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Extension of Tax Cuts Gives To The Rich
By Region 8 Webmaster John Davis

On May 18, 2006 President Bush signed another tax cut into law. Upon signing the bill, Bush stated “With this bill, we’re sending the American people a clear message about our policy: We’re going to continue to trust the American people with their own money.” Well thank you Mr. President for that vote of confidence, but it is just too bad that it appears that the only Americans you trust with their own money are the rich. Because, once again you have signed into law a tax cut whose impact favors the wealthy while ignoring those on the lower end of the income chain.

The Tax Increase Prevention and Reconciliation Act of 2005 signed into law by President Bush essentially extends the lower tax rates on capital gains and dividends that were passed earlier until 2010 as well as several expiring business tax breaks. According to the Economic Policy Institute, this tax cut will primarily hit a very narrow slice of the population, which is the richest 1% of the population. This tax cut in a nutshell covers dividend checks for stocks from publicly traded companies, ownership of closely held businesses and nonresidential real estate. Of the total assets within these categories, the wealthiest 1% of the population holds 37% of all stocks, 62% of all closely held businesses and 47% of all nonresidential real estate.

When you break out the top 1% from the bottom 90% in terms of household wealthy, the top 1% wealth in terms of three categories affected by these tax cuts equals $10.9 trillion dollars compared to $3.9 trillion for the lowest 90% of households. Essentially, that top 1% owns 2.8 times what the lower 90% own collectively. This means the average family in the top 1% holds $10,000,000 in assets while the average family in the lower 90% holds just $40,000 in assets. With that in mind, this extension of the tax cut will mean the wealthiest 1% will benefit from this bill 250 to 1 compared with the lower 90% of families.

The Tax Policy Center reported the tax cut will average about $3 per family making $20,000 or less, while families making $1,000,000 or more will see an average tax cut of $43,000. Families whose income fall within the $50,000-$70,000 range would see a tax cut of $112 – provided a portion of their income comes from stock dividends or nonresidential property. To add insult to injury, the Republicans removed a provision from the bill to add a tax credit of $4,000 a year per student for college tuition. Working class Americans who do not own stock or nonresidential property cant share in this tax cut, but the Republicans were adamant about denying the working class a credit for trying to educate their children.

This bill caps the tax on capital gains to 15%. Compare that with what you paid on your income tax last year. Many of the rich obtain the bulk of their income from capital gains, which will mean they will only pay a 15% tax rate while you are still stuck in the 28% range of taxes on your pay check. So while you are hitting a time clock to make a living, you are being taxed at almost twice the rate the wealthy are paying for watching their capital gains checks roll in. The government reports these capital gains tax cuts have resulted in a savings of $880,000,000,000 in the five years since their were passed. Remember, this tax cut benefits the top 1% 250 to 1 compared to those of us who fall within the bottom 90%. So, thanks again President Bush for trusting those within that top 1% with their money, while those of us in the bottom 90% earn no trust from you. It is no wonder the President currently has the lowest approval ratings in history – because that top 1%’s rating on presidential approval doesn’t add up nearly as fast as their tax cuts.