Under Obama-Pelosi, this isn’t even George McGovern’s party anymore.
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The origins of the Earned Income Tax Credit (EITC), which has done so much to reduce income tax liabilities for lower income people, can be found in Ronald Reagan’s famous testimony before the Senate Finance Committee in 1972, where he proposed exempting the working poor from all Social Security and income taxes as an alternative to welfare. As President, Reagan cut federal income tax rates across the board for all taxpayers by 25%. He also indexed the tax brackets for all taxpayers to prevent inflation from pushing workers into higher tax brackets.
In the Tax Reform Act of 1986, President Reagan reduced the federal income tax rate for the middle class all the way down to 15%. That act also doubled the personal exemption, shielding more income from taxation for everybody.
Newt Gingrich’s Contract With America adopted a child tax credit of $500 per child that reduced the tax liabilities of lower income people by a higher percentage than for higher income people. President Bush doubled that credit to $1,000 per child, and made it refundable so that low-income people who do not even pay $1,000 in federal income taxes could still get the full credit. Bush also adopted a new lower tax bracket for the lowest income workers of 10%, reducing their federal income tax rate by 33%. Again, he cut the top rate for the highest income workers by just 11.6%, from 39.6% to 35%.
Consequently, primarily as a result of Reagan Republican tax policies, even before President Obama was elected America actually had the most progressive tax policies in the world. When President Reagan was elected, the share of federal income taxes paid by the top 1% was 17.6%. After a quarter century of rate cuts, that share had more than doubled by 2007, as indicated above. That is because with the lower tax rates, incomes boomed along with the economy, and high income taxpayers had the incentives to pull their money out of tax shelters and invest it in the real economy, fueling the boom while increasing their reported income. That is why Jack Kemp always used to say, if you want to soak the rich, cut tax rates.
In an article last week in the Wall Street Journal, Art Laffer showed that Kemp’s strategy has long been the most effective way to raise taxes paid by the rich. From 1921 to 1928, the top marginal income tax rate was slashed from 73% to 25%. Federal income taxes paid by the top 1% of income earners nearly doubled as a percent of GDP, from 0.6% to 1.1%. As a result of the Kennedy tax cuts adopted in 1964, the top income tax rate was slashed from 91% to 70%. Federal income taxes paid by the top 1% rose by 50% as a percent of GDP, from 1.3% to 1.9%.
Laffer adds in the Journal, “Since 1978, the top earned income tax rate fell to 35% from 50%, the top capital gains tax rate fell to 15% from 39.9%, and the highest dividend tax rate fell to 15% from 70%.” Meanwhile, federal income taxes paid by the top 1% of income earners as a percent of GDP more than doubled from 1.5% in 1978 to 3.3% in 2007, while the bottom 95% saw their tax payments fall from 5.4% of GDP in 1978 to 3.2% in 2007.
Laffer asks why Obama sycophant Mr. Buffett would want to reverse those numbers. He could ask as well why would Mr. Obama.
The answer is neither wants to do so. Buffett is just playing for good publicity. Obama is just playing the voters to get reelected.
I would be tempted to call President Obama a liar. But I am not in such a generous mood.
A man of faith in a godless age is hitting Americans where it hurts.
Mr. and Mrs. American Spectator Reader, let P.J. O’Rourke talk sense to your kids.
In Britain, defending your property can get you life.
The debacle of this president’s administration is both a cause and a symptom of the decline of American values. Unless Congress impeaches him, that decline will go on unchecked. An eminent jurist surveys the damage and assesses the chances for the recovery of our culture.
It won’t take long for conservatives to scratch this presidential wannabe off their 2008 scorecard.
The American Christmas, like the songs that celebrate it, makes room for everybody under the rainbow. Is that why so many people seem to be hostile to it?
Was the President done in by the economy, or by the politics of the economy?