This is part three of a series. If you truly want to know all the facts and opinion on this, it would serve you well to read the prior two posts. FYI, I have spent more time on this than any paper I ever did at any level of schooling. I have done my best to research the facts here. I am reporting my opinion, but am also trying to provide the facts and figures that led me to this conclusion so you can make your own. One last comment prior to getting to the meat of the matter: it amazes me with all the technology and information at our fingertips how difficult it is to find unbiased raw financial data concerning most aspects of taxes.
In the previous post I inserted a spreadsheet I put together to help me get all my research numbers in one place. (which is another aspect of this I have found amazing - there is no repository of comprehensive data on tax revenue, policy, rates, etc. anywhere! But, I digress). As I have been evaluating these numbers I came up with a few more that I thought would be relevant.
There are grave differences in what the tax rates are set at and what the actual effective rates (what is actually paid) are. This is especially true of the households at the very low end of incomes and those at the extreme upper end of incomes. This is due to tax credits and such at the low end and tax credits and what are called "tax breaks" on the upper end. These adjustments mean those at the low end usually end up getting money from the government when filing, which are usually even above what they paid in. At the upper end, it means the rates are adjusted down based on investments, donations, etc. This means that the effective rates are less than zero at the lower end and can be halved at the upper end. (this varies based on the year and the tax code, but is always lower from 25% to 50%)
What this means is, sometimes tax increases or cuts are actually neither. (to give you an example, let's say I give you a dollar but then tell you there is a fee for you getting that dollar of fifty cents. Now, you give me the fifty cents. Does that mean I gave you a dollar, or fifty cents? That is how the tax code changes work. There are all sorts of "stuff" written into any tax bill that GREATLY changes what people actually pay in taxes.
All that being said, from looking at the figures - ultimately tax cuts do NOT cut tax revenues when allowing two to three years for those with money to adjust their investment strategies. Here are some facts on the tax revenues received the year following the largest tax changes since 1960:
As you can see, the tax changes did not make much difference to the revenue brought in. (these figures come from the IRS.gov site, FYI)
If you look at my large spreadsheet from the previous post you will see there are no negative affects on income levels either or any other measure that I could find. I will stand by my evaluation - if I had to chose between the government getting more money and spending it and it staying with those that earned it - leave it in the hands of the taxpayers. Remember, even if you are not a libertarian as I am looking for smaller government; if the tax cuts do not cut revenue or negatively impact negatively any financial aspects I can find - why give it to Washington? They are proven to be the least efficient spenders of our money.
Now comes the argument that the rich do not save taxes and the tax cuts only benefit them. Well, obviously the @50% of people that do not pay Federal income taxes cannot pay less, so from that standpoint - YES tax cuts benefit the "rich". However I will end with on last chart. This shows the percentage of Federal income taxes paid by the top 1%, top 5%, and top 10% the year after the largest tax cut years since 2001 (could not find earlier years! I also included 2012 as a reference).
As you can see, the "rich" pay well above their income percentage even after tax cuts. FYI, the top 1% in 2014 paid just over 40% of the Federal income taxes collected. So, the rich don't pay taxes?
I welcome any cogent and civil comment. I do not publish advertisements nor crude comments. You are welcomed to disagree (preferably with proof) and it will be published immediately. I also welcome questions.
I hope someone takes the time to study all this. Like I said, I spent more time on this than any paper I have ever done and probably more time than any sane person would that was not being paid or forced to do it!
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