C
ChasNemo
Guest
Once again, Bush shoots the bird at the working class and the working
poor!
http://www.cbpp. org/1-17- 08tax-stmt. htm
ADMINISTRATION STIMULUS PLAN FAILS TESTS FOR ACHIEVING
MOST EFFECTIVE STIMULUS GIVES LESS FAVORABLE
TREATMENT TO FAMILIES UNDER $40,000
Statement by Robert Greenstein, Executive Director
The centerpiece of the President's new stimulus plan -- a rebate
provided by
temporarily eliminating the 10 percent income tax bracket -- fails
crucial
tests for providing the most effective stimulus, because it is not
targeted on
the tens of millions of families most likely to spend that rebate. In
so
doing, the plan flouts the advice offered yesterday by Federal Reserve
chair
Ben Bernanke. The plan also includes a business tax component that, at
best,
would provide modest stimulus.
This plan would bypass altogether, or provide only partial help to,
the more
than 40 percent of tax filers -- over 50 million filers -- with the most
modest
incomes. Families of four below $40,950 would get partial help or
nothing at
all.
The plan is being described as featuring a rebate of $800 to
individuals and
$1,600 to couples. That, however, is misleading. Only the 60 percent
of tax
filers with incomes high enough to be in the 15 percent tax bracket or
a
higher bracket could get those amounts.
Households that earn too little to be in the 10 percent bracket would
get
nothing. The fact that many of these workers pay large amounts of
payroll tax
would be ignored. Families of four making less than $24,900 would be
shut out
entirely.
All households in the 10 percent bracket -- families of four with
incomes
between $24,900 and $40,950, and many families somewhat above that
range as
well -- would get only a partial rebate. [1]
Not Well Designed to Give Economy the Most Help
As the Congressional Budget Office explained this week and as
virtually all
reputable economists agree, low- and moderate-income households will
spend a
larger share of any tax rebate dollars they get (and save as smaller
share)
than higher income households. As CBO has also explained, this means
that tax
rebates focused on lower- and moderate-income households inject more
money
into the economy quickly and are more effective as stimulus.
Federal Reserve Chairman Ben Bernanke made this point in testimony
before the
House Budget Committee yesterday. "Putting money into the hands of
households
and firms that would spend it in the near term" is a priority,
Bernanke said.
The Administration plan ignores these basic economic realities and
excludes
the very families it is most important to include if the stimulus is
to be as
effective as possible. The plan thus would save fewer jobs and do less
to
shore up a weak economy than it should.
Relatively Ineffective Business Tax Component
The plan also includes business tax incentives that CBO and various
studies,
including studies by Federal Reserve economists, have said had only
modest
effects at best when tried as economic stimulus in the last downturn.
But if
the effects of the proposed business tax cuts in boosting the economy
are
uncertain, one effect of those tax cuts is quite clear -- they would
drive
states whose revenues are already declining because of the slowdown
deeper
into deficit, due to the linkages between federal and state tax codes.
States are required to balance their budgets even in recessions, so
the plan's
business tax cuts would trigger larger state budget cuts or tax
increases to
close the bigger deficits. The areas of state budgets most likely to
be cut
would be health care -- including health insurance for low-income
children --
education, and assistance to local governments, many of which are
already
suffering financially due to falling property tax revenues. These are
the
budget areas where the largest share of state budget cuts typically
are made
during recessions. In recent weeks, states already have begun to
propose cuts
in them.
While including relatively ineffective business tax subsidies, the
plan omits
any additional weeks of unemployment insurance benefits for laid-off
workers
whose UI benefits run out before they can find a new job, despite the
fact
that CBO and other analysts rate this very high as effective stimulus
and it
has been a basic component of stimulus packages adopted in every
recession for
decades.
The plan thus seems to favor Administration ideological or political
preferences over the evidence on what would work best in helping to
keep the
economy out of a painful recession.
Both for the economy and for the sake of millions of struggling
families,
policymakers should do substantially better than this in fashioning a
stimulus
package.
------------ --------- --------- --------- --------- --------- -
End Notes:
[1] For a family taking the standard deduction, the 10 percent bracket
begins
at $24,900 for a family of four. In fact, because of interactions with
the
child tax credit, a family with two children would not be able to
benefit from
the President's proposal until its income exceeded $25,190. Moreover,
some
families take additional credits, like the dependent care tax credit,
or
itemize deductions. As a result, a significant number of families
with
incomes somewhat above $25,000 would get nothing, and a significant
number of
families somewhat above $41,000 would get only a partial rebate.
