Information on the number of tax returns filed by individuals with incomes or $1,000,000 or more, and the total income

tax revenues generated from these tax returns, can be analyzed to see effect of the Bush tax cuts (data for years 20012008) by comparing it with the data for earlier years (1994-2000). Such an analysis is quite revealing and shows convincingly (using classical statistical methods that we can all agree upon) that such individuals would definitely have paid much more in total taxes if there were no Bush tax cuts. In other words, the IRS data (extracted from the annual SOI Bulletins) shows convincingly that cutting the tax rate on the rich did NOT increase government revenues, as implied by the famous Laffer curve. The idea that cutting the highest marginal tax rate would increase government revenues provided the intellectual faade for Reagans deeply held personal beliefs and led to what is known as the supply-side economics. Do the rich pay more in taxes? Sure they do. They are taxed at a higher rate. We have a progressive tax code, which means that as our incomes go up, ALL of us, without exception, pay a higher percent of our income in taxes. Should the rich be taxed at a higher rate, at least until we solve the ballooning deficit and debt issues and the economy heals? That is a political question outside the realm of this analysis. Our political leaders must address that during the 2012 and 2016 elections.

Strategy for Budget Deficit and the US National Debt Reduction _____________________ Is Taxing the Rich a Defensible or Viable Option?

By Dr. V. Laxmanan
Email: vlaxmanan@hotmail.com

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Table of Contents
Page No. Summary .. Introduction .. The highest marginal tax rates in history Effect of expanding tax base (number of tax returns) ... - Tax receipts before and after Bush tax cuts - Figures 1 to 7: The graphical tax story Conclusions . Appendix 1 ..... - Elementary discussion of marginal tax rates Appendix 2 . - Listing of data sources Appendix 3 . - Do the rich pay higher taxes? http://coins.thefuntimesguide.com/2009/02/morgan_silver_dollars.php 3 4 6 8 10 19 22

26

28

http://www.usna.org/handbook/silverdollar.html
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Summary
The near collapse of the US financial markets in 2008, the continued weakness in the US economy as revealed by the high unemployment rates, the growing budget deficits, the threat of government defaulting on its debt obligations due to the failure to raise the debt ceiling, all call for innovative apolitical solutions. Both liberals and conservatives must abandon their long standing divisive positions, for the greater good of the country. First, liberals must agree that the rich do pay higher taxes, since the US tax code is a progressive one. Second, conservatives must abandon their belief that cutting taxes for the rich somehow increases government revenues and has a profound, magical, and beneficial trickle down effect on the economy as a whole by spurring innovation and creating jobs. The annual SOI (Statistics of Income) Bulletins, published by the IRS, provide detailed data on the number of taxable returns and the total tax receipts for a variety of income groups ranging from $1 and below to $1 million and more. It is shown here, using a simple and straightforward method that we can all agree upon without partisan bickering, that for the tax years 1994-2009, i.e., before and after the Bush tax cuts took effect: i) ii) the total tax receipts increase as the tax base increases, i.e., as the number of taxable returns filed increases, and the total tax receipts increase at a much higher rate, with an expanding tax base, when the marginal tax rates are higher.

This recent data suggests that increasing the highest marginal tax rates (and/or allowing the Bush tax cuts to expire) coupled with spending cuts, starting with military spending, without compromising national security, is the ONLY viable option to balancing the budget. Cuts in military spending must be coupled with bold and imaginative Apollo moon-landing type projects that invest in clean energy, infrastructure, education, health care and other civilian sectors to rejuvenate the US economy and create millions of well-paying jobs. This must be coupled with new tax and employment legislation that promote bringing high paying jobs back to the US shores.
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Introduction
In FY 2010, the US government reported $2.2 trillion in revenues (tax receipts) and spent $3.5 trillion. The resultant deficit of $1.3 trillion was added to the growing national debt. For FY 2011, the estimated deficit is $1.6 trillion. Unlike other countries, the US has a legal ceiling on the national debt. Federal law requires Congress to authorize the government to borrow any money needed to pay for its spending. The debt ceiling, currently $14.294 trillion, was reached on May 16, 2011, according to the Secretary of the Treasury, and steps must be taken to raise it by August 2, 2011. The consequences of a default on the debt, and the related payments, are too numerous and serious to contemplate. Some have even suggested that the President should simply ignore the debt ceiling (which may be potentially unconstitutional) and authorize the Treasury department to continue meeting the obligations that have already been made (as opposed to incur new spending) instead of risk a default. http://www.fiduciarymgt.com/corp/additional/tax%20the%20rich.pdf http://topics.nytimes.com/topics/reference/timestopics/subjects/n/national_d ebt_us/index.html http://www.theatlantic.com/politics/archive/2011/04/the-speech-obamacould-give-the-constitution-forbids-default/237977/
http://news.yahoo.com/blogs/ticket/could-obama-ignore-congress-refuse-raise-debtceiling-142136726.html?ugccmtnav=v1%2Fcomments%2Fcontext%2F386285ed-21473226-b5ed-4ab1ce63d99c%2Fcomments%3Fcount%3D20%26sortBy%3DmostReplied

Against this background, the main purpose of this article is to focus on the question of increasing government revenues, rather than cutting spending, which usually receives most of the attention. Can government revenues be increased significantly, at least in the short run (to balance the budget and also to reduce the national debt), by increasing taxes, especially on taxes on the very rich?

