Boozman

Passes.

23 million Americans saved from a tax they have never had to pay before.

352-64.

Some interesting reading from this morning’s Wall Street Journal. Turns out the rich have been paying an even larger “fair share” than ever, and it is thanks to the Republican in the White House.

Here is the full text:

Taxes and Income
The Wall Street Journal
December 17, 2007; Page A20

Every Democrat running for President wants to raise taxes on “the rich,” but they will have to do something miraculous to outtax President Bush. Based on the latest available tax data, no Administration in modern history has done more to pry tax revenue from the wealthy.

Last week the Congressional Budget Office joined the IRS in releasing tax numbers for 2005, and part of the news is that the richest 1% paid about 39% of all income taxes that year. The richest 5% paid a tad less than 60%, and the richest 10% paid 70%. These tax shares are all up substantially since 1990, and even somewhat since 2000. Meanwhile, Americans with an income below the median — half of all households — paid a mere 3% of all income taxes in 2005. The richest 1.3 million tax-filers — those Americans with adjusted gross incomes of more than $365,000 in 2005 — paid more income tax than all of the 66 million American tax filers below the median in income. Ten times more.

For the political left and most of the media, this means only that the rich are getting richer, so of course they’re paying more taxes. And it is true that the top earners have increased their share of total income. Yet, as the nearby table shows, the rich showed more rapid gains in reported income shares in the 1990s than in the first half of this decade. The share of the richest 1% jumped to 20.8% of total income in 2000, from 14% in 1990, but increased only slightly to 21.2% in 2005. This makes it hard to pin their claim of “rising inequality” on the Bush tax cuts, though the income redistributionists are trying. By this measure, the Clinton years were far worse for “inequality.”

Notably, however, the share of taxes paid by the top 1% has kept climbing this decade — to 39.4% in 2005, from 37.4% in 2000. The share paid by the top 5% has increased even more rapidly. In other words, despite the tax reductions of 2001 and 2003, the rich saw their share of taxes paid rise at a faster rate than their share of income. How could this be?

One explanation is that the Bush tax cuts reduced the income tax liability of middle and lower income households by more proportionately than the rich. The average family of four with an income of $40,000 saw its income tax liability fall by about $2,052 a year from the 2001 and 2003 tax cuts.

The IRS statistics also tell a more complicated economic story than the media claim. First, America continues to be a society of upward income mobility. Over the past decade, millions of Americans have joined the once highly exclusive club of six- and seven-figure earners. Some 304,000 Americans earned $1 million or more in annual income in 2005, compared to 110,000 in 1996 and 176,000 in 2000. Because there is no cap on the top income share, this increase in millionaires pushes the top income (and taxes paid) share higher. The number of millionaire households in net worth also increased to nine million in 2006, up from six million in 2001, according to TNS, a global market research firm.

Liberals decry this as proof of a new “gilded age.” But we’d say these gains are a sign that more Americans are joining the ranks of the truly affluent. More than 13 million American households, or about one in 10, had an income of more than $100,000 a year in 2005. This is the kind of upward mobility that a dynamic society should want because it means that incomes aren’t stagnant and opportunity continues to exist.

Keep in mind as well that the IRS only records the income that taxpayers report. Its data don’t include income that the rich hide in tax shelters or otherwise defer. And there is evidence that lower tax rates since 1981 have caused the rich to declare more of what they earn. In 1980, when the top income tax rate was 70%, the richest 1% paid only 19% of all income taxes; now, with a top rate of 35%, they pay more than double that share. With lower rates and fewer tax loopholes after the 1986 reform, there is less incentive to shelter income to avoid tax.

The IRS figures are also misleading because they include income that can make many Americans rich for only a single year. In 2005, for example, taxpayers earned an estimated $600 billion in income from capital gains, which is reported on tax forms as part of adjustable gross income. But that might include the one-time gain from a middle-class senior couple that has lived modestly for decades but suddenly retires and sells the family business or home for $1 million or more. They may be “rich” in Hillary Clinton’s definition of the term, but in fact they are benefiting in one tax year from a lifetime of hard work and thrift.

The amount of capital gains declared on tax forms has doubled since the tax rate was cut to 15% from 20% in 2003, which has also contributed to more Americans being “rich.” Dividend income has also increased by at least 50% since that rate was cut to 15% from nearly 40% in 2003. So part of the income gains of the rich are simply a result of assets that have been converted into taxable income — in part because of lower tax rates.

