What will also sound familiar is the way the media will describe it, "tax cuts for the middle class" and "fair share for millionaires and billionaires." A more accurate way to describe it would be "maintaining tax rates for those making >$250,000" and a "Tax increase during a weak economy" for those who are successful and create new jobs.
Congressional Republicans have been trying to pass a bill extending the cuts to all Americans.
This is all part of the President's latest strategy of trying to make the GOP (and Romney) appear as favoring the rich over the middle class---a smoke screen at best.
First of all the $250,000 level includes small business owners whose income is actually a reflection of the their business not their personal income. Additionally in major cities such as NY $250,000 IS middle class.
The top 3 percent of earners, those making $250,000 or more, have about $2.3 trillion in total annual income. Evenif we took all their money it would only pay our bills for a bit over six months. If you wanted to limit it a bit and only confiscate all the income of the 400 wealthiest Americans that would net only about $1.4 trillion, a pittance in the Obama presidency. It would pay the federal government's bills for about Four and a half months, which means neither the government nor those wealthy 400 would have anything left to buy guacamole dip for their Super Bowl Party (nor pay the electric so they can watch the game on TV).
The President also makes the argument that the rich pay a lower percentage of their income in taxes. Maybe he never looked at the numbers. According to an AP report, this year, households making more than $1 million will pay an average of 29.1 percent of their income in federal taxes, including income taxes and payroll taxes, according to the Tax Policy Center, a Washington think tank.
Households making between $50,000 and $75,000 will pay 15 percent of their income in federal taxes.
Lower-income households will pay less. For example, households making between $40,000 and $50,000 will pay an average of 12.5 percent of their income in federal taxes. Households making between $20,000 and $30,000 will pay 5.7 percent.
If you look at the numbers based on a percent of total income vs a percent of taxes paid the top 1% of taxpayers pay almost twice their fair share of taxes, representing only 21.2% of total individual income but 39.4% of taxes. In fact the top 5% of tax payers are supplementing the income of the bottom 90% (the 6-10% group are paying about their fair share).
By any standard the "rich" are already paying their fare share and what really needs to be done to get us out of the economic disaster we are facing is to cut spending.
Yet this President is going to announce today that he wants to raise taxes on those most likely to create Jobs.
And as for the middle class "Bush tax cuts" extended or not, here comes Taxmageddon:
- Middle Class Death Tax. The death tax is currently 35% with an exemption of $5 million ($10 million for married couples). For those dying on or after January 1 2013, there is a 55 percent top death tax rate on estates over $1 million. A person leaving behind two homes and a retirement account could easily pass along a death tax bill to their loved ones.
- Higher tax rates on savers and investors. The capital gains tax will rise from 15 percent this year to 23.8 percent in 2013. The dividends tax will rise from 15 percent this year to 43.4 percent in 2013. This is because of scheduled rate hikes plus Obamacare’s investment surtax.
- There are twenty new or higher taxes in Obamacare. Some have already gone into effect (the tanning tax, the medicine cabinet tax, the HSA withdrawal tax, W-2 health insurance reporting, and the “economic substance doctrine”). Several more will go into effect on January 1, 2013. They include:
- Medicare Payroll Tax Hike. The Medicare payroll tax is currently 2.9 percent on all wages and self-employment profits. Starting in 2013, wages and profits exceeding $200,000 ($250,000 in the case of married couples) will face a 3.8 percent rate.
- “Special Needs Kids Tax.” Imposes a cap on FSAs of $2500 (now unlimited). Indexed to inflation after 2013. There is one group of FSA owners for whom this new cap will be particularly cruel and onerous: parents of special needs children. There are thousands of families with special needs children in the United States, and many of them use FSAs to pay for special needs education. Tuition rates at one leading school that teaches special needs children in Washington, D.C. (National Child Research Center) can easily exceed $14,000 per year. Under tax rules, FSA dollars can be used to pay for this type of special needs education. This Obamacare cap harms these families.
- Medical Device Tax. Medical device manufacturers employ 360,000 people in 6000 plants across the country. This law imposes a new 2.3% excise tax. [we are talking about everything from portable oxygen tanks to wheelchairs] Exempts items retailing for <$100.
- “Haircut” for Medical Itemized Deductions. Currently, those facing high medical expenses are allowed a deduction for medical expenses to the extent that those expenses exceed 7.5 percent of adjusted gross income (AGI). The new provision imposes a threshold of 10 percent of AGI. Waived for 65+ taxpayers in 2013-2016 only.
- The AMT will ensnare over 31 million families, up from 4 million last year. According to the left-leaning Tax Policy Center, Congress’ failure to index the AMT will lead to an explosion of AMT taxpaying families—rising from 4 million last year to 31 million. These families will have to calculate their tax burdens twice, and pay taxes at the higher level. The AMT was created in 1969 to ensnare a handful of taxpayers.
- Full business expensing will disappear. In 2011, businesses can expense half of their purchases of equipment. Starting on 2013 tax returns, all of it will have to be “depreciated” (slowly deducted over many years).
- Taxes will be raised on all types of businesses. There are literally scores of tax hikes on business that will take place. The biggest is the loss of the “research and experimentation tax credit,” but there are many, many others. Combining high marginal tax rates with the loss of this tax relief will cost jobs.
- Tax Benefits for Education and Teaching Reduced. The deduction for tuition and fees will not be available. Tax credits for education will be limited. Teachers will no longer be able to deduct classroom expenses. Coverdell Education Savings Accounts will be cut. Employer-provided educational assistance is curtailed. The student loan interest deduction will be disallowed for hundreds of thousands of families.
- Charitable Contributions from IRAs no longer allowed. Under current law, a retired person with an IRA can contribute up to $100,000 per year directly to a charity from their IRA. This contribution also counts toward an annual “required minimum distribution.” This ability will no longer be there.
It is yet to be seen whether Obama's class warfare strategy rerun will work as a campaign tactic, but we do know it will not work as an economic policy. Raising taxes on those earning above $250,000 means taking money from the job creators-- small business owners and the well off. It will end up depressing an already under-performing job market and economy.
The Taxmageddon taxes will further burden the economy, mostly the middle class, but it will also hurt US corporations which already pay the highest corporate taxes in the western world--also depressing the job market.
None of this is important to President Obama, who will travel across the country this week calling for his warped definition of "tax fairness." Taxing an already overtaxed populace and increased spending on programs such as Obamacare.
President Obama says he needs four more years to finish the job. The frightening part is, if given that time, he will finish the job of slowing down the economy until the United States has a rerun of the last recession....or worse.