The tax scam

People who call the Republican proposal a "tax cut" are making a mistake or trying to deceive the public. The Republican proposal is to increase middle class taxes to give more public money to the very rich. The system is supposed to work by sharing the costs of government fairly. But the Republicans want to give a special tax rate to the rich and make the middle class pay the costs of government like the two very expensive wars we are still fighting and the costs of the debt that they ran up and we have to pay interest on. Here's the picture on the left. That huge grey bubble at the bottom is a tax gift to millionaires.

This is how it works: the IRS figures out how much tax everyone owes based on the tax rates that apply to everyone and then gives you a break depending on how much you earned. As you can see, people earning very little get nothing but under the Republican plan people earning a million dollars or more get $103,000 back! But it's even better than that because the government does not have any extra money - that $103,000 has to be borrowed. And who has $103,000 to invest in nice tax free government treasury bonds? Not the people who get $800 from this new tax tilt. They have bills to pay. Imagine this: someone making $100 million a year gets a nice $100,000 from the IRS and buys a 10 year treasury bond at 4%. So the government is telling that person, we are not going to just give you $100,000, we're going guarantee you to $40,000 in profit from it over 10 years - and we are going to give you another $100,000 every year. In ten years the IRS will have given him a million dollar nest egg and if he invests it in treasury bonds, he will have made an additional $200,000 in interest all paid by - the middle class taxpayers. Pays for a nice prep school for the kids and a small Christmas bonus for the maid, thanks very much. Think how many jobs have been created by this scam. Zero is not a big number.

"Tax cuts" paid for by borrowing are not really cuts because someone has to be stuck with the bill in the end. If the "cuts" are even, then all we are doing is sticking our children with the debt - not very nice for them. But if the "cuts" are really gifts to people with connections, we are paying rich people to get richer and sticking our children with the debt. And to make it worse: the tax system is already tilted. The 400 people who earned the most in 2007 paid an average of 16% tax - SIXTEEN PERCENT - on income of over $340 MILLION. So someone standing on their feet all day working in a store for say $47,000 pays 17% to the government after going to HR block, but if you make $340,000,000 you can afford a clever tax accountant and tax lawyers who will get your rate down to %16. Because paying taxes is for the little people.

And what happens next? Next year, the Republicans will tell us that the deficit, the deficit created by their tax gifts to contributors, is too high and so social security must be cut. Because they are really concerned about the government deficit, really they are.



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