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Data extracted from IRS Statistics of Income (SOI) Bulletins Income (AGI) range
Tax year 2008 $1M or more $100k to $200k $50k to $100k $1 to $10k Tax year 2000 $1M or more $100k to $200k $50k to $100k $1 to $10k

Tax returns (in 000s)

320 13,851 30,926 23,778

Total income tax ($, millions)

249,020 232,270 184,554 598

240 8,083 25,673 25,604

226,320 184,035 215,549 2,231

Taxing the Rich Those reporting an AGI of over $1 million contributed $0.26 trillion in individual income taxes (in 2008), or about 23% of total contribution. If their tax contribution was doubled to $0.52 trillion, it would represent an additional tax revenue of $0.26 trillion, a paltry 15.8% of the OMB projected $1.6 trillion deficit for 2011. http://www.fiduciarymgt.co m/corp/additional/tax%20t he%20rich.pdf
The above findings will now be analyzed in more detail for their validity using multiyear data from the same SOI Bulletins, see Richtaxpersdata2/vl/03JUL11 Figure 7, page 18, in particular.

Accordingly, we will discuss the recent trends in the tax receipts by the government, as reported in the SOI (Statistics of Income) Bulletins, especially the tax paid by individuals with Adjusted Gross Income (AGI) of $1,000,000 or more, both before and after the much maligned Bush tax cuts, the subject of many acrimonious debates. For example, a recent study, on this topic entitled Taxing the Rich, by Fiduciary Management Inc. Investment Counsel, individuals with AGI of more than $1 million paid $0.26 trillion in taxes in 2008. Even a doubling of the highest marginal tax rate, from the current 35% to 70%, as advocated by some experts, will not help in balancing the budget or with the retirement of the US national debt.
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Before we proceed with this discussion, however, a little historical perspective may be in order. http://www.fiduciarymgt.com/corp/additional/tax%20the%20rich.pdf

The highest marginal tax rates in history

Supply side economics, which was widely accepted after President Reagan took office, was supposedly inspired by the famous Laffer curve. The essential argument behind this curve was as follows. At a tax rate of 0%, there will obviously be zero tax receipts and hence no Mantra of Supply-side Economics government revenues of any kind. There is no tax base. At a tax rate of 100%, the http://www.time.com/time/ government revenues would again go to magazine/article/0,9171,169 2027,00.html zero, since the government takes all the money and hence no would want to work for You cut taxes and tax revenues increase President an after-tax wage of zero. Hence, there must Bush, 2006 be a maximum point on the graph of government revenues versus the tax rate. Keeping taxes low does When the tax rate becomes too high produce more revenue for the Federal Government (prohibitive range of the curve), government Vice President Dick Cheney. revenues can actually fall. Conversely, if the tax rate is lowered, government could tax cuts as we all know, increase revenues potentially collect more in revenues.
Republican Presidential candidate/nominee John McCain. I know that reducing taxes increases government revenues Republican Presidential candidate Rudy Guiliani in a TV ad.

This supply-side argument, as it is now called, used universally by Republicans to justify all types of tax cuts, (see side bar) however, seems to conflict with the following facts about the highest marginal tax rates in US history. It looks like the very rich did NOT quit working when the highest marginal tax

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rates were as close to 100% as is imaginable. Consider the following. Woodrow Wilson, the 28th President of the United States served in office from 1913 to 1921, see the links given below. He was also the President of Princeton University (1902-1910) and the Governor of New Jersey (19111913). During Wilsons tenure as President, the maximum marginal tax rate was increased from just 7% in 1913 to a whopping 77% in 1918. It was scaled back to 73% in 1919 where it remained until 1921 and was then further lowered to 56% in 1922. http://en.wikipedia.org/wiki/Woodrow_Wilson http://www.taxpolicycenter.org/taxfacts/displayafact.cfm?Docid=213 Even higher marginal tax rates were prevalent in the US before Kennedy took office. It was 94% in 1945 (World War II) then lowered to 86.45% in 1943. It was raised to 91% in 1950 and to 92% in 1952 and held at a constant 91% from 1954 to 1961, when it was lowered significantly by President Kennedy, a topic of a recent discussion by Annie Lowrey, see http://www.slate.com/id/2297513/ Do Tax Cuts Ever Increase Government Revenue? Obviously, Wilson was successful in convincing Congress to approve such an unprecedented increase in the nations highest marginal tax rate in order to achieve some of the financial and economic reforms that he wanted and also manage the tremendous economic burden of the US entry into World War I. Later Wilson was responsible for creating the League of Nations (the predecessor to the modern United Nations) and for these peace efforts he was awarded the Nobel Peace Prize in 1919, the first US President to receive this high honor. As discussed in another recent article by the present author, history teaches that the US national debt has always increased in times of war but responsible efforts were also made, in the immediate aftermath of the crisis, to pay off the debt. http://www.scribd.com/doc/58580703/The-US-National-Debt-RetirementProgram
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The Bush tax cuts of 2001 and 2003, the subject of recent endless debates, which reduced the highest marginal tax rate from a mere 39.6% to a slightly lower 35%, on the other hand, were coupled with hundreds of billions of dollars, approaching trillions, of increased spending to fight the war on terrorism (following the 9/11 attacks) and unprecedented increases in the military spending to fight two wars - in Iraq and Afghanistan. It is against this historical background that the following discussion is being offered to address the issue of the growing national debt, the debt ceiling, and the more urgent challenge of rejuvenating the US economy by creating millions of well paying jobs that have been lost, seemingly forever, in the last decade or more.

