Tuesday, December 7, 2010

The cost of tax cuts

Well, well, well.  It's interesting what you discover when you actually see the numbers associated with various government spending plans.

I've heard nothing but complaining from most on the left with regards to extending the Bush era tax cuts.  "We can't afford to give tax cuts to the rich!!", they say.  I'll ignore for now that this is NOT giving new cuts to anyone, but simply maintaining the current tax rates.  It's claimed that extending the tax cuts will cost over $400 billion and that the country just can't afford that.  This means that we should only preserve the tax cuts for anyone making less than $250,000 a year.

Well, according to this article over on CNN:
The package would extend the Bush tax cuts for everyone for two years, including two years of relief for the middle class from the Alternative Minimum Tax. The estimated cost would be $458 billion, according to earlier numbers from the Treasury Department.
The bulk of that cost -- $383 billion -- is for the extension of cuts for families making less than $250,000. The rest -- roughly $75 billion -- is attributable to the extension of cuts that apply to the highest income families.
Only $75 billion is attributable to the rich?  Really?  That's only 16.4% of the cost.  If they wanted to be brutally honest, we could easily afford those tax breaks.  It's the other $458 billion that we can't afford.

So, how does that $75 billion compare to other measures in the compromise?  The extension of unemployment benefits has a projected cost of $56 billion.  That's 3/4s of the cost of the tax cuts for the rich right there.  Further, as best I understand it, Federal income taxes are not paid on unemployment payments.  Get the unemployment rate down and you have an increase in your tax base as well as a decrease in unemployment benefit expenditures.

The Social Security tax holiday has a cost of $120 billion.  The tax holiday is a 2 point reduction in the Social Security tax rate (4.2% instead of 6.2%).  Cut that in half and you've just about paid for these evil tax cuts for the rich.

The class warfare needs to stop.  As is plainly evident, these tax cuts for the rich are a drop in the overflowing fiscal bucket that is federal spending.  $75 billion will do next to nothing to bring the deficit under control, yet it has become the ultimate show-stopper.  If $75 billion a year were that crucial, then why all the pushback against spending cuts already proposed by Republicans?  Oh, wait, that's right.  Those are "too small", "gimmicky" and "not serious".

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