Breaking Up Bush Era Tax Cuts

The George W Bush tax cuts that have been in place for nearly a decade must come to an end and the end result must allow tax breaks to expire for individuals making in excess of $200K and couples earning over $250K.

Backtracking for a moment to the years between 1947 and 1973, household income of the middle 20% of Americans nearly doubled while the top 20% saw their incomes rise by a disproportionate, but still impressive, 85%. Since then, through 2006 the middle class saw their incomes rise by just 24% while top-tiered incomes nearly tripled. Since 2007 when the housing bubble popped, there has been a 36% drop in the wealth of the middle class. By contrast, the wealth of the top 1% saw a decline of just 11%.

Today, only 2% of Americans earn more than $250K, which is five times more than the rest of American workers. This means that 98% of us should rightfully be inclined to support the expiration of tax cuts to that very select group of money-makers.
Obstructionists to re-taxing readily the rich point out that the upper crust accounts for 30% of consumer spending which in itself exposes a reality that there is disparity of wealth in this county that relies too heavily on the affluent to keep the economy moving. In essence, this means that 2% of the populous have too great a deal of influence in the decisions made by Congress.

Who are among the rich and powerful who are adamant in maintaining their tax cuts? Might they not be lawyers, doctors, CEOs and CFOs and a few of their immediate underlings, inheritors of ‘old money’ and Wall Street investment manipulators? And how about politicians and their cohorts – lobbyists and campaign contributors? And highly compensated entertainers – actors, musicians and athletes?

Another point to be made is that, while ‘we’ rely on seasonal tax preparers to help us file our 1040 tax forms to report our miniscule incomes, ‘they’ employ on-hand tax lawyers to take advantage of the many loopholes in the tax codes. Not only that, but they also have tax shelters in offshore bank accounts.

No, I don’t buy-in to the alarms that by allowing tax cuts to expire for the rich will be detrimental to the recovery of the economy – the GDP may shrink by half a percentage point. What these pretentious claimants portend to be true are not so. They are not in the same grievous financial straits as the rest of us.

On one account, the upper echelon is drawing back from spending. Instead, in many instances they are hoarding their moneys just as have corporations and banking institutions. So there goes a good chunk of the reported 30% of consumer spending, thus hindering economic growth.

There have been a number of contradictory news items that have gotten my dander up to upper atmospheric proportions.

In The Tampa Tribune Business section on July 24, in an article from the Orlando Sentinel, American Express Business Insights reported “ultra-affluent” cardholders, which are those who charge a minimum of $84,000 per year, increased their spending at theme parks by nearly 32% in the first quarter of 2010; there was a 1% increase by the rest of the company’s cardholders. The article also stated that Walt Disney World has begun presales of homes priced as high as $8M in the “Golden Oaks” residential development project. Interested parties readily “plunk down $25K just to get their names on a priority reservation list.”

Another shocker to my sensibilities was an insert in the June 27 Sunday edition of The New York Times. It came in the form of what I viewed as an “Atlas of Adventures”, a 167-page advertisement catalogue issued by Regent Seven Seas Cruises titled “Winter Collection – September 2010 to May 2011”.

The many discount offers included a 7-day cruise in the Western Caribbean with a 2-for-1 fare deal in a Deluxe Suite (356 sq ft including a 50 sq ft balcony) priced as $4,365 per person including free air fare and unlimited shore excursions (usually $89 to $99). It’s quite a deal considering the normal rate is $8,595/person plus air fare. On the higher end, $9,865/person (usually $19,565/person plus air fare) would provide the vacationer a Master Suite (1403 sq ft with a 187 sq ft balcony).
In comparison, a similar 7-day cruise aboard a Princes Cruises ship is priced from $749 (interior room/160 sq ft) to $1,149 (master suite with balcony/461 to 687 sq ft). No 2-for-1 fare offers; no freebee shore excursions but well within the means if many of the 98% of Americans.

For the most affluent, Regency offers the Full Discovery Collection, a 75-night cruise leaving from Istanbul and disembarking in Fort Lauderdale. The basic Deluxe Suite ($301 sq ft/49 sq ft balcony) cost $37,150 per person (usually $81,995 per person plus air fare). A Master Suite (2001 sq ft/71 sq ft balcony) costs $127,650 (usually $262,995 plus air fare).

It’s estimated that by extending the tax cuts to all American taxpayers would ‘cost’ the government over $2 trillion in unrealized tax revenues over the next decade. Broken down, $1.5 trillion would come from ‘us 98%’ and $800 billion from ‘those 2%’. Most middle and low income earners need the continuation of the tax cuts just to catch up on past due bills and for the basic necessities to maintain their social status – extending their tax cuts may also allow them to increase their discretionary spending, a known boost to the economy.

The $800 billion of re-found revenues to the federal government could be used to reduce the federal deficit. But, in my opinion, these funds might be better spent as an investment for job creation, a faithless goal of the Obama administration. The economic foundation of American has been built in large part by small businesses. They are the vehicle that can spur the economy by getting Americans back to work. Re-employed laborers will not only garner newfound wages, thus allowing them to spend rather than just survive through austerity measures, but would also bring in added tax revenues and take them off unemployment payrolls.

Tax breaks given to small business should not be a give-away; guidelines would need to be in place to guarantee the intended results, such as verifiable new employment over a period of a full year.

It appears that Republicans as a whole and a few stray Democrats will stalemate attempts to bring to an end tax cuts to the rich; it will be an all-or-nothing ‘compromise’ to extend or expire the tax cuts at every income level. This would be poor governance for the average American.

Regardless of the action or inaction of Congress, the acrimonious rich will never associate lower class American citizens as ‘we the people’ but, instead, look down upon us as ‘you, the little people’.