Effect of Expanding Tax Base (number of taxable returns) With the Same Marginal Tax Rate
The tax cuts enacted under President George Bush (in 2001 and 2003) reduced the highest marginal tax rate from 39.6% to 35%. They also had a sunset provision and were due to expire on December 31, 2010. After a great deal of acrimonious debate, President Obama compromised and agreed to extend these tax cuts for the near future since increasing the taxes on rich, it was argued, would be harmful and counterproductive and hurt the economic recovery and actually destroy jobs. The data compiled in Tables 2 and 3, from appropriate SOI Bulletins for each year (see appendix 1 for a detailed listing of all the sources), however, shows, interestingly, that the number of income tax returns filed with taxable incomes of $1,000,000 or more has varied greatly over the years, both BEFORE and AFTER the Bush tax cuts. In 2006, the number of such tax returns was 353,000, nearly twice the number of 181,000 for 2003. It was even higher in 2007. The total income tax paid by this group also increased as the number of tax returns increased, both in the pre-Bush tax cuts era and in the post-Bush-tax-cuts era. These trends can be better understood by reviewing the graphs prepared in Figures 1 to 4.
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Table 2: Tax Stats for Adjusted Gross Income of $1,000,000 or more After the Bush tax cuts of 2001 and 2003
Tax year 2008 2007 2006 2005 2004 2003 2002 2001 No. of taxable returns (in thousands) 320 391 353 304 241 181 168 192 Total income tax (in $ millions) 249,020 310,033 273,064 235,665 178,429 132,503 135,844 164,120

Table 3: Tax Stats for Adjusted Gross Income of $1,000,000 or more Before the Bush tax cuts (Clinton era tax rates)
Tax year 1994 1995 1996 1997 1998 1999 2000 No. of taxable returns (in thousands) 70 87 111 144 172 205 240 Total income tax (in $ millions) 56,637 71,540 96,956 121,936 146,767 182,293 226,320

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Figure 1: Composite plot of the income tax stats compiled in Tables 2 and 3, BEFORE (diamonds) and AFTER (solid dots) the enactment of the Bush tax cuts of 2001 and 2003. The number of taxable returns (in thousands) was not constant and varied significantly year after year within both tax structures. However, from the overlapping data, it is clear that the higher marginal tax rates yielded higher tax receipts from this highest income group ($1,000,000 or more). This trend can be quantified mathematically, as described in Figures 2 and 3, by considering the two sets of data (BEFORE and AFTER the tax cuts), separately.

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Figure 2: The total income tax revenues generated from tax returns reported Adjusted Gross Income (AGI) of $1,000,000 or more, for the tax years 2001-2008. The number of taxable returns (in thousands) with this AGI level varied by more than a factor of 2, as seen from the numbers in Table 2. As the number of tax returns increases, the total tax revenues generated also increases. A nearly perfect linear relation is observed. The equation of the best-fit straight line through the data points is of the type y = hx + c. The numerical values of the slope h and the intercept c of the straight line can be readily determined using the classical statistical method known as linear regression analysis (or method of least squares). The linear regression coefficient r 2 = 0.9987 is very high showing a very strong positive correlation. This also permits an extrapolation from this data for higher values of x. If the number of such tax returns increases to 500,000, for example, the tax revenues generated will increase to about $0.4 trillion. (The data points for 2001 and 2002, which fall above the best-fit line, were deliberately excluded from the regression analysis.)
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Figure 3: The total income tax receipts from tax returns with Adjusted Gross Income (AGI) of $1,000,000 or more, for the tax years 1994-2000. Again, the number of taxable returns (in thousands) varied by more than a factor of 3, as seen from the numbers in Table 3. Again, a nearly perfect linear relation is observed. The numerical values of the slope h and intercept c were determined using linear regression analysis (method of least squares). The linear regression coefficient r 2 = 0.9941 is very high showing a very strong positive correlation. This also permits an extrapolation from this data for higher values of x observed in subsequent years. This is more clearly illustrated in the composite plot of Figure 4.

http://blogs.saschina.org/pudongtok/files/2011/03/Lady-Liberty-andLady-Justice.jpg

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Figure 4: Composite plot of the tax data before and after the Bush tax cuts. The best-fit lines for the two tax structures have been superimposed on to the data plotted earlier in Figure 1. At any given point in time, with a constant tax rate structure, the tax receipts increase when the number of tax returns filed increase. However, as we see from the overlapping sets of data for these two recent tax structures, from the Clinton and the junior George Bush eras, the higher tax rate would have yielded higher tax receipts when the tax base increased if more taxpayers had filed their tax returns and paid the higher tax rates.

As we see in Figure 2 and 3, with the exception of the two data points for 2001 and 2002, all the other data points fall on a nearly perfect straight line (for each tax era), with higher total tax receipts always being associated with an increase in the number of tax returns. The constants h and c in the equation of the best-fit line through the data points, y = hx + c, can be readily determined using classical statistics. After the Bush tax cuts, the
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slope h = 0.00084 and the intercept c = - 0.02148. Before the Bush tax cuts, the slope was higher, h = 0.000971. The higher the slope h, the higher the rate of increase in the tax receipts as more tax returns are filed. If the number of taxpayers increase (more millionaires filing taxes, i.e., if the tax base increases), the total tax receipts will clearly increase. This is the significance of a booming economy, with an increasing tax base. We can extrapolate using this best-fit line to determine the tax receipts as the number of taxpayers increase. At the current tax rates (after the Bush tax cuts, which have been retained), the projected budget deficit of $1.6 trillion for 2011 can be erased only if an additional 2,000,000 tax returns are filed in this income group. Given the recent trends in tax filings since 1994, such a huge increase cannot be contemplated, even if the economy recovers fully. This means that it is IMPOSSIBLE to wipe out the projected budget deficits simply by taxing the rich, at the same current rates. However, if both parties can contemplate the impossible and do what was recognized during the Wilson Presidency, perhaps, a return to a balanced budget is possible. This would also require a disciplined effort to cut government spending, most notably military spending which has thus far been off the table and generally loathed by Republicans. Indeed, recent studies have shown that each $1 billion invested in other sectors of the economy can yield significantly more jobs than investing in the military to either fund wars and/or enhance national security, see links below. While recognizing the futility of taxing the rich, to balance the budget and/or curb (or even pay off) the growing national debt, the analysis here recognizes the importance of once again increasing the highest marginal tax rates, as was done in earlier eras. This, however, requires that we also increase the tax base and direct government spending towards bold new and futuristic Apollo moon-landing type programs (see discussion in the first of this series of three articles), which invest wisely in clean energy, infrastrucuture, education, and health care projects to have the greatest impact on job creation.
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http://www.scribd.com/doc/58101386/The-US-National-Debt-and-the-longterm http://useconomy.about.com/b/2011/06/29/the-true-cost-of-war.htm http://www.americanprogress.org/issues/2009/06/pdf/peri_report.pdf http://www.peri.umass.edu/fileadmin/pdf/published_study/spending_prioritie s_PERI.pdf

