Think back to whatever math class you took last, and you'll probably recall the concept of a function, which associates an "output" value for each of its "input" values. Much has been said about the Bush tax cuts, the Obama tax cut, and the Obama-McConnell tax deal, but I think one of the best ways to get a sense of how they all relate is to treat tax rates as functions and graph the tax paid for any given income level.
Below, I'll present the graphs I have produced, with some commentary on each. I'll then include the full details of how I obtained these numbers. I welcome feedback and criticism on the analysis, so please take a careful look at my numbers and methodology if you're so inclined. If I get constructive feedback that I can use to make this write-up even better, I may make a "version 2.0" of this later.
The one overarching conclusion revealed by all these graphs is that in recent times, tax rates have never been lower than under Obama. The specifics follow.
First, let's look at tax rates for a married couple making up to $70,000 per year:
For all these graphs, blue indicates Clinton-era tax rates; red indicates Bush-era tax rates. The 2009 tax rates incorporating Obama's Making Work Pay tax credit are in green. Finally, the black line shows what the 2009 tax rates would be if the new tax deal were applied for that year. Everything is adjusted to 2009 dollars.
This graph clearly shows the effect of the first Bush tax cut, which took effect in 2002. (I've put it in a slightly different shade of red to distinguish it from the further cuts that applied for 2003, though they are about the same in this income range.) The Obama tax cut is also apparent from the position of the green line relative to the others. Notice how the blue, red, and green lines are essentially parallel in the right half of the graph, with the Bush rates about halfway between the Clinton and Obama rates. This means that for many earners, Bush and Obama each cut their taxes by a fixed number of dollars, regardless of income. Furthermore, Obama cut their taxes by as much again as Bush did.
For anyone with a low enough income to be on the left half of the graph, the new tax deal has the unfortunate effect of raising their taxes relative to the current rates. However, it's still lower than the Bush rates ever were. If you're on the right half, your taxes have reached a new low.
Now let's zoom out a bit and look at the rates for a couple making up to $300,000:
Here, you can see that for moderately wealthy earners, the Bush cuts of 2002 didn't make much difference, but the ones starting in 2003 sure did. The more a couple made, the better the 2003 cut was. You can also see that the Obama rates were no higher, and are just a little bit lower until you reach the phase-out for the Making Work Pay credit. For anyone on the right half of this graph, the new tax deal is a big win---it's almost like getting the 2003 Bush tax cuts all over again. The more you make, the more you win.
Now, lets zoom out even further and look at the picture for a couple making up to $1,000,000:
At this scale, about the only thing that matters is the Bush tax cut that kicked in in 2003. All the lines before that are essentially the same, and all the ones after are pretty close. (I actually had to make the red lines with a broader stroke so they wouldn't disappear behind the green one.) And yet, it's still apparent from this graph that the Obama-McConnell tax deal makes taxes on the super-wealthy even lower than they've ever been.
So, some conclusions we can reach:
For most people, in 2009 Barack Obama incrementally cut their taxes by the same amount that George Bush did. The fact that this is widely unrecognized when it is so easy to observe graphically is, in my opinion, a huge missed opportunity in messaging.
We've blasted another big hole in the federal government's revenue.
Regardless of how you feel about the Obama-McConnell tax deal, passing nothing would have been a hit to the economy, because of the double whammy of both the Bush and Obama tax cuts expiring for tax year 2011.
Overall, contemporary tax rates have never been lower than under Obama.
The following are some comments about how I produced these graphs, and all the data that went into them:
First, these graphs are an oversimplification of an extremely complicated tax code. They basically assume earners with all income coming from wages, with no special deductions or credits. But, this assumption seems to me like a good way to model the most basic components of our income tax system.
The graphs combine regular income tax, OASDI (Social Security), and Medicare rates.
I made no effort to account for the capital gains rate, which often gives high earners an even bigger tax break than these graphs indicate.
I chose to analyze rates for a married couple. The relative rates for single earners are comparable. To some extent, the analysis assumes both partners earn the same amount of money. This isn't likely to be true.
