The Trickle Up Effect

Did you watch the final Presidential debate on Wednesday?

I was stunned by John McCain’s efforts to paint Barack Obama as a big-spending, big-taxing liberal and accuse him of wanting to take away American’s hard-earned money.

Yes Obama would increase taxes for the wealthiest 1% of our country’s population, but this is because of the Bush administration’s fiscally-irresponsible tax breaks for the highest income Americans and who needs to bring up dropping a bundle on a war? Now we see where that has gotten us. The irony of McCain’s accusations is that Obama would cut taxes for 95% of the population and give bigger tax relief than McCain would give to 60% of Americans.

As I listened to the debate, I started to wonder – does it really all come down to taxes for some voters? And if so, what about domestic and social needs such as fixing our national healthcare system and lowering health costs, re-valuing early childhood education, improving our schools, making college more affordable, fighting for pay equity between women and men, eliminating gender discrimination, strengthening domestic violence laws, building clean energy and using renewable resources, and living with hope that we can rebuild our country with strength from the bottom up.

I think Barack described our situation well when he said, “When that dream of opportunity is denied to too many Americans, then ultimately that pain has a way of trickling up.”

Are we stuck in the trickle up effect?

But wait a minute, is this really all about taxes? Why has the conversation run aground in the debate over taxes when it should be sailing in deeper water – meaning what do these candidates really represent to us?

Obama for me and I know many others has been celebrated as a voice of hope and possibility. From what I can tell, McCain supporters see him as a representation of safety, familiarity and paternal security.

Instead of getting narrowed in the debate over taxes, this to me is the real debate – do you want hope or do you want a false sense of security? For some of us, it’s an easy choice.

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9 thoughts on “The Trickle Up Effect

  1. The latest IRS data has arrived on who paid what share of income taxes in 2006.

    The top 1% of taxpayers, those who earn above $388,806, paid 40% of all income taxes in 2006, the highest share in at least 40 years. The top 10% in income, those earning more than $108,904, paid 71%. Americans with an income below the median paid a record low 2.9% of all income taxes, while the top 50% paid 97.1%.

    About 40% of the population paid no income taxes.

    The top 1% earned 22% of all reported income. But they also paid a share of taxes not far from double their share of income – 40%. The tax code is already steeply progressive. This data does include real estate taxes, sales taxes or the death tax, in which half of your income and property goes to the government – not your children – when you die.

    We also know from income mobility data that a very large percentage in the top 1% are “new rich,” not inheritors of fortunes. There is rapid turnover in the ranks of the highest income earners, so much so that people who started in the top 1% of income in the 1980s and 1990s suffered the largest declines in earnings of any income group over the subsequent decade, according to Treasury Department studies of actual tax returns. It’s hard to stay king of the hill in America for long.

    The most amazing part of this story is the leap in the number of Americans who declared adjusted gross income of more than $1 million from 2003 to 2006. The ranks of U.S. millionaires nearly doubled to 354,000 from 181,000 in a mere three years after the tax cuts.

    Taxes paid by millionaire households more than doubled to $274 billion in 2006 from $136 billion in 2003. These tax payments from the rich explain the very rapid reduction in the budget deficit to 1.9% of GDP in 2006 from 3.5% in 2003.

    The last time tax rates were as high as the ones proposed by those who want taxes increased was the Carter years — the rich paid only 19% of all income taxes, half of the 40% share they pay today. Why? Because they either worked less, earned less, or they found ways to shelter income from taxes so it was never reported to the IRS as income.

    The way to soak the rich is with low tax rates, and last week’s IRS data provide more powerful validation of that proposition. The lower the taxes, the more people make money and the more taxes come into our country. When taxes are increased the opposite is true.

    Remember that the income tax was enacted in 1913. Before that, nobody paid income taxes and we were still able to win wars, fund public education, etc. – whatever is important to you or your politics, it was funded without income taxes. In less than 100 years, income taxes have moved to take almost half of even a middle class family’s income. That means that you work 5 months of the year for free for the government to use with little to no accountability. When you hear politicians – no matter what party – say that they are going to increase taxes, it is evidenced that it actually hurts the economy, middle class mobility and produces less revenue to fund social services and national security.



