All you have to do is google "Capital Gains Tax Cuts" to see the wide and diverse range of opinion on the effects of reductions (or increases) in the capital gains rate. Although, in all fairness, those who favor the lowest possible capital gains have some pretty potent ammunition on their side, while the skeptics argue, for the most part, that proponents overstate the positive effects of lower rates.

The Heritage Foundation (I know it's a conservative think tank; what did you expect from a Conservative?) has of the capital gains debate, including some aspects that I, and probably most of you, had never considered:

Myth 6: Government cannot "afford" large and permanent cut in capital gains tax rates.

Fact 6: Improving economic growth, not increasing federal tax revenue, is the proper focus of the debate regarding capital gains tax rates, and greater economic growth increases federal tax revenue from many sources.

Too often politicians incorrectly concern themselves with the effects of policy changes on the federal budget rather than on the national economy. As James Carville said in 1992, "It's the economy, Stupid." (Note: He didn't say, "It's the budget, Stupid.")

The correct goal of tax policy should be to maximize economic growth, not federal tax revenue. Consequently, the optimal tax rate is the rate that is best for the economy, and this rate is lower than the rate that provides the government with the most tax revenue.

The government should not act like a business trying to maximize revenue. Rather, the goal of tax policy should be to enhance economic growth and raise only as much tax revenue as is needed, not as much as is possible. (Emphasis - mine)

More investment and greater realizations caused by lower capital gains tax rates lead to increased capital gains tax revenue and more federal revenue from other taxes such as corporate taxes, personal income taxes, and payroll taxes.

When predicting the budgetary effects of capital gains tax rate changes, it is necessary to account for behavioral responses by using "dynamic" rather than "static" scoring.

The 1997 tax cut dramatically increased capital gains realizations and federal revenue.
Capital gains taxes comprise only a minor part of federal tax revenue.

Official government forecasters (CBO and JCT) consistently have overestimated the revenue "losses" from capital gains tax rate reductions, because they use "static" rather than "dynamic" scoring.

(and)

Myth 7: Capital gains already receive preferential treatment because they are taxed at lower rates than ordinary income.

Fact 7: Double-taxation of investment returns and taxing inflation cause capital gains tax rates to exceed tax rates on ordinary income.

The government taxes investment returns - dividends and capital gains - twice, first as corporate income taxes and then as personal income taxes.

This double taxation causes capital gains tax rates to exceed ordinary income tax rates.
For example when a corporation earns $100 profit, the government takes $35 in corporate taxes, leaving $65 distributed to investors taxed at 20%. The government takes another $13 (20% of $65) in capital gains taxes, leaving investors with $52 and government with $48 out of the original $100 profit. Thus, an effective tax rate on capital gains of 48%. (Note: Since dividend are also subject to double taxation, but are taxed at ordinary income tax rates, the effective tax rates on dividends can approach 60%!)

The most counterproductive and unfair characteristic of the tax on capital gains is that it taxes inflation, because capital gains are not adjusted for inflation. The example above does not even include the fact that capital gains taxes include taxes on inflation, and, therefore, actually tax investors at even higher real tax rates - at times more than 100%!

For example, if an investment of $1000 rises in value to $1100, while prices generally have risen 10%, there is no real (after inflation) increase in value. However, an investor who sold this asset for $1100 would still have to pay taxes on the inflationary gain of $100. At the current top statutory rate of 20%, this investor would pay $20 in capital gains taxes on an investment that produced no real gain. The result, in this case, is a tax rate of infinity!

The policy of failing to adjust capital gains for inflation raises effective capital gains tax rates to levels substantially exceeding statutory rates and often surpassing 100 percent.

These high effective tax rates force investors to retain assets, increasing the "lock-in" effect. Moreover, the policy hurts economic growth by inhibiting new investments, because under current law inflation is a risk investors must bear.
The tax on inflation most severely punishes the elderly, low-income, middle-income, and less successful investors, because these people are less able to adjust the timing of their investment decisions than investors with higher incomes.

Indexing (adjusting) capital gains for inflation - as other countries have done - would eliminate the unfair and harmful tax on inflation.

Matt, you hit it right on the head. The economy is good for many of us, and that's what's important. If you think gas prices are too high, and that the oil companies are making too much money, go buy some of their stock and recoup your losses. As long as the tax cuts stay in effect, we all benefit. If it takes starting a war to get a conservative like Bush into office, then so be it, as long as we keep those tax cuts going. Why people don't see that reason as a good enough one to go to war, is frankly beyond me. Viewed as an economic model, the loss of a few thousand men and women in this war (and again, as I've emphasized in my prior posts, only a couple hundred were killed during the actual war - - most of the deaths have come since we declared victory, so it's inaccurate to say that we've lost all these men and women "during the war") is justified because their ultimate economic contribution to the country will have less of a beneficial effect than the favorable trickle down effect of the upper class not having to pay such high taxes. If the only way to get to that favorable economic setting is to start a war, which always has the effect of firing up the citizenry and making people support the war (justified or not), then it makes economic sense to start a war.

We don't need to justify the war on any other basis, and people should just stop trying. Yes, go ahead and cite the Republican/Conservative talking points with which we are all familiar and which we can find on a weekly basis on this site as well as Ann Coulter's and Bill O'Reilly's sites, but let's be honest enough to say that in order to get the programs in place that favor the important people in our country, we needed to get a guy like Bush reelected. And if the only way to do that was to start a war, then it's ok to do that. And there are other benefits which probably outweigh the loss of life, such as increasing the likelihood that Christianity has become the de facto official religion of the country, so that other non-Christians will start spreading the word.

So, let's everyone stop complaining. SUPPORT THE TROOPS [Bush]!!

"The result, in this case, is a tax rate of infinity!"

This tax rate is over 100% but it is certianly not infinite.

quick math

%gain or loss = final/initial

= ( 1100 + 20 in tax ) / ( 1100 ) = about 102% tax rate. Much less than infinite

Let’s bust some other myths.

Myth- Democrats love taxes.
Truth- No we do not (not that I am a Democrat). I am all for lower taxes, but I am also for fiscal responsibility something the Republicans use to stand for. If you are going to start a war, you have to find the money to pay for it. We all know that politician (notice I did not say republicans even thought they are the ones that are driving the debt/deficient) can’t stop themselves from spending, so they should be forced to find ways to pay for all (non emergency) spending bills (pay as you go).

