Beware of Politicians Bearing Gifts
The Senate just passed a tax cut for the middle class, but unfortunately it must now be passed by the House. Instead of expressing my views of tax cuts I dug into my writings of many years ago and found the following article written 11 years ago that is still relevant today and will be many years from now. Remember this was written in 2001 and pertains to California.
I become very nervous when politicians talk about tax cuts. Past tax reductions have cost me money.
I remember when Gov. Deukmejian took office and cut taxes by sending everyone a refund. I received a $64 refund check. I soon lost my $64 when the state doubled car licenses, raised registration fees, hunting and fishing licenses, and fees to get into State Parks and facilities. I’m still paying for the $64 refund and will pay for the rest of my life.
Reagan’s tax cut cost even more He cut the top rate from 50% to 39%. The lower rate was raised from 11% to 15%. He also eliminated interest and other deductions that affected the average taxpayer. My tax changed little while high income people received a substantial cut.
This was called “Trickle Down Economics” The tax cut for the rich would be invested and trickle down to average and low income people, but didn’t turn out that way; instead of investing the tax saving they built larger houses, bought expensive cars and yachts, and upgraded their standard of living. We also developed the largest deficit in history. Nothing trickled down. George Bush had to raise taxes after his well known saying “Read My Lips No New Taxes” as a result of this tax cut.
The new proposed tax cut is of the same ilk. Because Michael Jordon and Tiger Woods are suffering from the 39% tax rate, their rate will be reduced to 33%. The average and lower tax payer will get a rate reduction of 5% resulting in crumbs in comparison.
We can be happy about the plan to eliminate the estate tax. I now have to be careful to keep my estate under $2 million or my heirs will have to be taxed on the excess. If the estate tax is eliminated someone will have to pay for the tax loss Guess who will pay for that? Remember the $64 refund check I received?
I have a tax plan called “The Trickle Up Tax Cut” Give all the tax cut to the lower 66% of the taxpayers who will spur the economy by their purchases. These expenditures will trickle up to big business. Many of the modern millionaires acquired their money through inheritance or using the backs and skills of lower and middle income people.
The details of the proposed tax cut have been very vague and sketchy. The President promised those with middle or lower incomes would save $1600 in taxes, which would spur the slowing economy. He didn’t say if it would be received in one year, two years, or 10 years. I read where the average taxpayer would receive between $150 and $300 the first year. This would be enough for a family to cloth one child for the first day of school. I doubt that this would bump the economy much.
The politicians justify the distribution of the tax cut as the top 2% pay 43% of the taxes. I don’t know where this figure came from and question its accuracy. Let’s accept this alleged figure and look at taxation as a whole. Who pays most of the following taxes, the upper 2% or the other 98% of the taxpayers? Sales tax, social security tax, alcohol and beverage tax, gasoline tax, phone tax, propane tax, auto license fees, luxury tax, and many other hidden taxes.
I don’t have time to calculate the amount these hidden taxes bring in, but would hazard a guess that most of it would be paid by lower and middle income people. If I knew the amount I could compare it with the alleged 43% of the income tax paid by the top 2%. I can handle politicians lying about their sex life, but resent being treated like an idiot in other matters.
I formed much of this philosophy by going through a 4 million dollar house my son-in-law was hired to build. I saw gold wash basins in five or six bathrooms, six fireplaces and many other extravagances beyond description. This house was for 2 people to use as a winter home in Arizona. It was also one of the cheaper houses in the neighborhood. The owner was probably fighting against the increase in the minimum wage. This experience eliminated any sympathy I may have had for those in the 39% tax bracket. This isn’t quite true as I have had these thoughts for many years, but this experience reinforced them.
My advice to people in the lower or middle income bracket is, don’t spend any tax cuts until you have the money in your hands and have read the small print. They may sound like your friends, but are put into office by wealthy contributors who expect and will be repaid for their contributions. 4/2/01