  2. Hi Tabby, I took the time to read back through your recent blogs today and just want to
    say that I really like your tone and the content a lot. It’s a good service to women and
    readers in general.
    A friend just transferred some old GET OUT THE VOTE spots to You Tube. Thought you’d get
    a kick out of them
    In 1994 I raised the money, cast, directed and produced this public service
    announcement. It won a CLIO award. I hope it helps get out the vote again. Please
    forward it to anyone you know who can spread it around swing states.
    The spot, was credited with helping to register a million women to vote in
    California that year.
    It takes a village.
    Julie

  3. Julie,
    The Get Out The Vote spot is fantastic! I just viewed it. Thank you for making it and thank you for sharing it. I will be sure to pass it along.

    I hope to see you around soon,
    Tabby

  4. hey tabby
    love seeing what you’re up to. saw that you worked with the ladies who launch. victoria
    is an an acquaintance of mine here in cleveland. that is where i now live.

    such a great idea and so glad it has worked for you! looks like your life is blooming.
    you go girl!

    ommmmmmmmmmmmmmmmarni

  5. Tabby, I hate to be the bearer of bad news to your blog, but your numbers are not factually correct. I am not sure where you get the 60%, but Barak is actually giving “tax cuts” to 44% of the population by most accounts, including NY Times and the Wall Street Journal and of that 44%, 40% of those people already pay $0 in federal income taxes. So in effect, Obama is promising tax rebates to people who already pay $0 in taxes.

    See below:

    http://online.wsj.com/article/SB122385651698727257-email.html

    According to the American Enterprise Institute, there’s another catch: Because Obama’s “tax credits” are phased out as incomes rise, they impose a huge “marginal” tax rate increase on low-income workers… Some families with an income of $40,000 could lose up to 40 cents in vanishing credits for every additional dollar earned from working overtime or taking a new job.

    This will be a huge hardship on lower middle income families. I know that you are voting for Obama, I just think it is important for you to understand the effect of his policies. It may be “just taxes” to you, but to people who are struggling it is the difference between buying food or gas for your family because your taxes are taking up 40% of your income. Pretty sad.

  6. Tabby,

    It is all politics. We have to wait to see if they do as they said when elected. I have already voted for Obama on a absente ballot and the recent surge of ads and speeches doesn’t bother me much. I just believe in hope as you mentioned.

  7. There is a problem with statistics: They can be manipulated to make any point you want. If I had Obama, Joe Biden or even Warren Buffet at my side they would offer an easy antidote to the tax statistics often favored by Republicans. The tax to and fro becomes a lively debate – but is simply not part of a fruitful dialogue aimed at problem solving.

    Looking back to the early days of our nation and no income taxes is also not relevant. The America of the Founding Fathers was an agrarian society, lots of self-sufficient farmers and the like, and also with a much lower population than we have now. Does anybody really think that the America of today would function without income taxes?

    How then can we come to understand if trickle up or trickle down works? Let’s cut to the chase. More important that tax statistics or arguments about eliminating taxes is this fact: A purely market-driven economy leaves people behind. If there is no profit to be made on a child or on a homeless person that child or homeless person will be abandoned. So what then? You can depend upon the kindness of nice people but there doesn’t seem to be enough of that going around. Government, funded by taxes, might need to step in to fund education for children or keep people from dying. And if the government isn’t properly funded to step in, then Republicans who advocate lower taxes must take responsibility for the void they will create.

  8. This is a great way to see the choice between Obama and McCain — I’d only add that Obama may represent not just hope but a glue to bring us together as Americans to find common ground. I see McCain as more divisive as indicated by the campaign they’ve run causing Americans to vote out of fear and intolerance. I personally don’t know how Palin and McCain can sleep at night.

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