2%

$89793

0

$89793

0

< $100,000

21592

12.9%

$190495

5%

$61028

0

       

10%

$26810

0

< $200,000

5374

17.9%

$126268

20%

0

$14813

< $500,000

1401

24.6%

$99512

35%

0

$20175

< $1,000,000

262

29.1%

$51291

50%

0

$37755

> $1,000,000

144

28.8%

$121936

67%

0

$161734

Totals

93466

     

$229598

$234479

Note that The REAL Plan breaks the filers with income between 50,000-100,000 dollars into two groups. The groups with incomes less than $75,000 are taxed at 5% and those over at 10%. The only possible improvement left is to split the upper tax brackets into several smaller brackets as the whiney rich would attempt to adjust their income into a lower tax bracket.

The REAL Plan here provides a large stimulus for the economy by specifically targeting the cuts to the low-income groups, which would be the most likely to purchase new goods and services. Also, note that the plan would provide considerable additional investment income for those individuals of the middle class that is those with income of between 50,000-100,000 dollars. This is precisely the most likely owners of a small business, a group that provides for the bilk of the job creation. One should note that the S&P500 companies have had a net decrease in the number of jobs since the 1980s.The Plan increases the taxes on the upper income groups by roughly the same amount as the current budget surplus of $230 billion dollars. Thus the positive net increase in investment dollars comes from the middle class.

Additionally the REAL Plan is nearly revenue neutral. The Plan reduces the taxes or eliminates taxes for 92% of the 1997 filers, with 66% of those filers exempted from any taxes due.

I urge readers to copy the details and graph or simply the URLs for this page and mail their congress critters without delay to implement the REAL Plan. Accept no substitute, an Email link is provided below for those wishing to do so. The enterprising readers may even wish to mail all the congress critters.

Link to the House

Linkt to the Senate