We hate to break up the media’s egalitarian chorus with these details, but facts are facts. If Democrats really want to soak the rich, they’ll keep tax rates where they are, or, better, lower them some more.

The Associated Press picks up on a story the House GOP has warned the American people about: a delay in tax returns for millions of Americans.

The culprit: a lack of an Alternative Minimum Tax patch.

WASHINGTON (AP) — Silena Davis had counted on an early tax refund to pay for getting her teeth fixed. Now, because Congress has dawdled all year on a tax bill, she and millions of other early filers could have to wait extra weeks for refunds that last year averaged $2,291.

The Internal Revenue Service is looking hard at delaying the start of its filing season, set to kick off on Jan. 14, if Congress fails to pass legislation in the next two weeks. At issue is how to handle what could be a dramatic increase in the number of people facing a higher alternative minimum tax.

If there is a delay and it extends into mid-February, it would slow nearly 32 million refunds worth a total of about $87 billion, the IRS Oversight Board predicts.

The House passed its own version of the temporary, one-year, patch of the AMT - paying for it with a $70 billion permanent tax increase. Rep. Boozman voted against the plan. The 130% tax increase is also DOA in the Senate, where even some Democrats have balked at it.

The alternative minimum tax was passed in 1969 and was aimed at about 155 very wealthy families who used deductions to avoid paying any federal income tax. The AMT disallows certain deductions and credits. It was not adjusted for inflation; as a result, over the years it has hit a growing number of middle-income taxpayers.

More than 4 million were subject to it in the 2006 tax year, and that could soar to 25 million this year without congressional action.

The House needs to pass a patch which doesn’t increase taxes and does not violate the PAYGO rules a bipartisan majority of members voted on in January.

From this morning’s edition of The Hill, it would appear House Democrats are finding things to complain about - even in places where it takes a herculean effort to bend the facts to their view.

Congressional Democrats will focus on the economy next week in an effort to win political advantage from public fears about an approaching recession.

This underscores the party leadership’s concern to avoid getting bogged down in more debate about Iraq and to make sure it is President Bush and Republicans who are blamed in the 2008 election for voter anxieties about the economy.

So pivoting off the issue of doing nothing of note this Congress, except for a minimum-wage increase and 47 post offices receiving names, the House leadership will attempt to blame Congressional Republicans for the “bad economy” instead of working in a bipartisan effort to find solutions.

To illustrate the disconnect between House leaders and reality, here are some points to consider:

• On November 2, the Bureau of Labor Statistics released new jobs figures – 166,000 jobs created in October. Since August 2003, 8.31 million jobs have been created, with 1.68 million jobs created over the 12 months that ended in October.
• The economy has now added jobs for 50 straight months – the longest period of uninterrupted job growth on record. The unemployment rate remains low at 4.7 percent.
• Real GDP grew at a strong 3.9 percent in the third quarter of 2007. The economy has now experienced six years of uninterrupted growth, averaging 2.8 percent a year since 2001.
• Real after-tax per capita personal income has risen by 12.7 percent – an average of over $3,800 per person – since January 2001.

“They’re making this up as they go along,” Rep. Adam Putnam (Fla.), the Republican Conference chairman, said.

A couple of questions to ask during this time, according to House Democrats, of woe:

• Why hasn’t there been a clean AMT patch passed by the House which protects millions of Americans from paying a tax originally conceived for the uber-rich, while protecting millions of more Americans who create our vibrant economy from a $70 billion permanent tax increase?
• If things are as bad as they seem, why do we need the multi-trillion-dollar “Mother of All Tax Hikes“?

Apparently the Washington press corps needed some extra help in deciphering whether Speaker Pelosi supports the “Mother of All Tax Hikes.”

Following the unveiling of arguably the most politically explosive domestic policy bill of the 110th Congress last Thursday, Pelosi seemed to wholeheartedly support the tax overhaul authored by Ways and Means Committee Chairman Rangel.

“I certainly support his plan,” Pelosi (D-Calif.) said to the assembled reporters.

But when the transcript of the briefing came out, words were inserted — highlighted by brackets — clarifying that she supported his goal, if not his specific proposals.

The final transcript read: “I certainly support his plan [to begin tax reform.]”

