[vacets-gen] Reaganomics

[Tin Le]

The following article is a pretty good explanation on one of the problem 
we are experiencing.  The "trickle down" theory doesn't work, and the "tax 
cuts" is really "tax cuts for the very rich"... :-) e.g. if most of your 
income is from stocks, investment and not from a 9-5 job paycheck, you 
won't get taxed under income tax & Social Security (higher progressive 
rates).  The super rich does not need SS anyway.

Keep that in mind when you hear Bush/Republican promises "tax cuts"... the 
"cuts" has got to come from somewhere, usually from middle-class... us. 
There is no free lunch....

Tin Le
-- 
http://tin.le.org
Tin Le - tin at le.org
Firewall and Security Consulting

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Subject: More info about Reagan's tax cuts

by Mark Zepezauer and Arthur Naiman 1996

You remember Ronald Reagan, don't you? He was elected president
in 1980 on a promise to cut taxes.

Reagan did reduce taxes...for the rich. For everybody else, he
signed the largest tax increase in US history (adjusted for
inflation), which far exceeded his tax cuts. How did he manage
that? By raising Social Security tax rates while he lowered
income tax rates.

Social Security tax is a major technique for transferring the tax
burden away from the rich. One reason is that it only applies to
"earned" income; income from investments is exempt. Another
reason is that there's a ceiling-currently $62,700-on how much
earned income is taxed.

Anyone who earns $62,700 or more pays the same Social Security
tax Bill Gates does- needless to say, it amounts to a slightly
higher percentage of their income. This makes Social Security one
of our most regressive taxes. A family that made the (1993)
median income of $37,800 paid 7.65% of its income in Social
Security tax, while one that made ten times as much paid 1.46%
and one that made a hundred times as much paid 0.1% (one-tenth of
1%).

Between 1971 and 1991, families making the median income saw
their combined Social Security and income taxes go up 329%, while
the combined tax bill of families making more than $1 million a
year dropped 34%. As a result, most working people today pay more
Social Security tax than they do income tax.

The Social Security tax has been raised nine times since 1977.
Because these massive tax hikes were sold to the public as a way
of saving Social Security, one of the government's most popular
programs, both parties supported them, without much controversy
or publicity.

People have been told that the trust fund has to begin racking up
huge surpluses or it will go bankrupt when the Baby Boom
generation begins to retire. (Since the Baby Boom lasted from
1946 to 1964, the first boomers will start collecting Social
Security in 2008, at age 62.)

The extra money doesn't just sit in the trust fund; the
government borrows it to pay for other things, like military
waste and corporate welfare-making Social Security tax, in
effect, just another form of income tax. Over a trillion dollars,
plus interest, will have to be repaid in order for Social
Security, and other trust funds like Medicare, to meet their
obligations in the next century. Can you guess who's going to
repay it?

The government borrows money from itself to disguise the fact
that it's spending more than it takes in. This shell game has
been around for almost 30 years. Back when government was more
honest, Social Security's income and expenditures were treated as
separate from the discretionary part of federal budget (the part
the government could spend as it wished). The trust fund took in
money and paid out benefits, and it wasn't included in the
budgets passed by Congress and signed by the President.

But in 1969, the so-called ''unified budget" was instituted. By
combining Social Security with other taxes, President Johnson
could claim that the US was running a surplus, even though it was
actually being bled dry by the Vietnam War. To this day, the
unified budget makes military spending look like a smaller
percentage of discretionary federal spending than it really is.
Through the ceiling.

Social Security tax receipts for fiscal 1996 are estimated at
$426 billion, and outlays at $357 billion. If the wealthy had to
pay Social Security tax on all their earned income, the
government would have taken in an additional $53 billion.

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