I would live to see Stevens announce an increase in tax rates to pay for his bridge. That would never fly with the American people.

Myth-The cut in capital gains tax stimulated the stock market.
Truth- As this study found, it has not been true:

http://www.cbpp.org/12-12-05tax.htm

“The first is that the tax cuts had little effect on stock prices because such a significant fraction of U.S. corporate stock is held in tax-preferred accounts or by non-profits and pension plans. Dividends paid on such stock were already exempt from personal income taxes and thus could not benefit from the 2003 dividend tax cut.”

I do not think it is fair to say that Democrats oppose what is good for the economy. Republicans and Democrats seem to have a fundamental difference of opinion when it comes to tax cuts. I think more money in the hands of the people and less in the hands of Government can only be a good thing. Any tax cuts will need to be offset by decreases in Government spending/ Here is where Republicans seem to have failed miserably.

I doubt they are coming, the Democrats will play their most assinine card they always play...tax cuts for the rich.

Reid will fillibuster this or do everything he can to.

"Myth- Democrats love taxes.
Truth- No we do not (not that I am a Democrat)."
-Barney

So Barney are you a Democrat or not...in those few words you say "we" and then say you aren't.

Confusing as usual.

Barney, I can't remember anyone who touted the dividend tax reduction as a means of stimulating the stock market. The rationale was to eliminate the double taxation on dividends, or, in liberal speak, "to make it faaaaaaiiiir".

Look at for the last decade, and you can see what happened after the capital gains tax cuts of 1997 and 2003. In both instances, the market was basically moving sideways prior to the cuts. Could other factors have been involved? Possibly. Just a coincidence? Probably not.

Shocking, Barney finds "a" study that says cut in capital gains didn't help fuel stock market. I'll bet if I find 10 that do he will dismiss them all.

Of course if I find "a" study or even 10 studies that dismiss human beings as the cause for Global Warming, well then Barney and the left goes wild that most of the studies say the opposite.

Ah yes, the hypocrisy of the left in FULL GEAR.

How about a basic economics class Barney. If you lower the price of goods or lower the overall cost, you tend to make them more affordable and more attractive...you sell more. With the capital gains taxes lowered, you made those investments more attractive to make.

Furthermore, let's talk about fundamental fairness. You guys on the left bitch ad nauseum about the savings rate in this country and then you turn around and tax those savings. Here we have a policy to encourage more savings through investment and you guys still complain. It's amazing.

Just how miserable are your daily lives?

Ray, I think what they meant my a tax rate of infinity was the fact that, without indexing capital gains for inflation, an investor could end up paying taxes "forever" on gains that were inflationary in nature without ever making an actual profit. It's the same reason that the income tax rates were finally indexed for inflation.

Sorry, Barney. My link to the DOW chart disappeared into cyber space.

Spook,
I understand your analysis regarding capital gains vis-a-vis inflation. But exactly the same argument can be made for any kind of income that isn't indexed to inflation, including wages. In fact, the effect on wages is even worse. For example, say the wage for a given job is $1000, and doesn't increase at all while inflation increases 10%. And say your tax rate on that $1000 remains 20%. Thus, the real value of your income, prior to inflation, will be $800. After inflation you're still making $1000, but it's buying power has dropped 10%, to $900. But you're still paying the same taxes on it. Thus, the real value of your income, after adjusting for inflation, is $700.

In the case of capital gains, if your $1000 investment doesn't increase in value at all you pay no taxes. Thus, the real value of your investment, after adjusting for inflation, is $900. Compound that difference year after year after year and the difference gets huge.

Notice that I tracked the salary FOR THE SAME JOB. That's the proper way to analyze it. Obviously, any person worth his or her salt will get promoted. But if the structure of the enterprise doesn't change the argument doesn't change. In other words, even if you're promoted, the person replacing you in the same structure will be affected just the same as if you remained in your job.

I'm not sure what to make of the Capital Gains discussions as I am not as informed on it as I would like. The only point that I would like to make is, that if we are going to cut taxes, we should do it in a way that is most likely to stimulate the economy. I am biased because I work for corporate America. Since consumer spending on consumer goods and services is how my corporate clients improve their profits, and thus stockholder value and therefore increases the needs for my services, I support tax cuts that will stimulate more consumer spending. It means more money for my clients, more money for me and more spending. Since consumer spending is supposedly 70% of our GDP, I think any tax cuts should focus on the people who do the majority of that spending and that is the middle class.

I also agree that we need to get our books in order before we start throwing around tax cuts. I mean, before I start spending money on capital investments in my business, I try to cut down on our debt first, become more efficient in my current processes and generally try to be a leaner operation. I don't see the current administration and congress doing that anytime soon.

Rico,
If I may be so presumptuous; your theory misses one important element; income is dynamic, that is it is earned and received over a period of time (Einstein’s 4th dimension). Capital gains from investments are earned over a different period of time than income and paid in lump sums, hence the need to tax them a second time. Unless Jimmy Carter is in the White House, inflation has a negligible effect on the paycheck received immediately after earning the proceeds; assuming the money is being spent.

In fact, the effect on wages is even worse.

Rico, your statement is correct, except it isn't the government's responsibility or within the government's purview to index wages to inflation. Plus your 10% inflation rate hasn't been a reality since Carter.

Fifteen years ago I was running a small, family business (22 employees, annual sales of about $2.5 million). I just got burned out, sold out to my younger brother and started a new home-based business. I've never made, in the new business, anywhere close to what I was making in 1991, in actual dollars, much less in inflation adjusted dollars. But I'm also not paying nearly the taxes I was paying back then, it's a lot less stressful, and I couldn't have a nicer boss. It's all kind of relative. I walked away in 1991 with enough money to put my two daughters through college without going into debt. If I'd waited 5 more years (when my brother sold out to a large conglomerate), I'd have walked away a millionaire. Of course, I'd probably also have been an alcoholic by then, so, like I said, it's all relative.

Still haven't gotten an email from you. I used to have my email address on my Type Key profile page, but the spam got too intolerable. I did request to Matt that he release my email address to you. Suggestion - if you request again, don't file it under "hate mail", heh.