# # #
The Center on Budget and Policy Priorities is a nonprofit,
nonpartisan
research organization and policy institute that conducts research and
analysis
on a range of government policies and programs. It is supported
primarily by
foundation grants.
poor!
http://www.cbpp. org/1-17- 08tax-stmt. htm
ADMINISTRATION STIMULUS PLAN FAILS TESTS FOR ACHIEVING
MOST EFFECTIVE STIMULUS GIVES LESS FAVORABLE
TREATMENT TO FAMILIES UNDER $40,000
Statement by Robert Greenstein, Executive Director
The centerpiece of the President's new stimulus plan -- a rebate
provided by
temporarily eliminating the 10 percent income tax bracket -- fails
crucial
tests for providing the most effective stimulus, because it is not
targeted on
the tens of millions of families most likely to spend that rebate. In
so
doing, the plan flouts the advice offered yesterday by Federal Reserve
chair
Ben Bernanke. The plan also includes a business tax component that, at
best,
would provide modest stimulus.
This plan would bypass altogether, or provide only partial help to,
the more
than 40 percent of tax filers -- over 50 million filers -- with the most
modest
incomes. Families of four below $40,950 would get partial help or
nothing at
all.
The plan is being described as featuring a rebate of $800 to
individuals and
$1,600 to couples. That, however, is misleading. Only the 60 percent
of tax
filers with incomes high enough to be in the 15 percent tax bracket or
a
higher bracket could get those amounts.
Households that earn too little to be in the 10 percent bracket would
get
nothing. The fact that many of these workers pay large amounts of
payroll tax
would be ignored. Families of four making less than $24,900 would be
shut out
entirely.
All households in the 10 percent bracket -- families of four with
incomes
between $24,900 and $40,950, and many families somewhat above that
range as
well -- would get only a partial rebate. [1]
Not Well Designed to Give Economy the Most Help
As the Congressional Budget Office explained this week and as
virtually all
reputable economists agree, low- and moderate-income households will
spend a
larger share of any tax rebate dollars they get (and save as smaller
share)
than higher income households. As CBO has also explained, this means
that tax
rebates focused on lower- and moderate-income households inject more
money
into the economy quickly and are more effective as stimulus.
Federal Reserve Chairman Ben Bernanke made this point in testimony
before the
House Budget Committee yesterday. "Putting money into the hands of
households
and firms that would spend it in the near term" is a priority,
Bernanke said.
The Administration plan ignores these basic economic realities and
excludes
the very families it is most important to include if the stimulus is
to be as
effective as possible. The plan thus would save fewer jobs and do less
to
shore up a weak economy than it should.
Relatively Ineffective Business Tax Component
The plan also includes business tax incentives that CBO and various
studies,
including studies by Federal Reserve economists, have said had only
modest
effects at best when tried as economic stimulus in the last downturn.
But if
the effects of the proposed business tax cuts in boosting the economy
are
uncertain, one effect of those tax cuts is quite clear -- they would
drive
states whose revenues are already declining because of the slowdown
deeper
into deficit, due to the linkages between federal and state tax codes.
States are required to balance their budgets even in recessions, so
the plan's
business tax cuts would trigger larger state budget cuts or tax
increases to
close the bigger deficits. The areas of state budgets most likely to
be cut
would be health care -- including health insurance for low-income
children --
education, and assistance to local governments, many of which are
already
suffering financially due to falling property tax revenues. These are
the
budget areas where the largest share of state budget cuts typically
are made
during recessions. In recent weeks, states already have begun to
propose cuts
in them.
While including relatively ineffective business tax subsidies, the
plan omits
any additional weeks of unemployment insurance benefits for laid-off
workers
whose UI benefits run out before they can find a new job, despite the
fact
that CBO and other analysts rate this very high as effective stimulus
and it
has been a basic component of stimulus packages adopted in every
recession for
decades.
The plan thus seems to favor Administration ideological or political
preferences over the evidence on what would work best in helping to
keep the
economy out of a painful recession.
Both for the economy and for the sake of millions of struggling
families,
policymakers should do substantially better than this in fashioning a
stimulus
package.
------------ --------- --------- --------- --------- --------- -
End Notes:
[1] For a family taking the standard deduction, the 10 percent bracket
begins
at $24,900 for a family of four. In fact, because of interactions with
the
child tax credit, a family with two children would not be able to
benefit from
the President's proposal until its income exceeded $25,190. Moreover,
some
families take additional credits, like the dependent care tax credit,
or
itemize deductions. As a result, a significant number of families
with
incomes somewhat above $25,000 would get nothing, and a significant
number of
families somewhat above $41,000 would get only a partial rebate.
# # #
The Center on Budget and Policy Priorities is a nonprofit,
nonpartisan
research organization and policy institute that conducts research and
analysis
on a range of government policies and programs. It is supported
primarily by
foundation grants.
