Digby nails it - again. Tax Cut Primer

http://digbysblog.blogspot.com/2009/01/uriah-heeps-on-parade-by-digby-its.html

Look, I blame the Democrats for this too. They needed to explain that the government has to spend money directly to create jobs, whether it's a job working backstage at Shakespeare in the Park or putting in new lawns on the mall or staffing family planning clinics. It's all jobs, many of which already exist and will be kept rather than lost if the feds can kick in some money. Tax cuts are used to stimulate demand, but the last round didn't halt the slide. Neither has interest rate cuts. None of the usual stuff is working. That's why a direct injection of federal money into the economy is required.

Republicans babble about tax cuts no matter what the situation. (They talked about them after 9/11 and Katrina, fergawdsake. They have nothing else.) You would think this was obvious at this point, but apparently everyone in Washington has been so indoctrinated in conservative propaganda that they just can't grasp it.

Matthews betrays a common fundamental misunderstanding of how the tax code works, which the Republicans are cynically using to advance their own agenda. Nobody seems to get this one except for Barney Frank (and he didn't have a good explanation for it either when I saw him talk about it this morning.) If you give a credit to just the people who work and pay payroll taxes (medicare and social security) but who don't make enough money to pay federal income taxes, you are directly targeting the working poor, by definition. Rich people usually don't do their own taxes so they never look at the tax tables. But those of us who do see that many people at minimum wage jobs don't end up paying any federal income taxes --- after they take their standard deduction and other tax credits. It's not that they don't work or pay anything fergawdsake. In fact, the federal government holds on to their money all year and then refunds it to them after they file.

If, on the other hand, if you do what the Republicans cynically want Obama to do, and lower the rates from 15% to 10%, you are lowering the rates for every taxpayer in America, even the millionaires. No matter how much they earn, everyone pays the same rate on the first 20 thousand or so of their earnings. Just as everyone then pays the same rate on the next 20 thousand and so on. (Say, 10% on the first 20 and 15% on the second 20%) The rate goes up the more you earn, but not on the whole amount you earn, only the difference between brackets. That's one reason that all the nonsense about being in a "higher tax bracket" isn't exactly correct. Only the amount you earned above the lower bracket is taxed at the higher rate.

The Republicans want to give a tax break to people who don't need it and want to deny a targeted tax credit to the working poor

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