The True Facts on The Estate Tax & Capitol Gains Taxes

As you know Bush and the republicans are soon going to come out with a so-called pro-growth, pro-job creation, economic package. It will include more tax cuts, including capitol gains tax cuts etc. The majority of these tax cuts, capitol gains, and estate taxes will go to the wealthy. It's trickle down reaganomics all over again, in reality it is just a scam to lower taxes on the wealthy. The following articles and information will prove that and inform you of the truth about these taxes.

Republican Party is very accommodating to rich tax avoiders

When Leona Helmsley famously said "only the little people pay taxes," she wasn't kidding. The snooty remark may have helped bring down the hotel queen in 1989 but the attitude still pervades corporate boardrooms and country clubs. Taxes are among the top things rich people try to avoid -- along with paternity suits and having it publicly disclosed that their executive compensation includes a lifetime supply of peeled grapes.

Leagues of high-priced lawyers, accountants, and lobbyists spend every working moment thinking of ways the rich can avoid their responsibilities to fund our government. Those of us who live off a paycheck don't have much opportunity to move money around in order to exploit tax benefits -- into trusts or "family farms" or offshore tax havens -- we're too busy moving it to our mortgage bank, the supermarket and the doctor's office. But the rich can, and do, and Washington has rarely been friendlier to their cause.

The 2002 election was a juicy delight to two kinds of people: those who want to shift more of the tax burden from the investor class to wage earners; and those who want to further starve the Internal Revenue Service of the resources needed to catch tax cheats. It is no secret that Republican leaders serve those who seek an end taxes on capital gains, corporate profits and investment income. The party's motto should be: The tax man cometh, but only for those subject to withholding.

President Bush has made clear that one of his priorities next year will be to work with the 108th Congress to make his mammoth tax cuts permanent, including the elimination of the estate tax.

Do you make $350,000 or more a year? No? Then don't bother counting your savings from the tax cuts, they're not for you. According to Citizens for Tax Justice, when the Bush tax cuts are fully effective, 52 percent of the cuts will go to this country's richest 1 percent. And even if by some miracle of responsible governance they are not made permanent after 10 years, the total amount of tax cuts already going to the richest 1 percent will total $477-billion -- each taxpayer in that rarified category receiving an average of $342,000 worth of cuts.

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Year-by-Year Analysis of the Bush Tax Cuts Shows Growing Tilt to the Very Rich

A study released by Citizens for Tax Justice and the Children’s Defense Fund reveals for the first time who stands to benefit from the 2001-enacted Bush tax cuts in each year from 2001 through 2010. Among the key findings:

Over the ten-year period, the richest Americans—the best-off one percent—are slated to receive tax cuts totaling almost half a trillion dollars. The $477 billion in tax breaks the Bush administration has targeted to this elite group will average $342,000 each over the decade.

By 2010, when (and if) the Bush tax reductions are fully in place, an astonishing 52 percent of the total tax cuts will go to the richest one percent—whose average 2010 income will be $1.5 million. Their tax-cut windfall in that year alone will average $85,000 each. Put another way, of the estimated $234 billion in tax cuts scheduled for the year 2010, $121 billion will go to just 1.4 million taxpayers.

Although the rich have already received a hefty down payment on their Bush tax cuts—averaging just under $12,000 each this year—80 percent of their windfall is scheduled to come from tax changes that won’t take effect until after this year, mostly from items that phase in after 2005.

In contrast, the vast majority of taxpayers have already received most of their tax cuts from the 2001 legislation.

For the four out of five families and individuals making less than $73,000 this year, three-quarters of the tax cuts—averaging about $350 this year—are already in place.

Tax cuts for the 19 percent of taxpayers making between $73,000 and $356,000 this year will grow a little over the next four years as the cuts in the upper tax rates continue to kick in, but then will dwindle thereafter.

By 2010, the tax cuts for this group will be no bigger as a share of income than they are now.