The distinction is an important one. Rangel was immediately criticized by the GOP as he announced his highly controversial tax plan and Republicans started trying to tie the plan to Pelosi and the Democratic leadership.

Well, that certainly makes sense [not really, but we’ll just wink and nod like we do].

From the opinion pages of this morning’s USA Today, comes a hard look on how to deal with the AMT.

After taking over Congress this year, they promised a “pay-go” approach. Any tax cut or discretionary spending increase was to be offset elsewhere in the budget — a welcome change from the Republicans’ limitless spend-and-borrow approach. But now the Democrats find themselves struggling to come up with $50 billion in offsets needed just to continue the temporary AMT fixes.

So last week, House Democrats proposed a plan to repeal the AMT entirely. Rather than having to abandon their pay-go pledge each year, or be forced to raise taxes or slash spending merely to keep the AMT at current levels, they are pushing a major tax overhaul.

Predictably, the plan rests almost entirely on raising taxes for upper-income taxpayers. Just as predictably, Republicans dismissed it as class warfare.

Before we get too snooty, an admonition from the opinion-writers:

“But for those who don’t like the plan, we have one question: Where’s yours?”

Indeed…

The Politico reports on the looming fight over a $1,000,000,000 (that’s a trillion) tax bill being offered by Rep. Charles Rangel (D-NY).

“It is surprising how nervous people get when I use the words ‘fairness’ and ‘equity’ to describe our efforts to simplify the tax code and encourage economic investment,” the New York Democrat told Politico.

One “fair” proposal: a 4 percent surcharge on unmarried taxpayers making more than $100,000 a year and couples making more than $200,000.

That comes to $4000 for singles, $8000 for couples.

From this morning’s Wall Street Journal. Reprinted here:

The Wall Street Journal
October 9, 2007

We hate to be the bearers of good news, but someone’s got to do it: The Congressional Budget Office has released its preliminary estimates for Fiscal Year 2007 that ended September 30, and the federal budget deficit fell again, this time by 35% to $161 billion.

There’s more to applaud, if you can stand it: Since 2004, deficit spending has tumbled by $251 billion, which is one of the most rapid three-year declines in U.S. history. The deficit as a share of the economy is down to 1.2%, or about half the average of the last 50 years. This improvement is especially remarkable given the $150 to $200 billion a year of post-9/11 expenses for homeland security and the wars in Iraq and Afghanistan.

Americans coughed up a record $2.568 trillion in taxes to the IRS in 2007, or 6.7% more than in 2006. This means federal receipts have climbed by $785 billion since the 2003 investment tax cuts, the largest four-year revenue increase in U.S. history. Income, dividend and capital gains tax rates were all cut in 2003, but individual income tax receipts have soared by 46.3% in four years, with payments by the wealthy accounting for most of the windfall. Last year’s increase in individual income payments was 11.3%, or more than double the rate of growth in nominal GDP. Don’t worry, class warriors: Hannah Montana and others among the “new rich” are paying their taxes.

Overall federal revenue is now 18.8% of GDP, compared with the 18.2% average of the past 40 years. The nearby table shows how far off CBO was, as usual, in its static-revenue estimates that failed to anticipate the impact of taxes on incentives and growth.

The biggest surprise in fiscal 2007 was the slower growth in federal spending. CBO reports that federal outlays crept up just 2.8% last year (2.5% after adjusting for timing in payments), which was “well below the 7.3 percent average over the previous five years.” The decline was largely due to lower disaster-related payments compared with Hurricane Katrina’s aftermath the year before, plus the budget deal last winter that kept domestic spending stable as Congress changed hands.

This is a one-year wonder. Congress is already gearing up to splurge again, with its $35 billion expansion in the children’s health program, a $286 billion five-year farm bill, $23 billion in water projects, and $22 billion more in non-defense discretionary spending. Combine this blowout with slowing revenue growth due to the housing recession, and the deficit may not fall again in 2008. This is all the more reason for President Bush to finally use his veto pen on spending bills.

The overriding lesson here is that the best antidote for deficits is faster growth, not tax increases. The budget deficit has declined more rapidly this decade in the wake of the Bush tax cuts than it did in the 1990s in the wake of the Clinton tax increases. CBO is still forecasting a balanced budget in 2010, but if Congress gets its way on spending and taxes, all of this progress will be short-lived.

Two words:

Bush’s fault.

Two words:

Bush’s fault.