In fact, the effect on wages is even worse.

Rico, your statement is correct, except it isn't the government's responsibility or within the government's purview to index wages to inflation. Plus your 10% inflation rate hasn't been a reality since Carter.

Fifteen years ago I was running a small, family business (22 employees, annual sales of about $2.5 million). I just got burned out, sold out to my younger brother and started a new home-based business. I've never made, in the new business, anywhere close to what I was making in 1991, in actual dollars, much less in inflation adjusted dollars. But I'm also not paying nearly the taxes I was paying back then, it's a lot less stressful, and I couldn't have a nicer boss. It's all kind of relative. I walked away in 1991 with enough money to put my two daughters through college without going into debt. If I'd waited 5 more years (when my brother sold out to a large conglomerate), I'd have walked away a millionaire. Of course, I'd probably also have been an alcoholic by then, so, like I said, it's all relative.

Still haven't gotten an email from you. I used to have my email address on my Type Key profile page, but the spam got too intolerable. I did request to Matt that he release my email address to you. Suggestion - if you request again, don't file it under "hate mail", heh.

According to a study by the Tax Policy Center, the tax cuts overwhelmingly benefit the richest Americans:

"The top tenth of 1 percent, whose average income is $5.3 million, would save an average of $82,415. Those in the top group would see their tax bill cut 4.8 percent, while Americans at the center of the income distribution — the middle fifth of taxpayers, who will earn an average of $36,000 this year — could expect a 0.4 percent reduction in their tax bill, or about $20.

Those who make less than $75,000 — which includes about 75 percent of all taxpayers — would save, at most, $110 each. Those making more than $1 million would save, on average, almost $42,000."

Despite administration claims to the contrary, Federal Reserve economists have found these investment tax cuts haven’t boosted the stock market.

Also, the non-partisan Joint Committee on Taxation has found that any economic benefits of the cuts are “eventually likely to be outweighed by the reduction in national savings due to increasing Federal government deficits.

Yes, Democrats oppose a good enonomy. It couldn't be that they oppose fiscal policy based on ideology. It couldn't be that the oppose runaway fiscal spending. It couldn't be that they support sound fiscal policy. It couldn't be that they oppose giving breaks and protection to businesses at the expense of consumers and employees. No, they must hate George Bush.

But of course, Reagan proved deficits don't matter, says Cheney. That is, until they do matter, which gives conservatives a reason to say "we need to cut funding to programs that help the poor and needy."

Once again Republicans prove themselves completely unable to execute sound fiscal policy, and once again, it will take Democrats to fix it.

I'm all for tax cuts, as long as there balanced by cuts in spending. The pork belly boys from both parties, defense contractors salivating at the prospect of the next war financed by China, the seniors whose vote Bush is trying to buy in the best Democratic fashion, and the overtaxed oil companies whose taxbreaks just aren't enough to generate less than record profits, all need tax relief to insure that the benfits of the giveaways for them are fully realized.
But who is going is going to pay for all this? We spend 250 billion a year finacing the national debt. Out of that we pay China 20 billion a year interest, on top of principal of payments on 500 billion, on top of a 200 billion dollar trade deficit, we buy Iranian and Venezuelan oil long after we have declared them enemies(Or at least Pat Robertson has), then threaten to send soldiers to fight the very military machines our trade policies help build.
So you want another tax cut? Whose gonna pay for it? Where the offsetting spending cuts gonna come from? Or are the republicans going to do what they have been doing since Reagan because they don't have the guts to face down the voters and tell them you can't have your cake and eat it, too.
Hey, China, you're payin' for our wars. You wanna throw in a tax cut with that?
Ask China for money. It's the republican way.

Bane,
There are a lot of simplifications in my analysis. Many things can mitigate the discrepancy between the buying power of income from wages vis-a-vis income from capital gains over time. But the fact is, they never disappear completely if one assumes (a) wages don't keep pace with inflation, and (b) wages and capital gains are taxed at the same rate.

As far as buying things goes, keep in mind that the things you buy are themselves often subject to other forms of taxes (sales taxes, gas taxes, property taxes, luxury taxes, etc.). Likewise, if the rate of depreciation of the things you buy is greater than the rate of inflation, then you lose ground by buying things. From a pure investment standpoint, it never makes sense to buy more than you need -- unless the things you buy have investment value. But you have to weigh that against quality of life issues, of course.

But the whole issue of buying things brings up something else people don't often consider in the tax mix -- if you don't consider ALL of the various forms of taxes you pay, you don't really have a full appreciation of exactly how much of your income goes to taxes. And since you HAVE to buy certain things regardless of your income (unless you live in a cave or something), many forms of taxes are regressive rather than progressive. And that's something to keep in mind as well when considering whether taxes are "fair" or not. There are different ways to consider fairness when it comes to taxes. But however your notion is construed, it seems to me that you have to consider all taxes in your notion, not just federal taxes.

And Spook, you used the 10% inflation figure, so that's what I used, too. No sense in changing assumptions in the middle of an example. It just makes peoples' heads sizzle that much more. The principle is the same regardless of the rate one uses -- assuming it's greater than zero. And yes, I understand that the government has no direct control over wage expansion, or inflation, income from capital gains, for that matter. But it is also true that government policies can have effects on all three.

And I'm sorry, Spook... I thought you had already gotten my email address and I was waiting for your reply! Anyway, I will resubmit my request. Sorry about that.

And Spook, you used the 10% inflation figure, so that's what I used, too.

Aaaggghhh, you're right. Actually, it was in the Heritage Foundation piece I linked to, and I didn't catch it. Must be some old Carter holdovers working at Heritage, heh.

As far as buying things goes, keep in mind that the things you buy are themselves often subject to other forms of taxes (sales taxes, gas taxes, property taxes, luxury taxes, etc.).

Indiana has a real boondoggle going on gas. We're one of I believe 8 states that has a gas specific tax ($.18/gallon) that also charges the state sales tax (6% or another $.18/gallon at $3.00/gallon). Add the $.184 federal gas tax, and we're paying $.544/gallon in taxes.

