So let me be clear to Mr. Boehner... we should not hold middle class tax cuts hostage any longer. We are ready, this week, to give tax cuts to every American making $250,000 or less. For any income over this amount, the tax rates would go back to what they were under President Clinton... let me remind you that with those tax rates in place, this country created 22 million jobs, raised incomes, and had the largest surplus in history.
Republicans believe the apocalypse will come if the Republican-Congress-enacted tax increase, scheduled to take place on January 1, 2011, is not repealed. The rich will apparently pack up their belongings and leave for Somalia Canada Mars, or so the story goes.
What they fail to mention is that if the Obama-proposed tax rates for 2011 are put into effect, those who make over $250,000 a year (married, filing jointly) will still be experiencing a significant tax reduction compared with what would happen by reverting to the old law. Yup. Compared to what they would have paid in 1998, they will be paying less taxes. President Obama is proposing a tax cut for the rich.
How is that? Have the Democrats overturned the laws of arithmetic? (and without a Republican filibuster?) No. It's simply that the rich, like the poor, would still get the benefit of the reductions in marginal tax rates put in place by the Bush tax cuts for all their income up to $250,000, because Obama's proposal keeps those tax rates intact -- instead of having them revert to the Bush tax hike levels scheduled to happen next year.
Need proof? Here are the marginal taxes rates for 1998, 2010, and (as proposed) for 2011. (Married, filing jointly.)
1998 | up to 42k: 15% | up to 102k: 28% | up to 156k: 31% | up to 278k: 36% | above 278k: 39.6% |
2010 | up to 17k: 10% | up to 68k: 15% | up to 137k: 25% | up to 209k: 28% | up to 373k: 33% | above 373k: 35% |
2011 | up to 17k: 10% | up to 68k: 15% | up to 137k: 25% | up to 209k: 28% | up to 250k: 33% | up to 278k: 36% | above 278k: 39.6% |
Note: I'm making assumptions as to what Obama's proposed rates for 2011 would look like based on his statements that he would keep rates as is for those making less than $250K and restore Clinton-era rates for those making more.
So if you made $100K in 1998, you'd have paid 15% on the first $42,000, and then 28% on the rest ($58,000), or $22400 total. In 2010, you'd have paid 10% on the first $17,000, 15% on the next $51,000, and 25% on the remaining $32,000, for a total of $17350.
So what's the bottom line? Let's compute tax paid for someone who ends up with $500,000 after all their deductions using the different tax tables:
;; 1998: $171,672.0
;; 2010: $145,330.0
;; 2011: $158,282.0
A person who makes $500,000 would pay about $13K more in 2011 (a 2.6% increase) than they would in 2010, but about $13K less (2.6% less) than they would if the scheduled Bush tax increases were allowed to happen.
Doing a similar calculation, a person who makes $300,000 would pay about $4K more in 2011 (a 1.3% increase) than in 2010, but about $13K less (a 4.3% decrease) than if nothing were to be done.
Even someone making $10,000,000 would end up paying about $13K less.
And you thought Obama was a socialist.
Foot Note: these tax tables are NOT applied to your income -- they are applied to the number that you get after you do all your income tax calculations -- deducting your standard deduction and your IRA contributions, etc, etc. E.g, it doesn't show how much you pay if your salary and only income is $50,000 a year. It shows how much you pay once you've deducted everything that can be deducted from that $50,000, leaving you with, perhaps a figure of $35,000 to which these tables are applied. So, depending on your exact deductions, your annual income has to be significantly over $250,000 before you begin to feel any effects.