Why are we ruled by these idiots? Ch. XXIV

With apologies to Professor DeLong, David Cay Johnston analyzes recent IRS data to further highlight the shoveling of wealth to the already super-wealthy.

During last week's debate on whether to restore limits on the alternative minimum tax or make permanent the cuts in investment income taxes, House leaders chose as their spokesman Representative David L. Camp, a Michigan Republican. He said Republicans favored continuing investment tax cuts because that would help more people and would especially benefit those making less than $100,000.

"Nearly 60 percent of the taxpayers with incomes less than $100,000 had income from capital gains and dividends," he said on the House floor.

But I.R.S. data show that among the 90 percent of all taxpayers who made less than $100,000, dividend tax reductions benefited just one in seven and capital gains reductions one in 20.

Mr. Camp, who had said in an interview that his figures were correct, said Monday through a spokesman that he had been misinformed by the staff of the House Ways and Means Committee. But his office said he supported making the investment tax cuts permanent because cutting these rates was "good policy and good for our economy."

President Bush, in his budget, urged Congress to make permanent the reduced taxes on investment income. He also proposed limiting the effects of the alternative minimum tax through next year, saying a permanent solution "is best addressed within the context of fundamental tax reform."

The Congressional Budget Office estimated that making the investment tax cuts permanent would cost the government $197 billion over 10 years. But advocates of eliminating taxes on investments say there is no cost to the government because lowering taxes on such income encourages more investment, which should lead to more and higher-paying jobs. Taxes on wages from those jobs should more than offset the tax savings to investors, said Mr. Entin, an advocate of eliminating taxes on most investment income as a way of promoting economic growth.

However, the Congressional Research Service, an arm of Congress that analyzes issues, concluded in a January report that lower taxes on investment income may translate into lower savings because people need fewer investments to earn the same after-tax income. In another report, the research service showed how lower taxes on investment income can encourage investment outside the United States, creating jobs, but not for Americans.

My favorite line from the story has to be, "Because of the tax cuts, even the merely rich, making hundreds of thousands of dollars a year, are falling behind the very wealthiest..."

Read, as the faux libertarians say, the whole thing.