Several years ago I kept a tax diary for a couple months. The amount of our income (and mine isn't high by any stretch of the imagination) that gets siphoned off in the form of various taxes, user fees and such is just mind boggling. Just the surcharges, government fees and taxes on my cell-phone bill alone are almost $200.00 a year. I think if everyone would keep a tax/fee diary for a year we'd end up voting every incumbent politician out of office and starting over.

Rico,
Are we speaking of business or personal when we discuss depreciation? The business depreciation can be calculated for maximum tax benefit using the quickest depreciation possible as long as it’s not more than double straight line. The depreciation of personal assets is more dependent on desire than necessity; big ticket assets for personal use have not been subject to optimal inflationary pressure as much as big ticket items for business applications, personal computers and technology items aside. Autos and refrigerators haven’t changed as much as drill presses and back-hoes.

But, let’s assume that real wages outpace inflation (source: BLS), which is what has been happening since 2000. The taxation on personal income, always regressive, impacts the immediate spending power of earnings, where capital gains tax affects future buying power of capital gains, specifically those intended for retirement or investment income.

When wages and capital gains are paid they are taxed as income, the withholding of taxes is a different issue; any bulk payment is taxed at the highest marginal rate regardless of your annualized income. Just take out a severance package and see how much of a bite the Feds take. The issue is if capital gains should be taxed separately as a punishment for investments(assumption #2).

All payroll taxes are regressive, and except for the luxury tax, all sales taxes are proportional, the more you consume the more you pay in taxes, again assuming necessities like food are not subject to sales tax, (unless it’s caviar and cheap domestic beer). A national sales tax would be the least regressive and would not punish achievement or investment. You don’t want to pay taxes, don’t buy taxable goods.

Spook,
Use taxes, excise taxes, fees, licenses, inventory taxes, etc. we don’t think about that when we think about taxes.

Use taxes, excise taxes, fees, licenses, inventory taxes, etc. we don’t think about that when we think about taxes.

Well, Bane, we sure as hell should.

What's coming is all income over $100,000 being taxed at the rate of 100% and all income less then $36,000 not being taxed at all. Peace

Spook,
In business as you well know, many of these hidden taxes aren't deductible from the business income, thus paying tax on the tax. That’s one reason my fur stands on end when I hear people complain that the "rich" aren't paying their fair share. Small business owners aren't rich; just over burdened taxpayers that create jobs.

Found this on the Drudge report:

April Tax Revenue 2nd-Highest in History

A flood of income tax payments pushed up government receipts to the second-highest level in history in April, giving the country a sizable surplus for the month.

In its monthly accounting of the government's books, the Treasury Department said Wednesday that revenue for the month totaled $315.1 billion as Americans filed their tax returns by the April deadline. The gusher of tax revenue pushed total receipts up by 13.4 percent from April 2005.

It marked the largest one-month receipt total since the government collected $332 billion in revenue in April 2001, reflecting a boom in capital gains from stock investors lucky enough to cash out their investments before the bursting of the stock market bubble in early 2000.

dl,
Damn that's really bad news; give these spending monkeys more money and they'll pander themselves into a drunken spending spree just before an election.
The rise in revenues when taxes are cut is an unintentional consequence; Reagan couldn't explain it and he was a college educated economist. I know tax breaks for the producers in this country are a good thing, just once I’d like to see congress spend only what it takes in (unless we have a war, or national emergency, or there is danger of democrats taking over Congress.)

Yeah Rathaven, I think the dimocrats are a little out of touch with reality. They should quit trying to oppose everything, and go back to playing with their neopets. There they can control things like they want.

The economy is doing great without them, and their "we can do better" ideas. The better this economy is, the better chance we have of getting Jeb into office with Condi as a VP.

I know I've sent them more money this year than I ever have, they are great for my business, how's your's?? Maybe I should find a way to donate directly to the party more, so I could get a 'special' tax loophole, like the democrats do.

Small business owners aren't rich; just over burdened taxpayers that create jobs.

Couldn't have said it better, Bane. Do you think that would fit on a bumper sticker?

What's coming is all income over $100,000 being taxed at the rate of 100% and all income less then $36,000 not being taxed at all. Peace

Now if that isn't a liberal, masturbatory wet dream, Steve, I don't know what is. I wouldn't hold your breath if I were you.

My Bentley has a pretty big bumper.

*Sarcasm off*

Bane,
When I spoke of depreciation I didn't mean it in any technical sense, just the real world sense. I probably shouldn't have mentioned it at all, but the idea I was going after was this: say you buy a shirt (and I'm assuming you can't write it off as a business expense). As soon as you take the tags off it it's worth a fraction of what you paid for it. And thus you have, in effect, dramatically reduced the buying power of your money (especially if you didn't really need the shirt, lol!). The point is, that money is no longer available to you for re-investment (unless you're really good at running garage sales). That's what I meant.

Depreciation in the technical sense doesn't really apply, because they are offset against income on a 1:1 basis PRIOR TO taxes.

As far as wages outpacing inflation, you're going to have to give me more of a hint than simply "BLS". I've spent WAY too much time today tearing up the BLS site trying to figure out what statistics you're using. The best I could come up with is this. That graph shows AVERAGE hourly wages in inflation-adjusted dollars from 1996 through 2005. Follow the peaks to find out how things have gone. Interestingly, average wages peaked in late 2003 and have been on their way down since. They are now below what they were in late 2001.

[I might add that if you go up to see that graph, you can change the "From:" and "To:" points, then click the "Go" button. Change the starting point to, say, 1970, or something. Then it becomes REALLY interesting.]

And that's AVERAGE wages. I have been trying to find the statistics for MEDIAN wages on the BLS site, but I have been unsuccessful. The best I could come up with is this graph (Figure B), from the Economic Policy Institute. And it's pretty bleak. It shows that the real wages of most people are falling.

I suppose I should explain the difference between average and median wages. See, the average wage is the sum of all wages everybody makes divided by the number of people earning wages. Median wage, on the other hand, is the value where 50% of the wage earners fall below it and 50% of the wage earners fall above it. When the median falls below the average, that means that a small percentage of rich folks are getting richer and a whole bunch of poor folks aren't keeping up. You may be fine with that, but that's the only way to interpret the statistics.

So I suppose the next question is... are you fine with that?

Personally, I have no problem with rich folks getting richer as long as everyone else is as well. If that's not happening, it sets off alarm bells in my head. At that point it ceases to be a liberal/conservative issue, it becomes a social stability/instability issue. A flourishing economy does not necessarily equate with a flourishing society. That's something to keep in mind.