I chose to rework the 2009 tax rates as if the new tax deal were in effect because that's easier than trying to project ahead to what everything will be in 2011.
All the lines are adjusted to 2009 dollars by using the CPI from July of each year.
I assumed the standard deduction and two exemptions, and applied the tax rates to what was left after subtracting those. For Social Security and Medicare, I multiplied by the original income with no deductions.
I treated the Making Work Pay tax credit as cancelling out the first $800 of Social Security, because that's basically what it does.
None of this is tax advice. Don't use these graphs to file your taxes.
Again, this is a simplification for the purposes of modeling, but are there any major components of the tax system that I overlooked and should have taken into account? Are there any errors in my computation of the parts that I did take into account? I appreciate any feedback that can help make this analysis more solid and relevant to the casual reader.
Some handy links for data:
www.irs.gov
Social Security & Medicare Tax Rates
Social Security Contribution and Benefit Base
Consumer Price Index
The values I used to produce the graphs follow:
---- 1999
income deduct exempt taxable tax oasdi+hc total tax cpi cpi income cpi tax notes
0.00 0 0 0.00 0.00 0.00 0.00 166.70 0.00 0.00
12700.00 7200 5500 0.00 0.00 971.55 971.55 166.70 16406.46 1255.09 15%
start
55750.00 7200 5500 43050.00 6457.50 4264.88 10722.38 166.70 72020.51 13851.67 28%
start
116750.00 7200 5500 104050.00 23537.50 8931.38 32468.88 166.70 150823.21 41944.84 31%
start
145200.00 7200 5500 132500.00 32357.00 11107.80 43464.80 166.70 187576.28 56149.90 oasdi
breakpoint
171250.00 7200 5500 158550.00 40432.50 11485.53 51918.03 166.70 221228.91 67070.18 36%
start
295850.00 7200 5500 283150.00 85288.50 13292.23 98580.73 166.70 382193.12 127351.28 39.6%
start
1012700.00 7200 5500 1000000.00 369161.10 23686.55 392847.65 166.70 1308254.10 507499.31
---- 2000
income deduct exempt taxable tax oasdi+hc total tax cpi cpi income cpi tax notes
0.00 0 0 0.00 0.00 0.00 0.00 172.80 0.00 0.00
12950.00 7350 5600 0.00 0.00 990.68 990.68 172.80 16138.86 1234.62 15%
start
56800.00 7350 5600 43850.00 6577.50 4345.20 10922.70 172.80 70786.67 13612.35 28%
start
118900.00 7350 5600 105950.00 23965.50 9095.85 33061.35 172.80 148178.44 41202.52 31%
start
152400.00 7350 5600 139450.00 34350.50 11658.60 46009.10 172.80 189927.62 57338.57 oasdi
breakpoint
174400.00 7350 5600 161450.00 41170.50 11977.60 53148.10 172.80 217344.99 66235.51 36%
start
301300.00 7350 5600 288350.00 86854.50 13817.65 100672.15 172.80 375493.38 125462.08 39.6%
start
1012950.00 7350 5600 1000000.00 368667.90 24136.58 392804.48 172.80 1262383.08 489530.30
---- 2001
income deduct exempt taxable tax oasdi+hc total tax cpi cpi income cpi tax notes
0.00 0 0 0.00 0.00 0.00 0.00 177.50 0.00 0.00
13400.00 7600 5800 0.00 0.00 1025.10 1025.10 177.50 16257.48 1243.70 15%