As a result, freezing the Bush tax cuts at their 2002 levels would have little or no effect on 99 percent of the taxpayers, whose tax cuts are already mostly or completely “frozen.” Only the best-off one percent of the taxpayers will receive significant additional tax cuts if the rest of the Bush tax program continues to be implemented.

From 2001 through 2005, the best-off one percent will receive “only” 19.8 percent of the Bush tax cuts.

From 2006 through 2009, the share of the tax cuts going to the very rich jumps to 41 percent of the total.

By 2010, when all of the provisions of the bill—including complete repeal of the estate tax on extremely large estates—are scheduled to be fully in place, 51.8 percent of the tax cuts are targeted to the top one percent.

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Myth: A capital gains tax cut will help the little guy.

Fact: Only 1 percent of all taxpayers claim two-thirds of all capital gains.

Only 7 percent of all taxpayers report capital gains in any given year, and over two-thirds of the gains reported went to people making over $100,000 a year. Although it's true that most Americans own capital assets (like homes or businesses), they sell them only a few times in their life. The rich, on the other hand, make most of their annual income in capital gains, and deal in them constantly. That is why a capital gains tax cut would overwhelmingly benefit the rich.

According to IRS records, 93 percent of all Americans filing tax returns receive no capital gains income in any given year. Of the 7 percent who do, two-thirds of the gains go to those making over $100,000 a year.

As you can see, 1 percent of all taxpayers collect over two-thirds of all capital gains. A study of tax returns between 1989 and 1991 found that this is even more concentrated than it first appears: one twenty-fifth of 1 percent of working Americans collected 32 percent of all capital gains income.

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Myth: A capital gains tax cut will spur the economy

Fact: Historically, economic slumps and unemployment have followed capital gains tax cuts

There is no historical evidence that cutting the capital gains tax spurs economic growth. Cuts have usually been followed by economic downturns and reductions in saving and investment. Increases have generally seen the opposite. The theoretical case against cutting capital gains is also strong; most serious economists acknowledge that even eliminating this tax completely will not increase productivity, and may even do significant economic harm.

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The Real Facts on The Estate Tax

Tax the Wealthy

Why America needs the estate tax

By William H. Gates Sr. and Chuck Collins

For more than a decade, a powerful group of special-interest organizations has waged a multimillion-dollar campaign to turn public opinion against a tax that falls on the wealthiest 2 percent of the population. It worked. The "death tax," many Americans now believe, afflicts family farmers and small-business owners, robbing them of the opportunity to bequeath their lives' fortunes to their children.

The people pushing this line include the heirs to the Gallo wine and Mars candy fortunes, along with an organized association of more than 100 independent newspaper owners. Together with a veritable antitax industry of think tanks and lobbying firms in Washington, these groups have formed a potent "death tax elimination" lobby.

Of course, the vast majority of family farmers will never owe an estate tax. Rather, the windfall of estate tax repeal will shower upon the heirs and heiresses of the 3,000 wealthiest estates. This elite group will inherit billions in appreciated stock and real estate -- significant capital gains, many of which have never been subject to taxation.

Why do we raise the issue now? Because in a matter of days the Senate will decide whether to make permanent the 2001 repeal of the estate tax. It's an issue that has scarcely made the news, but its consequences will profoundly affect the health of the republic.

Many Americans believe that the estate tax debate has already played out. After all, the tax's phase-out and eventual repeal were included in the $1.35 trillion tax cut that President Bush signed into law last June.

But the Bush tax bill includes such a puzzling assortment of phase-outs, delayed activation dates, and gimmicks that money guru Jane Bryant Quinn called it "a contemptible piece of consumer fraud." To mask the bill's enormous cost in outlying years, its authors included a "sunset" provision: At the end of 2010, tax rules revert to those in effect as of May 2001.