As a public service, I’ve prepared your work calendars when the “steve plan” goes into effect:
-Earnings between $100,000 and $110,000, stop working in December
-Earnings between $110,000 and $120,000, stop working in November
-Earnings between $120,000 and $130,000, stop working in October
-Earnings between $130,000 and $150,000, stop working in September
-Earnings between $150,000 and $170,000, stop working in August
-Earnings between $170,000 and $200,000, stop working in June
-Earnings between $200,000 and $240,000, stop working in May
-Earnings between $240,000 and $300,000, stop working in April
-Earnings over $300,000, set up residency in France.

Because it bears repeating:

"The top tenth of 1 percent, whose average income is $5.3 million, would save an average of $82,415. Those in the top group would see their tax bill cut 4.8 percent, while Americans at the center of the income distribution — the middle fifth of taxpayers, who will earn an average of $36,000 this year — could expect a 0.4 percent reduction in their tax bill, or about $20.

Those who make less than $75,000 — which includes about 75 percent of all taxpayers — would save, at most, $110 each. Those making more than $1 million would save, on average, almost $42,000."

Me, I'm in the middle. I'll be getting a big fat $20 extra back. That's about 2/3 of a tank of gas--hooray! But I take much solace in knowing that people far richer than me are getting a much heftier tax break. Everybody knows millionaires really need that extra $40,000 to make ends meet.

Steve

"What's coming is all income over $100,000 being taxed at the rate of 100% and all income less then $36,000 not being taxed at all. Peace"

All I can say is wow. Stupidity (or is it a hopeful dream of yours) on display.

The national debt is approaching $10 trillion and the Republicans want to cut taxes by $70 billion. That is irresponsible. 87% of that $70 billion will go to the top 14% of the wealthiest Americans, while the bottom 50% will get just 5%. That is immoral. bush's war in Iraq has cost $262 billion and we owe the Chinese $260 billion. Why are the Chinese funding bush's war in Iraq? Peace

Rico,
Okay, this could get real boring for the non accountants out there, so I’ll punch it up as much as I can; these two accountants walk into a bar … you know, I’ve always wanted to have back-up singers; you know three black girls with afro’s in satin hot-pants that repeat the important parts of my jokes.
Bane:...and the second accountant said, "how much do you want it to be?"
Banettes: "want it to be "
Thank you, thank you very much ... try the veal, I'll be here all week.

Depreciation; once you buy a shirt it becomes an asset. What the value of that asset is what you believe it to be worth, or the replacement value of the asset. Because I just purchased it, I assume the replacement value is what I just paid. Depreciation is the contra-asset that devalues a portion of that asset over a period of time. I’m not sure what a 1:1 offset is ~ the maximum the IRS will allow is double straight line in any one year, and that’s if you can depreciate the asset over several years.

Re: BLS, don’t forget to look at all sectors, not just private; in the public sector wages stagnated from the period of 2000 through 2004, as states struggled to accommodate federal mandates, but began growing dramatically from 2005 forward as State revenues increased and union negotiations got serious. The BLS use an aggregate of real wages from different sectors, it’s best when you analyze the numbers as a relationship to the previous period. With the exception of the period during the third quarter of 2005, the real earnings have risen during every period since 2000. We know what happened in the third quarter to affect earnings; Katrina. In this respect the earnings in the private sector declined for several months while public sector income rose. Yet, across all sectors hourly wages, by themselves rose 5.7% in the first quarter of 2006. Since the second quarter of 2006 has had dramatic growth in productivity and corresponding drop in unemployment, the BLS is being, in my opinion, entirely too conservative in the wages estimates. Household incomes have risen steadily for several years even as some sectors saw stagnating hourly wages.

Either way, statistics can be malleable to prove any point you wish depending on your agenda, as the Economic Policy Institute demonstrates. AFSCME is the union representing government (public) workers, at recent meetings they produces documentation proving public service wage earners are making below median, and AFSCME employees real wages are rising significantly over the past few years, despite that Evil Bush cutting their jobs. And illegal immigration is putting intense downward pressure on hourly wages, yet the wages haven’t dropped; wages have risen slower than previous periods, and it was in those periods that inflation accelerated. Over all, incomes (including hourly wages over time) have outpaced inflation since the Reagan years.

Re: median vs. Average; as a former school teacher let me throw something else at you. Median would be applicable if the workforce were a nice bell curve; even if that curve listed slightly to the left or right. The small percentage of ultra high end earners doesn’t move the median proportional to their numbers. Median works best when confining to a group, like nurses, but not when looking at healthcare workers; few doctors vs. many orderlies pulls the median to the left. Mean will give you a clearer picture of aggregate wages and that’s the number the BLS uses. Don’t ask me how I know that, but part of my lesson plan for my students in the small business management class I taught at the local high school set that as one premise, that and the wages were based on surveys, not payroll tax information.

I suppose I look at the statistics I like best and glean from them that income is tracking ahead of inflation. Inflation variables change with each generation or else we’d be plotting the price of 8-track tapes.

It is hard to believe that there can be people as naive some of you in what was just five years ago such a great country.
"Of course, I expect Democrats to fight the tax cuts... after all, they oppose anything that is good for our economy."
Is your skull too thick to see that this hasn't worked and it never will. Our economy may be strong right now and everything looks just peachy but that doesn't erase the fact that we have an $8 TRILLION DEFICIT!!!! It is expected to reach $10 trillion by the time this nut job is out of office. So continue being your greedy selfish selves and forget about your children and the children for generations to come. This can only last so much longer before we finally scare away all of the foreign investors that are financially keeping us together. Can you not see this?!
And I have never seen anything so rediculous as what I have just read. A few thousand young and promising lives is an easy price so you can save yourself a few more dollars. Whoever wrote that should kill himself for the good of our country. I am sure you do not have the promise that so many of the dead had. I lost a friend in Iraq and reading that right now pissed me off.
I am a moderate democrat and I seriously open to any idea, but this man and his party is just rediculous.
Four and a half years ago the whole world cried for us on Sept. 11th and now we are hated by nearly every country. Just because we are paying off a nations leaders, it doesn't mean the country loves us. First the new Vietnam aka Iraq war was "Mission accomplished" three years and over 1000 lifes ago. Now we have pissed off Russia and our "good men" Bush and Dick are looking for a new Cold War.
What is it going to take for you remaining numb skulls(The whole 31%) to realize This man and all of his retarded men have ruined our country.
Come on guys. I have always found it funny and to no surprise that Universities are breeding grounds for liberals. Obviously an education helps one realize what is good for our country. I want to thank you guys for my life long opportunity to pay of one mans mistakes.

