Sunday, July 15, 2007

What Happens When Bush Tax Cuts Expire?

This is a copy of a great message posted to the Indianapolis Star Topix discussion forum calling themselves "First thought". This is not meant to be an endorsement of Bush or his administration in any way other than to note the impact of the tax cuts expiring in a few years.

And remember -- this is what happens when the Bush tax cuts expire.Twenty-three months after the next president is inaugurated, the Bush tax cuts expire. The winner of the 2008 election and her or his congressional allieswill determine what is done about the fact that, unless action is taken, in 2011 the economy will be walloped.

The five income tax brackets (10, 25, 28, 33 and 35 percent) will be increased by 50%, 12%, 10.7%, 9.1% and 13.1% percent, respectively, to 15, 28, 31, 36 and 39.6 percent. The child tax credit reverts to $500 from $1,000. The estate tax rate, which falls to zero in 2009, will snap back to a 60 percent maximum, and exemptions that have increased will decrease. The capital gains rate will rise, and the marriage penalty will be revived, as will the double taxation of dividends.

Furthermore, the alternative minimum tax was enacted by Democratic moralists in 1969 because 21 millionaires had legally avoided paying any income tax. The AMT, which allows almost no deductions, had one rate (24 percent) until 1993, when Democrats replaced it with two (26 percent and 28 percent). It has never been indexed for inflation and in the current tax year will hit almost one in five households -- 23 million of them.

Interesting, isn't it, that the group seeing the largest tax increase when the "tax cuts for the rich" expire during the next presidential term will be those making the least? And I wonder how many of those low income Americans removed from the tax rolls completely by the Bush "tax cuts for the rich" will find themselves once again required to pay income taxes with the return to Clinton-era tax policies?

Editors note: "tax cuts for the rich" are often calculated like this:

The "rich" family making $200,000 a year (and paying TENS of thousands in taxes) gets a 1% cut saving $2,000. Only gets a ONE PERCENT cut in the rate, but probably a 5% cut in what they are paying.

The "not rich" family making $40,000 a year gets a 3% cut saving $1,200. THREE PERCENT CUT in the rate, but probably a 40% cut in what they are paying.

The class warfare politicians will only tell people about the rich guys $2,000 compared to the other's $1,200 and rail against the unfairness of this. How is this, in any way, unfair to anyone but the rich person who is still subjected to Karl Marx Communist Manifesto style taxation.


Shorebreak said...

Interesting blog. Unfortunately, the Bush tax cut issue is not what we should be concerned with. The real issue that should be challenged before tackling tax cuts is the validity of the federal income tax.

Here's a question for you:

If you want tax reform, why do you push for replacing the income tax with the "fair tax", when time and again the courts have failed to present a law proving that the federal income tax is lawful and involuntary?

If you want "fair" taxation, shouldn't you be pushing to eliminate the income tax altogether, rather than replace it? It's also well known among tax researchers that federal income taxes don't fund our government - they fund the interest on our debt. So why replace it when a lawful solution would be to eliminate it?

Here's a perfect example, where just last week a federal jury found a Shreveport man "not guilty" for his refusal to pay income taxes for the last 10 years. Why was he found not guilty? Because the defense cited Supreme Court findings that only profits and gains are taxable under the Constitution, and because neither the prosecution nor the court could provide an income tax law that the defendant had ostensibly violated.

Here's the link, followed by the text:

Local attorney acquitted on federal income tax charges
Cryer stopped filing income taxes more than 10 years ago

July 13, 2007

By Loresha Wilson

A Shreveport attorney who has challenged the government for years on the legality of filing federal income taxes has been acquitted on charges he failed to file returns.

A federal jury unanimously found Tommy Cryer not guilty this week on two misdemeanor counts of failure to file.

And according to Cryer, the prosecution dismissed two felony charges of tax evasion prior to trial.

Attempts by The Times on Thursday to reach U.S. Attorney Donald Washington or Bill Flanagan, first assistant U.S. attorney, were not successful. Calls made to the two were not immediately returned.

"The court could not find a law that makes me liable or makes my revenues taxable," Cryer said. "The Supreme Court has ruled that the government cannot impose an income tax on anything but the profits and gains. When you work for someone you give your service and labor in exchange for money, so everything you make is not profit or gain. You put something into it."

Cryer was indicted last year on two counts of tax evasion. The indictment alleged he evaded payment of $73,000 in income tax to the Internal Revenue Service during 2000 and 2001.