Predictably, the original patrons of the tax bill -- some of whom have spent millions in campaign contributions, political advertising, and lobbying fees to abolish the estate tax -- find the sunset provision unacceptable. They urgently wish to make repeal of the estate tax permanent. And if they don't succeed in doing so now, the odds will soon be against them, as budget deficits grow and the cost of repeal escalates.

If, however, the Senate bows to this lobby's pressures by permanently repealing the estate tax, the country stands to lose $800 billion between 2011 and 2021. It's a loss that will significantly undercut Social Security and Medicare over the next seven decades, hitting hard as the eldest baby boomers reach retirement age.

The United States also stands to lose one of its most progressive federal taxes. Only estates worth more than $1 million (or $2 million for couples) are subject to the tax -- and the bulk of it is paid by the fewer than 3,000 estates with assets in excess of $5 million. Thanks to the Bush tax cut, between now and 2009 the exemptions will rise to $3.5 million for an individual ($7 million for couples).

Some people object to the notion of a tax at death, but taxing dead multimillionaires is eminently more fair than taxing the not-so-rich living. Between now and 2052, the intergenerational transfer of wealth is projected to reach between $41 trillion and $136 trillion. An estimated one-third to one-half of this wealth will be transferred by estates worth more than $5 million. The estate tax, should it remain in place, will therefore be an increasingly significant progressive source of revenue in the coming decades. Meanwhile, state budgets, already straining from plummeting tax revenues, will lose more than $6.5 billion a year when state-linked revenue from the estate tax is eliminated in 2005.

If the direct costs weren't high enough, the indirect ones could be beyond measure. Philanthropy is not solely inspired by the tax code, but the estate tax unquestionably provides a powerful incentive for charitably oriented people to stretch their giving. Estate tax repeal will most likely reduce charitable giving and bequests, particularly from estates in excess of $20 million, by an estimated $5 billion to $6 billion a year. This will certainly hit large charities that depend on bequests, such as hospitals, universities, and land conservancies. But it will also affect the entire nonprofit sector because one-third of all bequest dollars go toward creating or expanding foundations.

The debate that will decide all this may go by very quickly. Senators Phil Gramm of Texas and Jon Kyl of Arizona are fervently pushing to attach permanent repeal as a provision to any moving legislation. After Gramm threatened to attach the provision to the energy bill, the Senate Democratic leadership agreed instead to allow a freestanding vote on the matter before June 28. The vote currently looks too close to call, as each side pressures a handful of swing senators. Ultimately, the question is this: How high a price is America willing to pay in order to give a handful of millionaires and billionaires a tax break?

Opponents of the estate tax tend to be animated by a zealous belief in individual success and a profound animosity toward government. If my success results from my own effort and industry, the thinking runs, then the estate tax -- or any form of taxation -- is a form of larceny.

Like the "great man" theory of history, our dominant "great man" theory of wealth creation borders on mythology. Such folklore fills the pages of business magazines. In a recent interview, one chief of a global corporation was asked to justify his enormous compensation package. He responded, "I created over $300 billion in shareholder value last year, so I deserve to be greatly rewarded." The operative word here is "I." There was no mention of the share of wealth created by the company's other 180,000 employees. From this sort of thinking, it is a short distance to, "It's all mine" and, "Government has no business taking any part of it."

There is no question that some people accumulate great wealth through hard work, intelligence, creativity, and sacrifice. Individuals do make a difference, and it is important to recognize individual achievement. Yet it is equally important to acknowledge the influence of other factors, such as luck, privilege, other people's efforts, and society's investment in the creation of individual wealth.

Consider the many components of the social framework that enable great wealth to be built in the United States. Among them are a patent system, enforceable contracts, open courts, property ownership records, protection against crime and external threats, and public education. Even the stock market is a form of socially created wealth that provides liquidity to enterprises. David Blitzer, the chief investment strategist at Standard and Poors, recently wrote, "Financial markets are as much a social contract as is democratic government." When faith in this social system is shaken, as it has been by recent breaches of trust, we see how quickly individual wealth evaporates.

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