Sunday, April 09, 2006
Tax Cuts
Here is a link to a CNN article about the administration's proposed tax cuts and who will profit from them. 70 percent of the tax savings on investment income would go to the top 2 percent. Stephen Entin, president of the Institute for Research on the Economics of Taxation, told the Times that the tax cuts will produce jobs. Really! The investments of the wealthiest Americans would have to trickle down pretty far before anyone in my neighborhood would benefit from them. And while we wait for the trickle programs for the most disadvantaged are being cut.
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Further discussion on this issue can be found here.
A distinction should be made between the reduction in taxes on dividend income (investments) and wage income. Both were reduced. As you note, a reduction in tax on dividend income will only help those who hold investments that pay dividends. This will, of course, largely impact the wealthy. The other tax cut (on wages) is separate and, as is laid out very nicely in the above link, it's more difficult to determine what would be the 'fairest' solution here.
It should be noted that another part of the "tax cuts" is the elimination of the marriage penalty. This will, of course, only benefit those who are married. But it only serves to bring them to the taxing level singles are already at.
As to trickle-down economics, there has been much debate as to whether it works. Suffice to say, if great economic minds cannot agree, we don't have a consensus yet.
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