start
58600.00 7600 5800 45200.00 6780.00 4482.90 11262.90 177.50 71096.16 13664.66 27.5%
start
122650.00 7600 5800 109250.00 24393.75 9382.73 33776.48 177.50 148804.51 40979.14 30.5%
start
160800.00 7600 5800 147400.00 36029.50 12301.20 48330.70 177.50 195089.81 58636.98 oasdi
breakpoint
179900.00 7600 5800 166500.00 41855.00 12578.15 54433.15 177.50 218262.79 66040.75 35.5%
start
310750.00 7600 5800 297350.00 88306.75 14475.48 102782.23 177.50 377015.91 124700.03 39.1%
start
1013400.00 7600 5800 1000000.00 363042.90 24663.90 387706.80 177.50 1229502.55 470383.36
---- 2002
income deduct exempt taxable tax oasdi+hc total tax cpi cpi income cpi tax notes
0.00 0 0 0.00 0.00 0.00 0.00 180.10 0.00 0.00
13850.00 7850 6000 0.00 0.00 1059.53 1059.53 180.10 16560.86 1266.91 10%
start
25850.00 7850 6000 12000.00 1200.00 1977.53 3177.53 180.10 30909.62 3799.46 15%
start
60550.00 7850 6000 46700.00 6405.00 4632.08 11037.08 180.10 72401.46 13197.36 27%
start
126700.00 7850 6000 112850.00 24265.50 9692.55 33958.05 180.10 151499.01 40604.66 30%
start
169800.00 7850 6000 155950.00 37195.50 12989.70 50185.20 180.10 203034.98 60007.96 oasdi
breakpoint
185800.00 7850 6000 171950.00 41995.50 13221.70 55217.20 180.10 222166.66 66024.87 35%
start
320900.00 7850 6000 307050.00 89280.50 15180.65 104461.15 180.10 383709.81 124907.35 38.6%
start
1013850.00 7850 6000 1000000.00 356759.20 25228.43 381987.62 180.10 1212291.01 456754.12
---- 2003
income deduct exempt taxable tax oasdi+hc total tax cpi cpi income cpi tax notes
0.00 0 0 0.00 0.00 0.00 0.00 183.90 0.00 0.00
15600.00 9500 6100 0.00 0.00 1193.40 1193.40 183.90 18267.95 1397.50 10%
start
29600.00 9500 6100 14000.00 1400.00 2264.40 3664.40 183.90 34662.26 4291.09 15%
start
72400.00 9500 6100 56800.00 7820.00 5538.60 13358.60 183.90 84782.01 15643.22 25%
start
130250.00 9500 6100 114650.00 22282.50 9964.13 32246.62 183.90 152525.65 37761.52 28%
start
174000.00 9500 6100 158400.00 34532.50 13311.00 47843.50 183.90 203757.88 56025.81 oasdi
breakpoint
190300.00 9500 6100 174700.00 39096.50 13547.35 52643.85 183.90 222845.54 61647.12 33%
start
327550.00 9500 6100 311950.00 84389.00 15537.48 99926.48 183.90 383568.35 117016.13 35%
start
1015600.00 9500 6100 1000000.00 325206.50 25514.20 350720.70 183.90 1189290.24 410701.76
---- 2004
income deduct exempt taxable tax oasdi+hc total tax cpi cpi income cpi tax notes
0.00 0 0 0.00 0.00 0.00 0.00 189.40 0.00 0.00
15900.00 9700 6200 0.00 0.00 1216.35 1216.35 189.40 18078.57 1383.01 10%
start
30200.00 9700 6200 14300.00 1430.00 2310.30 3740.30 189.40 34337.91 4252.78 15%
start
74000.00 9700 6200 58100.00 8000.00 5661.00 13661.00 189.40 84139.25 15532.79 25%
start
133150.00 9700 6200 117250.00 22797.50 10185.98 32983.48 189.40 151393.80 37502.77 28%
start
175800.00 9700 6200 159900.00 34732.55 13448.70 48181.25 189.40 199887.57 54782.90 oasdi
breakpoint
194550.00 9700 6200 178650.00 39979.50 13720.58 53700.07 189.40 221206.64 61057.89 33%
