Well Gpa your comment obviously irritated me. I specifically attempted to write this post without being a "spindoctor" and merely pointing out another way of looking at it. It is a long post and overly simplified while specifically focusing only on a very tiny part of the issue.

So one of my pet peeves about discussions on taxes is that most people have only a general understanding of how taxes work. Due to the “general” understanding there are all sorts of myths associated with tax issues. A good example and one of my favorites is the old I got a raise but it took me into a higher tax bracket so it really ended up costing me more money. That is just inherently wrong because the tax system is graduated. I won’t bother explaining what a graduated tax scale is, google can do that for me.

While everything Gpa posted is true I would like to point out some real problems or at least perceived problems with “tax breaks”. I think it also leads people to question what “fair share” means.

Your taxes are calculated off of adjusted gross income (AGI). AGI also affects limits on allowable deductions. With that said typically not all of your income is AGI there are certain things that are removed from your gross income to end up at AGI hence it being called “adjusted”. It is pretty simple idea that is made complicated by the tax code.

Most people see a tax break in terms of the impact it has on them and not on the overall tax picture of the country. Bush’s recent tax breaks put more money in my pocket and that is something I like but it also put a lot more money (percentage wise) into wealthier people’s pockets. One could argue that sure it put more in their pocket than mine because they earn more and overall that would be true if the percentage were the same. In actuality wealthy people tend to have different sources of income than myself, they don’t just get a w-2 and then go and file. They receive capital gains, dividends etc…

Bush’s latest tax breaks reduced the percentage on some of these other types of income (without digging it up exact figures I believe it was dividend income got reduced to 30 something percent). Wealthy people tend to have a higher percentage of their income in these other forms of income or have the luxury of changing their investments to take advantage of the change i.e. move them from non-dividend issuing stocks to stocks that issue dividends. Anyway, my point in all of this is that not all tax breaks are evenly distributed among all the societal “classes”. Generally speaking wealthy people have more opportunity to take advantage of tax shelters, loopholes and in some cases tax breaks over the middle class who either don’t tend to have that luxury or can’t afford the top-notch tax accountant.

I believe with the above in mind you can see where people can believe that wealthy people do not always pay their “fair share” even when it is within the legal bounds of the tax code. As far as I am concerned about the subject I personally do not believe the blame should fall on the wealthy. Seriously, if you had the same advantage you would also capitalize on the opportunity to pay less to the government, I know I would.

I am usually more interested in how tax breaks affect the people making/approving the break or those who have influence on said people.

Tax breaks don’t turn economies, they can assist but they alone do not turn economies. Consumer confidence is about the only thing that can turn an economy around. As consumer confidence continues to improve, so will our economy. One of the non-political reason I think the war is not a good thing. I don’t think it is helping our confidence.