NETWORK has serious concern about extension of the 2001 and 2003 tax cuts to the two to three percent of the population with the highest income. The reasoning of those who advocate for ALL the 2001 and 2003 tax cuts to be extended seems flawed. They say that job creation and spending will be increased with the extension, and damaged if they are not extended.
The history of the last nine years does not give credence to this stance. Indeed, during this time of tax cuts for the wealthiest members of our communities, there was a great expansion of job-creation. However, far too many of them were created in other nations. Exporting so many jobs has exacerbated the joblessness here in the U.S.
An article by Timothy Homan of Bloomberg, based on the work of Moody Analytics, Inc., presents interesting information indicating that spending by the wealthiest members of our communities relies more on changes in the stock market than on taxation of their income. Tax savings among the wealthy go into savings! (http://www.bloomberg.com/news/2010-09-13/rich-americans-save-money-from-tax-cuts-instead-of-spending-moody-s-says.html). Roberton Williams of the Urban Institute affirms the view that tax savings of the wealthiest Americans go straight into the bank. (http://www.urban.org/uploadedpdf/500185-Tax-Cut-Extension.pdf).
In contrast, many studies have shown that tax savings on the part of low- and middle-income households are generally spent to meet immediate needs.
We should probably remember that this is not a tax increase, but rather a cessation of the tax boon given to the wealthiest two to three percent of households. Those with incomes in the top one percent have seen their income roughly triple since 1979 (adjusted for inflation). At the same time those in the lowest quintile saw an increase of barely one percent. The middle twenty percent (certainly a part of the middle class) have seen about a 15% income increase over the same period. The average income increase for the top quintile is about 75%. Those with incomes in the top one to two percent are surely more able to manage the taxes than are those whose economic progress has been negligible.
In addition, if Congress fulfills meets the wish of the president regarding expiration of the tax cuts, the wealthiest would still experience benefits:
lower tax rate – capped at 20%
reduction in marriage penalties
no increase in the tax on dividends
tax break for the first $250,000 in income, even for those with higher incomes.
NETWORK has the greatest concern for those among us who struggle to survive economically. Their number is increasing. We cannot see justification for maintaining the tax benefits for the top two to three percent of our neighbors.