Kevin

Do you own a house? Do you have a mortgage? Why do you have a mortgage? Why is it ok for you to borrow money for that house when you don't have it and yet you rip on the deficit of the government.

Name me ONE industrialized nation in the world that doesn't have debt and isn't, on average, running a deficit?

Seesliberalnonsense,
Don’t quit your day job; if your numbers were correct, that is the top wage earners will see a 4.8% decrease in their taxes or $82,415 that means they paid $1,716,979 in taxes on income of $6,132,000 or 28%. If your tax bracket gets $20.00 or .4% that means you only paid $5,000 in taxes or only 14%. I believe you need to pay more, and since liberals never met a tax they didn’t like, I think we should have a stupid tax; only softheaded liberals pay and all the proceeds will be used for government job creation.

Bane, with all due respect, could you please direct me to the sources of your numbers? Where are you getting this stuff? I need a reference.

For the record, I stressed the private sector because (a) that was the only numbers I could find (lol!), and (b) isn't that what conservatives are supposed to be all about? I mean come on, if it is necessary to rely on the public sector to save the numbers, doesn't that strike you as just a wee bit contrathetical?

Also by they way, you don't have to worry about losing me in numbers. Bring 'em on. I can handle it. If there's anything I understand pretty well, it's statistics. I even taught a few classes in it -- before I abandoned academia for the private sector. By the way, I found your explanation of mean vs. median wages a bit contorted. I found mine much clearer, lol!

Got a very busy day ahead of me, I’ll see about sourcing some of what I discussed as I can get it.
The numbers you're asking about, it's not the numbers in the tax question above is it? Because those are just factors of the information sees gave us in his post.

Government employment isn't just make-work projects; I work for the State at a university that receives the bulk of its funding from research for the private sector; citrus growers, business and engineering firms.

Respectfully, mean isn’t average and this is why it’s a better picture; try this;
Given the following $10,000; $10,000, $10,000, $10,000, $10,000, $60,000, $90,000, $100,000 & $360,000. Assume they represent salaries in your office, drones, supervisors and a boss. The median income is $10,000; the average income is $73,300; the mean income is $30,000. In this case, and anywhere the disparity is wide, mean is the best method. In fact, no matter how much the boss makes, or how much his supervisors get raises, the median will remain $10,000.
Still worse, if one of those $10,000's becomes $20,000 then the median goes to $20,000, while the mean moves to $32,000, see the difference?
This is why the Economic Policy Institute uses it; it doesn't reflect what happens when the spread, starting at the middle moves upward dramatically.
If you have Excel, try it (mean is called geomean in Excel). Try several scenarios, this is what we accountants call, building models.
When you have an entrepreneurial society, you will have risk takers that make big income, and stand to lose big time! The drones at the other end take no risks and their reward is a consistent salary. I’ve been both.

Okay class, wake up, the bell rang, you can go now ...

Don’t quit your day job; if your numbers were correct, that is the top wage earners will see a 4.8% decrease in their taxes or $82,415 that means they paid $1,716,979 in taxes on income of $6,132,000 or 28%. If your tax bracket gets $20.00 or .4% that means you only paid $5,000 in taxes or only 14%.

My numbers were correct. And if your numbers are correct, those $6 million wage-earners are still bringing home a shade under $4.5 million after taxes--oh no, such abject poverty for them!--whereas I'm bringing home a post-tax total of a little over $30,000. Which is OK--I'm lucky enough to be able to pay my rent and my bills while an ever-increasing number of folks aren't. But spare me your attempts to spin this as a great boon for me because at the end of the day, I'm getting an extra Andrew Jackson in my pocket. Yee-freaking-haw.

If you can be bought off by $20, bully for you. I can't be. If Republicans were honest, they'd simply say, "We want to help those who already have more than enough means to help themselves." Instead, they dishonestly spin this as some sort of great generosity for the ever-shrinking middle class. You can prattle all you want about how horrible it is to cough up a million dollars in taxes when you make $6 million, but you're not gonna drum up much sympathy from people who know better.

Bane,

There is one error in the calculations; Clinton raised the marginal rate for over $168,000 to 35%, (not 28%) so the taxpayer paying almost two million dollars in taxes only made $4.9 million.

Sees,
You are so typical of the non-acheivers in this country; punish those that take the risks. So, 1 person paying two million dollars in Federal taxes isn't enough for you? You want to confiscate the whole thing, give it to the government and prevent him or her from creating business and jobs?
Just another miserable socialist

Bane said: "The numbers you're asking about, it's not the numbers in the tax question above is it? Because those are just factors of the information sees gave us in his post."

No. It's the data you quoted from the BLS about "real wages outpacing inflation (source: BLS), which is what has been happening since 2000." I can't find those data. Everything I find contradicts that assertion. So I'm very curious where you're getting your numbers.

With regard to your last post, you made a distinction between "mean" and "average". Now, there are indeed numerous ways to define mean, but the most common -- and the one that is meant in this context -- is the arithmetic mean. And that is the same as the average. You are using the geometric mean, which is inappropriate for these kinds of data. The geometric mean is where you multiply all the values together and take the square root. That calculation is utter nonsense in the present context. Income distribution is a linear series, not a geometric series. And thus, only the arithmetic mean is appropriate.

Now let's get back to your example. Tell me, what would it take in your example for the median income to go down? I'll tell you what it would take: all five of the lowest values would have to decrease. Are you getting the picture now? Actually, your example isn't the best. It contains only a small number of values, most of which are exactly the same. That bears no relation to reality. We're really talking about millions of values. With those kinds of numbers, in order for the median to shift appreciably up or down, a vast number of people have to be getting richer or poorer. On the other hand, the mean can shift appreciably up or down even when a small number of people get vastly richer or poorer.