Cryer created a trust listing himself as the trustee, and received payments of dividends, interest and stock income to that trust, according to the indictment. He also was accused of concealing his receipt of the sources of income from the IRS by failing to file a tax return on behalf of that trust.

"I determined that my personal earnings were not 100 percent profits, some were income," Cryer said. "I refuse to file, I refuse to pay unless they can show me I have a lawful reason to pay."

"What I earned was my own personal labor. I am giving something in exchange. I'm giving my property and I don't belong to anyone else."

Cryer says he stopped filing returns more than 10 years ago after he investigated claims that income tax was a sham. He contends the law doesn't actually tax personal earning.

Sean Shepard said...

Shorebreak - I agree very much with your comments.

I consider the "Fair Tax" style proposals as the first step, getting the power shifted back to the taxpayers. And it is legislation with some support and organization behind it.

Without armed revolt, we're going to have to work within the system to make changes a little bit at a time.

Also. I'm aware of the Shreveport case, this is very recent news and it will be interesting to see the fallout. I believe that's the second case in a year that has been sucessfully argued in favor of a citizen.

Shorebreak said...

I understand your efforts, Sean, but here's my issue:

According to the claims of fair tax proponents, the Fair Tax will simply shift the tax burden from an individuals income to the things that an individual will consume. The logic is "if you don't want to pay the tax, don't pay for the item".

And that's where I have a problem. If we can agree that the income tax is unconstitutional, and we can agree that the income tax is used primarily to satisfy the interest payments on our national debt, can we not also agree that this percentage of taxes is an unnecessary burden and that it's legality can be legitimately questioned?

If that's the case, and this percentage of taxes is potentially illegitimate under the US Constitution, why would we support an alternative, such as the "Fair Tax", that simply shifts the burden from being extracted directly from our income and moves it over to items that we now purchase on a regular basis?

If we agree that current taxation is overbearing, why would a shift in revenue source resulting in the same gross revenue going to Uncle Sam be any better?

Personally, I view implementation of the Fair Tax as a step backwards in legitimate tax reform. It takes an unConstitutional income tax and shifts it to increased taxation on goods and services. Currently, there is a legitimate argument to eliminate the tax entirely. Once you institute the Fair Tax, that legitimacy is lost and the issue simply becomes a matter of how much each individuual is willing to pay.

Essentially, the Fair Tax is about as "fair" as the Patriot Act is "patriotic". My goal would be to simply have the income tax eliminated. The fair tax is one of those ideas that looks and feels good on the surface, but when you get to the core of the issue it's simply a shift that takes illegal income taxes and legitimizes them by increasing taxes on goods and services. It's a very slippery slope.

Sean Shepard said...

Shore - your argument is well reasoned and I really think we are probably closer on this issue than you realize.

My number one preference would be the complete elimination of taxes on property, income and wages (if not all taxes - but we don't really live in a Libertarian society nor do I see that anytime soon).

If Ron Paul were to get elected and be able to amass the congress to disband the IRS, revoke the tax code and get the states working on ratifying the repeal of the 16th Amendment his first week in office, that would be a happy day.

I do disagree with your point that there is very much momentum against the Income Tax in general. There are two court cases I'm aware of that have come out favorable towards the tax payers. And any vast success will likely result in Congress buttoning up the loopholes.

I think with savings so strongly incented with the FairTax, the wisest amongst us could at least escape it by not spending the money.

To your point, if the interest on the debt is just not collected for any longer, how do we pay for it? Much of that debt is owed to citizens or foreign countries (China being the largest holder of treasury notes last I knew, Japan maybe second?)

Now this is of course without getting into a complicated discussion about the Federal Reserve System (also unconstitutional) and the very kind of system that our founders were fighting against with King George.

We can't just default on the obligations.

I think savings would be incented so much with the FairTax plan that government would be forced to cut back. As someone who personally desires to pool large sums of capital for business investment, retirement and to "buy back my life" I favor the FairTax plan over a Flat Tax or no reform at all.

If trends continue though, Ireland or Panama might make good places to live. Maybe a loosely connected colony of floatillas on the Ocean outside taxing jurisdictions?? I'm ready.

RyanMullin said...

Excellent blog. Also I would like to thank you for getting footage of the tax protest events in Indy.
Feel Free to email me in regards to any events dealing with Ron Paul, the Liberatarion Party, Tax rallies, entrepreneurship, ...etc
Thanks again.
-Ryan Mullin