start
335000.00 9700 6200 319100.00 86328.00 15757.10 102085.10 189.40 380900.66 116072.48 35%
start
1015900.00 9700 6200 1000000.00 324643.00 25630.15 350273.15 189.40 1155095.46 398266.49
---- 2005
income deduct exempt taxable tax oasdi+hc total tax cpi cpi income cpi tax notes
0.00 0 0 0.00 0.00 0.00 0.00 195.40 0.00 0.00
16400.00 10000 6400 0.00 0.00 1254.60 1254.60 195.40 18074.50 1382.70 10%
start
31000.00 10000 6400 14600.00 1460.00 2371.50 3831.50 195.40 34165.20 4222.71 15%
start
75800.00 10000 6400 59400.00 8180.00 5798.70 13978.70 195.40 83539.44 15405.97 25%
start
136350.00 10000 6400 119950.00 23317.50 10430.78 33748.28 195.40 150271.80 37194.09 28%
start
180000.00 10000 6400 163600.00 35539.50 13770.00 49309.50 195.40 198378.61 54344.17 oasdi
breakpoint
199200.00 10000 6400 182800.00 40915.50 14048.40 54963.90 195.40 219538.99 60575.90 33%
start
342850.00 10000 6400 326450.00 88320.00 16131.33 104451.32 195.40 377856.14 115116.16 35%
start
1016400.00 10000 6400 1000000.00 324062.50 25897.80 349960.30 195.40 1120177.87 385692.43
---- 2006
income deduct exempt taxable tax oasdi+hc total tax cpi cpi income cpi tax notes
0.00 0 0 0.00 0.00 0.00 0.00 203.50 0.00 0.00
16900.00 10300 6600 0.00 0.00 1292.85 1292.85 203.50 17884.19 1368.14 10%
start
32000.00 10300 6600 15100.00 1510.00 2448.00 3958.00 203.50 33863.55 4188.50 15%
start
78200.00 10300 6600 61300.00 8440.00 5982.30 14422.30 203.50 82754.05 15262.20 25%
start
140600.00 10300 6600 123700.00 24040.00 10755.90 34795.90 203.50 148787.96 36822.27 28%
start
188400.00 10300 6600 171500.00 37424.00 14412.60 51836.60 203.50 199371.64 54855.35 oasdi
breakpoint
205350.00 10300 6600 188450.00 42170.00 14658.38 56828.38 203.50 217308.74 60137.82 33%
start
353450.00 10300 6600 336550.00 91043.00 16805.83 107848.82 203.50 374033.47 114129.50 35%
start
1016900.00 10300 6600 1000000.00 323250.00 26425.85 349675.85 203.50 1076120.06 370039.53
---- 2007
income deduct exempt taxable tax oasdi+hc total tax cpi cpi income cpi tax notes
0.00 0 0 0.00 0.00 0.00 0.00 208.30 0.00 0.00
17500.00 10700 6800 0.00 0.00 1338.75 1338.75 208.30 18092.47 1384.07 10%
start
33150.00 10700 6800 15650.00 1565.00 2535.98 4100.98 208.30 34272.30 4239.81 15%
start
81200.00 10700 6800 63700.00 8772.50 6211.80 14984.30 208.30 83949.04 15491.60 25%
start
146000.00 10700 6800 128500.00 24972.50 11169.00 36141.50 208.30 150942.86 37365.08 28%
start
195000.00 10700 6800 177500.00 38692.50 14917.50 53610.00 208.30 201601.76 55424.98 oasdi
breakpoint
213350.00 10700 6800 195850.00 43830.50 15183.58 59014.08 208.30 220573.00 61012.01 33%
start
367200.00 10700 6800 349700.00 94601.00 17414.40 112015.40 208.30 379631.62 115807.70 35%
start
1017500.00 10700 6800 1000000.00 322206.00 26843.75 349049.75 208.30 1051947.64 360866.89
---- 2008
income deduct exempt taxable tax oasdi+hc total tax cpi cpi income cpi tax notes
0.00 0 0 0.00 0.00 0.00 0.00 219.96 0.00 0.00