Table 4: SOI Bulletin Data on Tax Receipts from all taxpayers Before and After the Bush tax cuts of 2001 and 2003
Tax year No. of taxable returns (in thousands) 144,103 142,451 142,979 138,395 134,373 132,226 130,424 130,076 130,255 129,374 127,075 124,771 122,422 120,351 118,218 115,943 Total income tax (in $ millions) 1,175,422 1,031,581 1,115,602 1,023,920 934,835 831,976 748,017 796,986 887,974 980,645 877,401 788,542 731,321 658,245 588,419 534,856

2009 2008 2007 2006 2005 2004 2003 2002 2001 2000 1999 1998 1997 1996 1995 1994

Source: Statistics of Income (SOI) Bulletins published by IRS for each year. Finally, a review of the tax receipts data, for ALL taxpayers, from the same SOI Bulletins noted above, reveal the same trends, with total tax receipts increasing at a much higher rate when the marginal tax rates were higher (before the Bush tax cuts). This is illustrated by the graphs prepared in Figures 5 to 7. The figure captions are self-explanatory.
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Figure 5: The total tax receipts increase as the number of taxable returns increase with all the data points falling on a nearly perfect straight line for the tax years 1994-2000 (solid dots, prior to the Bush tax cuts). The two data points (diamonds) which fall below the best-fit line through the data points are the data for the tax years 2001 and 2002 (after the Bush tax cuts). An increase in the tax base, i.e., the number of taxable returns filed by taxpayers, will obviously increase the tax receipts. Note that this excludes corporate taxes (both domestic and foreign), estate, trust, and gift taxes.

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Figure 6: The total tax receipts data for the tax years 2001-2008 (diamonds, after the Bush tax cuts) again follow a nice linear trend and increase as the number of taxable returns increase. However, all the data points follow a line with a smaller slope h. The solid dots are the earlier data for the tax years 1994-2000 (prior to the Bush tax cuts). It is clear that if the tax base increases (more taxable returns are filed), the higher marginal tax rates yield the higher tax receipts. This means that, at least in the tax years under consideration, the US economy has been operating in what is known as the normal range of the Laffer curve, where government revenues are predicted to increase with increasing tax rates. Even according to Laffer, government revenues will increase with decreasing tax rates only if the economy is operating in what is known as the prohibitive range, see June 2004 discussion by Prof. Laffer himself.

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Figure 7: Composite plot of the total tax receipts data for the tax years 1994-2008, before (solid dots) and after (diamonds) the Bush tax cuts. The higher slope h for the pre-Bush tax cuts data implies that as the economy grows and the tax base increases, higher government revenues will be generated, at least for the immediate future, with a higher marginal tax rate. The US economy is clearly operating in the normal range of the Laffer curve. Also, the extrapolation based on the best-fit equations derived here suggests that in the tax year 2009, with taxable returns of 144.1 million, the total tax receipts would have been $1.4684 trillion, as opposed to the actual $1.175 trillion. This represents a revenue shortfall of $0.351 trillion and can be attributed entirely to the Bush tax cuts. It is also noteworthy that the tax shortfall of $0.351 trillion is GREATER than the total tax receipts in 2008 (which was $0.26 trillion) from individual with taxable incomes (AGI) of $1,000,000 or more. Although the entire budget deficit cannot be eliminated by increasing taxes on the very rich, significant progress towards balancing the budget can be made by combining judicious spending cuts (starting with military spending, as opposed to the Republican priority of cuts in social
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programs like social security, Medicare, etc. to help sustain the economic recovery) with such targeted tax increases (or by simply letting the Bush tax cuts expire).