In the case of income, the mean generally tells you more about what is happening to the income of the richer segments of the population, because they are the ones that have the biggest impact on the mean value. That happens when you have 1% of the population accounting for 25% of all income. The median value, on the other hand, tells you more about what is happening in the middle and lower end of the population. In order for the median to go down, lots of people have to be feeling a pinch. Likewise, for it to go up, lots of people have to be feeling pretty good.

Also, by comparing the changes in mean and median incomes you can get an idea of what is happening in the society as a whole. For example, when both the mean and median go down, that means the society as a whole is suffering. When both go up, that means the society as a whole is doing well. When the median increases and the mean decreases, that means that the income distribution as a whole is getting more egalitarian: the rich are getting poorer and the poor are getting richer. And finally, when the median decreases and the mean increases, that means that incomes are getting more disparate: the rich are getting richer and the poor are getting poorer. And that, I would argue, is not a good trend because it makes for an unstable society.

Now, the numbers I tracked are for the private sector. I did so because those those were the only ones I could find without days of digging. If you have more inclusive numbers I'd like to see them. It would very interesting to compare them, because then we could figure out how the government sector is faring relative to the private sector. I think they would be very revealing. My numbers (for the private sector) suggest that mean wages are almost now where they were at the end of 2001. The median wage, on the other hand, is still trending down from the end of 2001. Here's a quiz question: what does that tell you about the relative distribution of income? Here's another quiz question: if adding the government sector wages into the mix reverses the trends, what does that say about the conservative credo about small government?

Mark has posted numerous times highlighting the good aspects of the economy -- the stock market is doing well, GDP is up, that sort of thing. And the question is always... why don't people recognize this? Well, the place where most people feel economic pressures the most is in their own pocketbook. And my numbers are very suggestive as to why all the recent good news isn't getting much traction. Likewise, my numbers also explain why all the bad news back in 2004 (stock market was stagnant, sales were down, inventory was up, etc.) didn't get much traction, either. If you look at both the mean and median wage stats I offered, both of them were peaking in 2004. The economy wasn't an issue in spite of it all.

James Carville famously said, "It's the economy, stupid." I think he would have been more exact to say, "It's the pocketbook, stupid".

Rico,
I didn’t have much time today, dang work kept me on my toes all day, very little break time to leave messages to harass Baloney and Arse. But after the office closed, I looked back to my IE History and found this;

"For the 24-month period through the second quarter of 2005, the inflation-adjusted wages of an average American grew just 1 percent or so, according to statistics reported by the Bureau of Labor Statistics (BLS)." From CNNMoney.com January 30, 2006 (the article actually explains that wages outpaced inflation by 1%).

When I went to BLS I used the National Compensation Survey which shows the average hourly compensation from 2000 to 2005 increased from $15.80 in 2000 to $18.09 by 2004. This was a 2.73%, 5.86%, 3.32% and 1.92% respectively. Also in the Wages section, the BLS just reported a 5.7% increase for the second quarter of 2006, which is slightly ahead of the previous quarters. When viewed as a group of years, the 3.2% to 3.19% inflation falls slightly behind the real earnings increases.

Combine that information with the 1% above inflation for the period from 2003 through 2005 and I concluded that the entire period outpaced inflation, as I didn't see any single period that was running counter to that assumption.

I prefer to use the mean when speaking of wages as that is a better picture of what people make, the average is fine as a constant, but begins to become problematic as the workforce increases. Median if fine for a static picture, but as the example pointed out, once a large group falls above or below the median, it doesn’t move as the ends (high or low) stretch out. Still, you sound like an educated statistician so I’ll defer to your methodology.

I also did comparatives by industry about two years ago for the university budget process; we needed to know if salaries within our sphere were a) keeping pace with the private sector, and b) keeping pace with inflation. When doing this I reported that university compensation neither kept up with inflation nor the private sector. That’s why I can say with confidence that governmental wages outpaced both in the last 18 months; union contracts and salary steps increased to begin to close the gap on the private sector. It was based on this original research that I confidently stated that the BLS supported my contention; admittedly I hadn't looked at the numbers in a while and feared that they had changed direction. But, I found what I found before, wages have outpaced inflation. Now we find that is a debatable issue; many so-called experts disagree with my contention. But, the university accepted my numbers and still other experts still agree. Like left and right, there are degrees, not black and white.

Given the sources of my statistics (above) don’t track the same as yours; I see growth in real earnings and the median and average moving positive albeit not as fast as the mid-1990’s. But, like a car accelerating away from a stoplight, it continues accelerating but at a slower rate as it reaches its top speed. It does, nevertheless continue going faster than before. I hope we haven’t reached top end on salaries, but all indications are that another wage spurt like the mid-1990s is not likely.

As mentioned earlier, government and business are not mutually exclusive. Some things like research and development, or space exploration can be done more efficiently with government bodies. But, (save me from my fellow conservatives) not when the government body is in the governing business. Universities, NASA, police & security services etc. are not paid through taxation (entirely.) I mentioned before that the University I work for makes the bulk of its funds from the private sector for business, agricultural, medical, legal, engineering, and weapons research. (Well, the weapons are paid for by the government, but we wouldn’t have the bomb if this university system didn’t provide the assets to develop it.)

Class dismissed until tomorrow, when you guest lecturer will be the eminent Ricorun.

and remember,
The Torah says, "Love thy neighbor as thyself."
The Buddha says there is no "self."
So, maybe you are off the hook...

Rico,
I didn’t have much time today, dang work kept me on my toes all day, very little break time to leave messages to harass Baloney and Arse. But after the office closed, I looked back to my IE History and found this;

"For the 24-month period through the second quarter of 2005, the inflation-adjusted wages of an average American grew just 1 percent or so, according to statistics reported by the Bureau of Labor Statistics (BLS)." From CNNMoney.com January 30, 2006 (the article actually explains that wages outpaced inflation by 1%).

When I went to BLS I used the National Compensation Survey which shows the average hourly compensation from 2000 to 2005 increased from $15.80 in 2000 to $18.09 by 2004. This was a 2.73%, 5.86%, 3.32% and 1.92% respectively. Also in the Wages section, the BLS just reported a 5.7% increase for the second quarter of 2006, which is slightly ahead of the previous quarters. When viewed as a group of years, the 3.2% to 3.19% inflation falls slightly behind the real earnings increases.

