Here's something I found interesting.
Most American newspapers point out that Bush had lowered tax rates at the highest margin. It was only in British newspaper, The Economist, that something more important was highlighted - Bush had, in effect, lowered tax rates on everybody, and many middle class families had effectively stopped paying taxes altogether, because they got more tax credits from the government than what they paid. Interestingly, while a large part of the American middle class population received a 100% cut in tax payment and while the rich got a benefit of 4.6% of every amount over and above $250,000, the latter was a much more controversial issue. Obviously, since in real terms that may translate to far more money. But there is something more.
George Bush showed himself as a "compassionate conservative". He was supposed to be a pro-welfare-state statesman, and was known to complain angrily about income inequality, and remarked on January 30, 2007 that it "has been rising" since the years of Reagan and his father. Now, one may point out that an upper class man complaining about income inequality is quite possibly hypocritical and a sign of a pious stratagem. Of course, gossipy staffers in the White House have still remarked that Bush was a deeply ideological man and have remarked on his naiive egalitarianism and democratism. He was sincere, it seems. He was basically a neo-Fabian - a not very self-conscious rich man who dislikes the existence of an upper class with higher incomes. He was also consistent in following neoconservative Irving Krystol who once said "The idea behind a conservative welfare state is that you are allowed to keep your money only if you use it for a predefined purpose" - pretty much the whole idea behind tax credits.
So this reduction of tax rates on the top margin was the biggest anamoly of this welfare statist who had otherwise presided over the largest government expansion in medical care and in education. When I found out that he had extended tax credits so much that he gave a large part of the population a virtual exemption, I realized it was not inconsistent. But why didn't he behave like most such welfare statists and keep or raise tax rates on the top margin anyway?
I am guessing it's basic arithmetic. If we assume that a large part of the very rich would take fewer efforts to evade taxes if the tax rates were lower, they would have continued putting their money in offshore bank accounts. In effect, they could ransom Bush to keep their money. Once Bush lost a huge tax revenue base from a middle class and was collecting taxes only from the working class and the upper class, he'd have two options with the rich - not get any of their money at all, or allow them to keep $44 billion of their money and take the rest. In absolute terms, that's a greater savings for the rich than the middle class, although in relative terms it's a 100% savings for the middle class and possibly 1% savings for the very rich. These lowering of top margin tax rates may have been the only way to have him keep earning the money to finance his wars and dramatically expanded welfare state.
Now, this makes me wonder about progressives who complain about these tax rates. They have only complained about the tax rate cut for the rich, but not the complete cut for the middle class. Either because they themselves are beneficiaries or because they support the idea behind Irving Krystol's philosophy of tax credits. Or maybe this tax rate issue is all about class warfare and was never about public finances. What do you say?
Prateek Sanjay:Most American newspapers point out that Bush had lowered tax rates at the highest margin. It was only in British newspaper, The Economist, that something more important was highlighted - Bush had, in effect, lowered tax rates on everybody, and many middle class families had effectively stopped paying taxes altogether, because they got more tax credits from the government than what they paid. Interestingly, while a large part of the American middle class population received a 100% cut in tax payment and while the rich got a benefit of 4.6% of every amount over and above $250,000, the latter was a much more controversial issue. Obviously, since in real terms that may translate to far more money. But there is something more.
It's a much bigger deal for a very good reason. What is the government? A thief. So, who is the best 'mark' for this thief, so to speak? It's the people with enough to steal but not enough to defend or influence. So, the government may tax the poor but it isn't getting much because it's not starting with much. It may tax the rich but then the rich can pay people to navigate all those 'laws' and more importantly they can buy congresscritters and have laws made. So who is the government going to come down the hardest on? It's the people with enough to steal to make it worth the government's effort, but not with enough to pay the government to go away and still be left with a nice chunk for themselves. Hence, the middle class. I'd wager the middle class gets hit with more audits than anyone else, because the IRS damn well knows they don't have enough to defend themselves.
Good thieves are very adept at sizing up their targets.
Most American newspapers point out that Bush had lowered tax rates at the highest margin. It was only in British newspaper, The Economist, that something more important was highlighted - Bush had, in effect, lowered tax rates on everybody
xahrx, I am confused. I said it was the middle class that spared the most burden of taxes under Bush, but your post is an argument why government taxes the middle class the most.