*************************************** Conclusions
1. First, let us all be very clear about the following and lets end all the demagoguery once and for all for the good of this great country. We have a progressive tax system and this means that the rich are taxed at a higher rate and so they do pay higher taxes. Who is rich? Each one of us is really rich, since regardless of current income level, each one of us is destined to pay a higher percentage of our income in the form of taxes. This applies to anyone who is making $25,000 today and who might make $250,000 in a decade or so (with hard work and initiative), or anyone fortunate to be already making $250,00o or more today. 2. Second, let us end the divisive partisan bickering of the last three plus decades and put to rest the notion that tax cuts for the rich will trickle down and boost the economy, magically create jobs, and increase government revenues. The rather simple and straightforward analysis of the income tax stats, based on well established scientific methods and statistical arguments (linear regression analysis), that all reasonable people can agree upon, show that i) tax receipts increases as the tax base increases (number of taxable returns filed increase) and ii) tax receipts increased at a higher rate when the marginal tax rates were higher. The income tax data analyzed here were obtained from the SOI Bulletins for each year. 3. Third, budget deficits for the foreseeable future and the soaring national debt requires that we take a number of steps to heal the US economy and rejuvenate it and bring back jobs well paying jobs - back to the US. These include:
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a. Higher marginal tax rates for the very rich, using the Wilson Presidency as the model. Even Republicans of that era agreed that tax cuts are impossible in order to meet the war spending obligations. Sadly, under President Bush, military spending was increased with a simultaneous reduction in the tax rates (although only from 39.6% to 35%). b. Targeted cuts in military spending without compromising the reality of terrorist threat and long term national security needs. Outgoing defense secretary Gates has already made some excellent recommendations in this direction. c. Bold new domestic spending initiatives to rejuvenate the US economy with Apollo moon-landing type hope-and-confidence-building programs in the area of clean energy, infrastructure, health care and educational initiatives. Recent studies show that $1 billion spent in the civilian economy will create significantly more jobs than the same $1 billion spent in the military sector. The persistently high unacceptable rates of unemployment are unconscionable. These have devastating social consequences for both the 20+ year old fresh graduates (from high school and college) who cannot find a job toady (with some employers openly prohibiting the unemployed from even applying for a job what a shame!) and for the 50+ year olds, with grown kids ready to go to college, who are now unable to find a job and who might never find a job, certainly not the well-paying job that was lost. d. Steps must be taken to systematically undo many laws (including all the tax laws and laws relating to employment) that have unwittingly worked against the growth of US economy and the creation of jobs within the US. A bipartisan task force is urgently needed to rewrite these laws for the long term good of the country. If a President Wilson could raise the highest marginal tax rate from 7% to 77%, the next President surely can take such bold steps to restore the US economy and American greatness. Fortune favors the Brave!

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e. Pass a constitutional amendment, limiting the terms of all Supreme Court Justices to no more than two six year terms, if reconfirmed. 4. Launch a US National Debt Retirement Program as suggested in a separate article, to boost confidence in the US economy and to signal to all debtors, foreign and domestic, that the US is prepared to meet ALL of its debt obligations, as is clear from all of its history.

***************************************

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Appendix 1
Elementary discussion about the meaning of marginal tax rates and why the rich ALWAYS pay more in taxes
The marginal income tax rate tells us the additional tax that must be paid on each additional dollar of income. Lets see how this is determined. Let x be the taxable income and y the tax owed. If taxable income increases (or decreases) from x1 to x2 (say from $50,000 to $60,000), the tax owed will correspondingly increase (or decrease) from y1 to y2. The taxable income has changed by an amount x = (x2 x1) and the tax owed has changed by the amount y = (y2 y1). The marginal tax rate h = y/x is the ratio of these two changes. The higher the value of h, the higher is the additional tax y that is owed for the same change in the taxable income x. Our tax system is a progressive one. This means that all of us, without any exception, will pay more in taxes as our incomes go up. The tax rates for 2011 represent a continuation of the tax rates during the George Bush (junior Bush) presidency, which led to the much debated tax cuts (in 2001 and 2003) with sun set provisions. However, President Obama was forced to compromise and the so-called Bush tax cuts have been extended for the present. The matter will no doubt be debated again in the future. The following tables give the tax rates before and after the Bush tax cuts. http://www.pgdc.com/pgdc/resources/tables/1999-federal-income-tax-rateschedules-trusts-estates-and-individuals

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Tax rates for 1999 prior to the Bush tax cuts

Tax Bracket 10% Bracket 15% Bracket 28% Bracket 31% Bracket 36% Bracket 39.6% Bracket Married Filing Jointly Not present $0 $43,050 $43,050 $104,050 $104,050 - $158,550 $158,550 - $283,150 Over $283,150 Single Not present $0 - $25,750 $25,750 $62,450 $62,450 130,250 $130,250 - $283,150 Over $283,150 0.15 0.28 0.31 0.36 0.396 0 -3347.5 -5221.00 -11,733.50 -21,926.90 Constant A For single Constant B For single

A new 10% tax rate was created by the Bush tax cuts for the lowest income level. The 15% and 28% rates were retained. Two new rates, 25% and 33%, were created but the 31% rate was eliminated. The top rate was lowered from 39.6% to 35% and the 36% bracket was eliminated. The much maligned Bush tax cuts clearly represent a complex juggling of the tax code, whose net effect on the tax receipts could not be predicted in advance. Instead of using the tax tables, the tax y can also be determined using the equation y = Ax + B with constants A and B having the values given in the table for the appropriate income, x. The numerical values of A and B depend on the tax filing status. The values given here are for a single taxpayer. Alternatively, the tax can be determined using the procedure given in the link above, which uses the equation y = A(x - xm) + b where A is the tax rate, (x - xm) is income in excess of the maximum amount for the immediate prior tax bracket and b is the maximum tax calculated using the immediate prior tax bracket. For a single person, with a taxable income between $ 25,750 and $62,450, the applicable equation would be y = 3862.50 + 0.28(x 62,450) where A = 0.28 and b = 3862.50 = 0.15 25,750, the maximum tax paid at the 15% rate. It follows that B = 3862.50 0.28 62,450 = 3347.50. The constant B in the tax equation y = Ax + B becomes more and more negative as the taxable income x increases.
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With the extension of the Bush-era tax cuts, the 2011 federal income tax brackets are (this differs very slightly from the 2010 tax rate schedule now found at the IRS website, see link given below the table): http://www.fivecentnickel.com/2010/02/15/2011-federal-income-tax-brackets-irsincome-tax-rates/