Combine that information with the 1% above inflation for the period from 2003 through 2005 and I concluded that the entire period outpaced inflation, as I didn't see any single period that was running counter to that assumption.

I prefer to use the mean when speaking of wages as that is a better picture of what people make, the average is fine as a constant, but begins to become problematic as the workforce increases. Median if fine for a static picture, but as the example pointed out, once a large group falls above or below the median, it doesn’t move as the ends (high or low) stretch out. Still, you sound like an educated statistician so I’ll defer to your methodology.

I also did comparatives by industry about two years ago for the university budget process; we needed to know if salaries within our sphere were a) keeping pace with the private sector, and b) keeping pace with inflation. When doing this I reported that university compensation neither kept up with inflation nor the private sector. That’s why I can say with confidence that governmental wages outpaced both in the last 18 months; union contracts and salary steps increased to begin to close the gap on the private sector. It was based on this original research that I confidently stated that the BLS supported my contention; admittedly I hadn't looked at the numbers in a while and feared that they had changed direction. But, I found what I found before, wages have outpaced inflation. Now we find that is a debatable issue; many so-called experts disagree with my contention. But, the university accepted my numbers and still other experts still agree. Like left and right, there are degrees, not black and white.

Given the sources of my statistics (above) don’t track the same as yours; I see growth in real earnings and the median and average moving positive albeit not as fast as the mid-1990’s. But, like a car accelerating away from a stoplight, it continues accelerating but at a slower rate as it reaches its top speed. It does, nevertheless continue going faster than before. I hope we haven’t reached top end on salaries, but all indications are that another wage spurt like the mid-1990s is not likely.

As mentioned earlier, government and business are not mutually exclusive. Some things like research and development, or space exploration can be done more efficiently with government bodies. But, (save me from my fellow conservatives) not when the government body is in the governing business. Universities, NASA, police & security services etc. are not paid through taxation (entirely.) I mentioned before that the University I work for makes the bulk of its funds from the private sector for business, agricultural, medical, legal, engineering, and weapons research. (Well, the weapons are paid for by the government, but we wouldn’t have the bomb if this university system didn’t provide the assets to develop it.)

Class dismissed until tomorrow, when you guest lecturer will be the eminent Ricorun.

And remember,
The Torah says, "Love thy neighbor as thyself."
The Buddha says there is no "self."
So, maybe you are off the hook...

We all hope for something to increase our debt to China, if only a little bit.

This is winnow on drugs.
Look, muffinhead ~ if you can't keep up, take notes.

Rath,
Clinton raised the marginal rates to, I believe 40%, the rates were lowered in 2002 to the best of my recollection, to 35% when the "temporary tax cuts" were enacted.
But you're right, I did assume the 28% withholding number instead of the 35% tax number, thanks.

Bane,
I have some good news and bad news. Or maybe I should say I have bad news and worse news.

Thank you for that BLS reference. I actually found that page when I was wasting time the other day. The trouble was, for some reason the numbers didn't pop up when I picked all the categories I wanted. The computer just sat there and did nothing at all. But when you mentioned that link again I tried it on another computer, and voila! There they were, and exactly what you said they would be. Apparently the computer I was originally using has a problem with Java. Just great.

Anyway, the values reported there have not been adjusted for inflation. Fortunately, the BLS site also reportst the changes in the Consumer Price Index -- for 1999 - present, anyway. So I could at least adjust the numbers to 1998 dollars. This is what I came up with (% change from the year before is indicated in parentheses):

1998 = $15.72
1999 = $14.96 (-4.86%)
2000 = $14.88 (-0.52%)
2001 = $15.04 (1.10%)
2002 = $15.55 (3.37%)
2003 = $15.77 (1.39%)
2004 = $15.56 (-1.34%)

Because the above numbers are in 1998 dollars instead of 1982 dollars, the magnitude of the numbers are going to be different than the Average Hourly Earnings chart that I previously mentioned for the private sector. But the magnitude and direction of the changes are similar with one exception: the change from 1998 to 1999. The numbers above for all workers show a fairly big drop from the end of 1998 to the end of 1999. But the private sector numbers show a small increase. I guess it's unreasonable to expect perfect correspondence. Other than that, though, the changes in average wage for all workers versus private sector are quite similar. They are also reasonably consistent with your description -- except for a little dip in 2004, average wages have kept pace with inflation since the end of 2001. Apparently though, median wages have not. And I stand by my description of how to interpret the discrepancy: generally speaking, the rich are getting a little richer and the less well off are getting a little poorer. I'm sure there are plenty of people who are fine with that, but that's what the numbers mean.

Bane,
Please ignore my "I have some good news and bad news..." statement. That wasn't supposed to be in there. That's from something completely unrelated, and I didn't realize it was there until I posted my comment. Sorry.

Rico,
This is where I get to use the geometric mean; as a FA this is the most common method of divining a factor for return on investment, inflation calculations, and aggregate salary to inflation ratios, etc. The numbers from 2000 to 2005 seem to bear out the CNN article of 1.01% increase over inflation. Thanks for putting the wages into “inflation adjusted” dollars. I couldn’t get the BLS chart on non-seasonally adjusted to work this morning; perhaps I can run those numbers this weekend. Still my calculations on your numbers vary slightly from yours, albeit not enough to change your conclusions, just enough to annoy me into trying to calculate them again.

Still, your contention that the rich are getting richer while the poor get poorer cannot be verified with the information we have discussed. Although I cannot argue with the rich part, every sector I checked showed comparable rises in income. How can the survey show rises in salaries and the median remains stagnant? This would indicate that the median is falling behind inflation, yet the evidence we’ve seen contraindicates this conclusion. My theory is that the increase in the workforce is at or below median workers. The “job creation” that the Administration has touted is, while not minimum wage jobs, at or below median. This is only speculation as the BLS doesn’t keep those records as such, and all we have to go on is the press reports that the jobs are either minimum wage fast food jobs or hi-tech, hi-paid service sector jobs. Allow me some time to research this. We may have to take it up on another thread.

Btw, not to criticize, but in your last post the two links are the same url. Donch hate that cut-n-paste-n-forget-to-change-the-address thing?