17900.00 10900 7000 0.00 0.00 1369.35 1369.35 219.96 17524.61 1340.63 10%
start
33950.00 10900 7000 16050.00 1605.00 2597.18 4202.18 219.96 33238.01 4114.05 15%
start
83000.00 10900 7000 65100.00 8962.50 6349.50 15312.00 219.96 81259.36 14990.88 25%
start
149350.00 10900 7000 131450.00 25550.00 11425.28 36975.28 219.96 146217.89 36199.84 28%
start
204000.00 10900 7000 186100.00 40852.00 15606.00 56458.00 219.96 199721.79 55273.98 oasdi
breakpoint
218200.00 10900 7000 200300.00 44828.00 15811.90 60639.90 219.96 213623.99 59368.18 33%
start
375600.00 10900 7000 357700.00 96770.00 18094.20 114864.20 219.96 367723.06 112455.31 35%
start
1017900.00 10900 7000 1000000.00 321575.00 27407.55 348982.55 219.96 996552.99 341663.82
---- 2009
income deduct exempt taxable tax oasdi+hc total tax cpi cpi income cpi tax notes
0.00 0 0 0.00 0.00 0.00 0.00 215.35 0.00 0.00
12903.23 5603 7300 0.00 0.00 187.10 187.10 215.35 12903.23 187.10
stimulus breakpoint
18700.00 11400 7300 0.00 0.00 630.55 630.55 215.35 18700.00 630.55 10%
start
35400.00 11400 7300 16700.00 1670.00 1908.10 3578.10 215.35 35400.00 3578.10 15%
start
86600.00 11400 7300 67900.00 9350.00 5824.90 15174.90 215.35 86600.00 15174.90 25%
start
155750.00 11400 7300 137050.00 26637.50 11114.88 37752.38 215.35 155750.00 37752.38 28%
start
168700.00 11400 7300 150000.00 30263.50 12105.55 42369.05 215.35 168700.00 42369.05
phaseout start
208700.00 11400 7300 190000.00 41463.50 15965.55 57429.05 215.35 208700.00 57429.05
phaseout end
213600.00 11400 7300 194900.00 42835.50 16340.40 59175.90 215.35 213600.00 59175.90 oasdi
breakpoint
227550.00 11400 7300 208850.00 46741.50 16542.68 63284.18 215.35 227550.00 63284.18 33%
start
391650.00 11400 7300 372950.00 100894.50 18922.13 119816.62 215.35 391650.00 119816.62 35%
start
1018700.00 11400 7300 1000000.00 320362.00 28014.35 348376.35 215.35 1018700.00 348376.35
---- 2009deal
income deduct exempt taxable tax oasdi+hc total tax cpi cpi income cpi tax notes
0.00 0 0 0.00 0.00 0.00 0.00 215.35 0.00 0.00
18700.00 11400 7300 0.00 0.00 1056.55 1056.55 215.35 18700.00 1056.55 10%
start
35400.00 11400 7300 16700.00 1670.00 2000.10 3670.10 215.35 35400.00 3670.10 15%
start
86600.00 11400 7300 67900.00 9350.00 4892.90 14242.90 215.35 86600.00 14242.90 25%
start
155750.00 11400 7300 137050.00 26637.50 8799.88 35437.38 215.35 155750.00 35437.38 28%
start
168700.00 11400 7300 150000.00 30263.50 9531.55 39795.05 215.35 168700.00 39795.05
phaseout start
208700.00 11400 7300 190000.00 41463.50 11791.55 53255.05 215.35 208700.00 53255.05
phaseout end
213600.00 11400 7300 194900.00 42835.50 12068.40 54903.90 215.35 213600.00 54903.90 oasdi
breakpoint
227550.00 11400 7300 208850.00 46741.50 12270.68 59012.18 215.35 227550.00 59012.17 33%
start
391650.00 11400 7300 372950.00 100894.50 14650.13 115544.62 215.35 391650.00 115544.62 35%
start
1018700.00 11400 7300 1000000.00 320362.00 23742.35 344104.35 215.35 1018700.00 344104.35