Tax rates for 2011 with the extension of the Bush tax cuts
Tax Bracket 10% Bracket 15% Bracket 25% Bracket 28% Bracket 33% Bracket 35% Bracket Married Filing Jointly $0 $17,000 $17,001 $69,000 $69,001 $139,350 $139,351 $212,300 $212,301 $379,150 Over $379,150 Single $0 $8,500 $8,501 $34,500 $34,501 $83,600 $83,601 $174,400 $174,401 $379,150 Over $379,150 Constant A Constant B For single in For single in y = Ax + B y = Ax+ B 0.10 0.15 0.25 0.28 0.33 0.35 0 -425 -3,875 -6,383 -15,103 -22,686

The check marks indicate rates that were retained after Bush tax cuts. The other rates are new. For 2011, the income range for each bracket has changed slightly. The 10% bracket is extended to $8500, as opposed to $8,350 in 2010. The maximum marginal tax rate in 2011 is 35% and so the maximum value of h = 0.35. For a single taxpayer, this value of h is used to compute the tax owed if the 2011 taxable income is above $379,150. Different numerical values of h that apply are given in the tax computation worksheet, to be used by most high income taxpayers, at the end of the instructions for filing Form 1040. This may be found after the tax tables. For 2010, tax computation worksheet is on page 98, after the tax tables, see link here http://www.irs.gov/pub/irs-pdf/i1040.pdf Notice how the tax is to be computed. If taxable income is x it is multiplied by the appropriate value of h and then a constant amount c, is subtracted. So, the tax owed y = hx + c. For taxpayers with the highest taxable income

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h = 0.35 and c = - 25,682.50. Other values of h and c apply for taxpayers with income levels above $100,000 (using 2010 brackets). In summary, therefore, the US tax code is a series of straight lines, each with the equation y = hx + c, where the slope h and the intercept c keep on increasing as taxable income increases. Hence it is that the very rich pay higher income taxes in our progressive tax code. If the taxable income goes up from $400,000 to $410,000 income has gone up by $10,000 and tax owed goes up by 35% of $10,000 or $3,500. If the top marginal tax rate is reduced to 30%, the additional tax owed would be $3,000 which means a tax savings of $500 in this example. At lower income levels, the same increase in taxable income will again mean a lower increase in the tax bill. For example, if taxable income goes up from $50,000 to $60,000, the tax owed goes up by $2500 since the marginal tax rate at these income levels is 25% or h = 0.25. At an even lower income level of, say $15,000, an increase in the income to $25,000 (same increase of $10,000) will mean an increase in tax owed $1500 since the marginal tax rate for this income level is 15% or h = 0.15. An increase in taxable income from $18,000 to $28,000 also means the same $1500 increase in the tax owed since the marginal tax rate is constant between these income levels. In other words, the mathematical structure of the tax code is such that the rich always pay a higher percent of any additional income in the form of taxes. There is no escaping this. Every one of us gets the opportunity to experience this. We are all getting richer when our income increases. With each increase in income we have to give up more of the increase in the form of taxes. The extent of increase depends on how far one moves up from the lower tax bracket (lower value of h) to a higher tax bracket (higher value of h). http://www.taxpolicycenter.org/taxfacts/displayafact.cfm?Docid=213

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Appendix 2: Listing of Data Sources

The data in Table 1 was compiled from the following Statistics of Income (SOI) Bulletins available at the IRS website http://www.irs.gov . Click on Tax Stats after entering main page of IRS website (see side bar on the right hand side) and then on Publications which has the choice Individual Tax Statistics SOI Bulletin Articles. This takes us to individual tax years.
More Information (on main page of IRS website, right hand side) Newsroom IRS New Media Frequently Asked Questions Taxpayer Advocate Service Tax Stats Publications Individual Income Tax Returns Publication (Complete Report) Individual Income Tax Returns, Estimated Data Line Counts Conference Papers Individual Tax Statistics SOI Bulletin Articles

Individual Taxes to access these documents for each year (see links below). A discrepancy of 1 in the number of returns was noticed between the documents by prepared by different authors working for SOI Division, e.g. 391 or 392 in 2007 returns and likewise 353 or 354 in 2006 returns.

Recent data after the Bush tax cuts on 2001 and 2003
http://www.irs.gov/taxstats/productsandpubs/article/0,,id=130681,00.html Individual Income Tax Returns, 2008 by Justin Bryan http://www.irs.gov/pub/irs-soi/08inreturnsbul.pdf 2008 & 2007 Individual Income Tax Rates and Shares, 2007 by Adrian Dungan and Kyle Mudry http://www.irs.gov/pub/irs-soi/10winbulinincome.pdf 2007 & 2006 Individual Income Tax Returns, 2006 by Justin Bryan http://www.irs.gov/pub/irs-soi/08fallbulintax.pdf 2006 & 2005
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Individual Income Tax Returns, 2005 by Sean Marcia and Justin Bryan http://www.irs.gov/pub/irs-soi/07infallbulreturns.pdf 2005 and 2004 Individual Income Tax Returns, 2004 by Michael Parisi and Scott Hollenbeck http://www.irs.gov/pub/irs-soi/04indtr.pdf 2004 and 2003 Individual Income Tax Returns, 2002 by Michael Parisi and Scott Hollenbeck http://www.irs.gov/pub/irs-soi/02indtr.pdf 2002 and 2001

Data from Pre-Bush Tax Cuts

Individual Tax Returns, 1995 Therese Cruciano http://www.irs.gov/pub/irs-soi/95ints.pdf 1995 and 1994 Individual Tax Returns, 1996 Therese Cruciano http://www.irs.gov/pub/irs-soi/96indiv.pdf 1996 and 1995 Individual Tax Returns, 1997 by David Campbell and Michael Parisi http://www.irs.gov/pub/irs-soi/97indtr.pdf 1997 and 1996 Individual Tax Returns, 1998 by David Campbell, Michael Parisi, and Brian Balkovic http://www.irs.gov/pub/irs-soi/98indtr.pdf 1998 and 1997 Individual Tax Returns, 1999 by David Campbell and Michael Parisi http://www.irs.gov/pub/irs-soi/99indtr.pdf 1999 and 1998 Individual Tax Returns, 2000 by David Campbell and Michael Parisi http://www.irs.gov/pub/irs-soi/00indtr.pdf

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Appendix 3 Do the rich pay higher taxes?

First, do the rich pay more in taxes? The simple answer is, Yes, they do. There can be no ifs and buts about this. They pay higher taxes because they are taxed at a higher rate. The tax system that we have is a progressive one. This means that the higher the income, the higher the taxes paid. Why cant we agree on something so simple? Just examine the income tax stats compiled in the table on page 5 of the main text. For tax year 2008, the group with taxable income of $1 million or more paid a total of $249,020 million, or almost $0.25 trillion, in taxes. Compare this to $184,554 million, or $0.184 trillion, paid by the (middle class) income range of $50,000 to $100,000. More importantly, the higher tax receipts resulted from just 320,000 tax returns as opposed to 30,926,000 returns for the middle class. Unfortunately, no consensus is possible partly because of complex, often politically motivated, studies, some also authored by the Congressional Budget Office (CBO), which use various, often self-serving, measures to discuss how the tax burden has, or has not, shifted from the rich to the middle class (and the even the poor). The shifting tax burden argument is usually made by studying the exactly the same income tax statistics released annually by the IRS Statistics of Income (SOI) Bulletins. The number of tax returns filed by different income groups and the total annual tax paid by each group is analyzed in such studies. If there are N1 taxpayers with a taxable income in a certain range, (say $500,001 to $1,000,000), the total tax paid by this income group will depend on the exact value of the taxable income (say x1) for each member of this group which determines the exact income tax (say y1) paid. Although the marginal tax rate is the same for all the N1 taxpayers (currently 35%, see appendix 1), the exact tax paid by each member of this income group is NOT the same. For example, a taxpayer with a taxable
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income of $500,001 pays a tax of $152,644. A second taxpayer, with a taxable income of $950,001 pays a tax of $310,144. Both taxpayers have a marginal tax rate is 35%. (The increase in taxable income of $400,000 resulted in a tax increase of $157,500 which is 35% of $400,000.) Such differences in the exact tax paid by each member of an income group, unfortunately, lend themselves to a number of confusing, misleading and/or self-serving interpretations. We will return to this point shortly. Also, tax-savings arguments, based on percentages, tend to get misleading and confusing. Simple math teaches us that 1% of $100,000 equals $1000 but 1% of $10,000 equals $100. But $1000 is ten times $100. If the tax rate goes down by 1%, the person with ten times the taxable income has much more to gain, in absolute dollar savings, than the person with the lower income. Notice that the rich taxpayers mentioned above, with taxable incomes over $500,000, pay more in taxes than the income earned by most taxpayers classified as middle class or lower income taxpayers. Furthermore, when it comes to taxes, we always tend to think of somebody else as the rich person who is benefiting from unfair tax laws and loopholes. Actually, each one of us is rich. Each one of us will pay a higher amount in taxes as our incomes increase. It is that simple. The tax code is the same for all, at any given point in time. All of us can take advantage of exactly the same loopholes. And, the rich, i.e, the one with the higher income, always pays higher taxes, at any given point in time.

Table 1: Increasing taxes paid with increasing income

Taxable income $25,000 $60,000 $100,000 $250,000 $370,000 Tax paid in 2010 $3325.00 $11,550.00 $25,492.00 $73,780.00 $113,380.00 2010 Tax as % of income 13.3 19.3 25.5 29.5 30.6 Tax paid in 1999 $3,750.00 $13,452.50 $25,779.00 $78,266.50 $124,593.10 1999 Tax as % of income 15.0 22.4 25.8 31.3 33.7
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This is illustrated in Table 1 with some simple calculations using tax rates that applied both before and after the so-called Bush tax cuts (of 2001 and 2003), see also brief discussion provided in appendix 1. Going down the column labeled tax paid, both the absolute amount of tax paid and the tax as a percent of the taxable income go up with increasing income in both scenarios. The politics begins when we start comparing columns 3 and 5. At the lowest income level, the Bush tax cuts have clearly put a lot of money into the pockets of those who are already rich. At the income level of $25,000, the Bush tax cuts yielded a tax savings of $425 but at 10 times that income, at $250,000, the tax savings was $4,486.50. This is more than 10 times (which would be $4250), the reason being simply the nature of the progressive tax code. If we start looking at the data in this manner, and also take into account many complex factors surrounding millions of tax returns that are filed each year and analyze them (based on income levels), it becomes bewildering and one is led to conflicting conclusions that only encourage political demagoguery. One study by the Congressional Budget Office shows that the Bush tax cuts have shifted the tax burden from the rich to the middle class. It all depends on what percentages one is calculating to make a point. The tax declined at all income levels, but more so in the top brackets, says one study, see link below. Contrary opinions have also been expressed (see links and brief comments between the **** used as separators from the rest of the text). ************************************************************************************* http://www.cbsnews.com/stories/2004/08/16/politics/main636398.shtml Study: Bush Tax Cuts Favor Wealthy http://www.sodahead.com/united-states/bush-tax-cuts-wealthfare-heavilyfavor-the-rich/question-1236179/ Bush Tax Cuts (Wealthfare) Heavily Favor the Rich.. by SodaH8r-ade~POTC~ Posted
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.you must answer the question "why invest in the US instead of a low cost, high growth country?" Until you answer that question, tax cuts will not only not do any good, but in a sense will do harm, by increasing the speed at which jobs are offshored out of America. http://www.nytimes.com/2007/01/08/washington/08tax.html Tax Cuts Offer Most for Very Rich, Study Says By EDMUND L. ANDREWS Published: January 8, 2007 Families earning more than $1 million a year saw their federal tax rates drop more sharply than any group in the country as a result of President Bushs tax cuts, according to a new Congressional study. The study, by the nonpartisan Congressional Budget Office, also shows that tax rates for middle-income earners edged up in 2004, the most recent year for which data was available, while rates for people at the very top continued to decline. Interestingly, the following is from a New York Times article dated November 9, 1920, going back to the time when President Wilson was in office, when Republicans agreed that there can no reduction in taxes to meet war time obligations. We will return to this point later in this article. http://query.nytimes.com/gst/abstract.html?res=F60F13F8355910738DDD A00894D9415B808EF1D3 REPUBLICANS FIND TAX CUT IMPOSSIBLE; Admit Revenue Must Be Maintained to Meet War Obligations Due in 1923. TALK OF A TAX ON SALES Favor Repealing Levy on Excess Profits and Declare for Economy In Government.
Special to The New York Times. (); November 09, 1920, , Section Business & Finance, Page 28, Column , words

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[ DISPLAYING ABSTRACT ] WASHINGTON, Nov. 8.--Republican members of Congress now in Washington are agreed that there can be no reduction of taxation for two or three years. The Government, they say, must continue to collect about the same amount as at present until 1923 at least to meet $8,000,000,000 of its war obligations.

A contrary viewpoint can also be expressed, or one that merely adds to the confusion. http://allfinancialmatters.com/2008/05/13/bushs-tax-cuts-for-the-richactually-favor-the-poor/ Bush tax cuts for the rich actually favor the poor. http://lanle.wordpress.com/tag/economist/ December 2, 2010

Republicans Find Tax Cuts Impossible; Admit Revenues Must Be Maintained to Meet War Obligations Due in 1923
http://query.nytimes.com/gst/abst ract.html?res=F60F13F835591073 8DDDA00894D9415B808EF1D3

John Cassidy- The Economy: Why They Failed Filed under: Uncategorized ktetaichinh @ 4:38 am Tags: commentary, economist, usa

http://www.fxpro.com/vn/news/daily-forexbrief/20110414/obama-finally-gets-it-fiscalpolicy

Daily Forex Brief

Obama finally gets it on fiscal policy
14/04/11 @ 07:00 GMT by Michael Derks, Chief Strategist

In arguably his strongest endorsement yet of the crying need to address Americas fiscal obesity, President Obama last night outlined his plan to reduce the cumulative fiscal deficit by $4trln over the next 12 years. In order to achieve this deficit reduction, the President envisages spending cuts outweighing tax increases by a ratio of 3:1. Also of note was the aggressive timetable Obama set out to negotiate an agreement: talks will begin in early May with the aim of completing a deal by late June. This dovetails with the increasingly heated congressional debate concerning the $14.29trln debt limit, which is expected to be reached by mid May (according to the Treasury Department).

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About the author

The author is a naturalized US citizen who came to US seeking a higher education. He obtained his Masters (S. M.) and Doctoral (Sc. D.) degrees in Materials Engineering from the Massachusetts Institute of Technology, Cambridge, USA. He then spent his entire professional career at leading US research institutions (MIT, NASA, Case Western Reserve University, and General Motors R & D Center, in Warren, MI). He holds four patents in advanced materials processing, has co-authored two books, and has published several scientific papers in leading peer-reviewed international journals. His expertise includes developing simple mathematical models to explain the behavior of complex systems. He has also authored several recent documents (all uploaded at this website) addressing a variety of issues to promote fresh thinking and analysis of the large masses of data being collected daily to understand social, economic, and political systems. He can be reached by email at vlaxmanan@hotmail.com

Image by patrimonio at http://ClipartOf.com/1064489 Final document completed and uploaded on July 3, 2011.

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Goddess of Wealth and Good Fortune Across Cultures

Seven Lucky Gods of Japan http://www.onmarkproductions.com/html/seven.shtml

Shichi = Seven, Fuku = Luck, Jin = God/Deity/Kami Click any image above to jump to that deity page

The Goddess with the flowing pot of gold http://www.goddessgift.com/goddess-lakshmi.html

http://www.theoi.com/Daimon/Tykhe.html Nemesis & Tyche, Athenian amphora C 5th B.C., Antikensammlung, Berlin Tykhe, the goddess or spirit of good fortune, often depicted with Nemesis, the downside of Tykhe, the one who provided a check against the excesses of good fortune.

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Image by KJ Pargeter at

http://ClipartOf.com/46561

http://static5.depositphotos.com/1005125/424/i/450/dep_4241863-American-flagon-blue-sky-freedom.jpg http://thumbs.dreamstime.com/thumblarge_ 4/1099201137G65j3x.jpg

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