Will the Bush Tax cuts affect your taxes? MoneyBlogNewz/Flickr.com/CC-BY
The Bush tax cuts are scheduled to expire Dec. 31. The Obama tax plan would extend for two years the Bush tax cuts for everyone except those who make at least $200,000 a year. Republicans say raising taxes on the rich will stifle economic recovery. Obama says he can’t reduce the deficit and offer tax breaks for the rich. Some analysts say the Obama tax plan won’t make a difference in reducing the deficit, while tax cuts in general won’t help the economy. But the debate is suspended for now. Democrats who say they support the Obama tax plan are too afraid to vote on it before the November elections, lest they be crucified at the polls for raising taxes.
A closer look at the Obama tax plan
Obama’s plan to raise taxes for the rich may not sting as much as Republicans claim. Bob Williams at the Christian Science Monitor took a close look at the details. He writes that to ensure no one making less than $200,000 gets a tax increase, the Obama tax plan extends the 28 percent bracket. This cuts taxes for even the richest taxpayers by a few hundred dollars. It also provides a small cushion against higher taxes for people just over the $200,000 threshold. The Tax Policy Center said only 1.7 percent of households will pay more under the Obama tax plan than if Congress extends all the Bush tax cuts. Williams wrote that the reason nearly 95 percent of that 1.7 percent would pay more isn’t because of ordinary income. They get hit when the tax on capital gains and dividends goes from 15 to 20 percent. If a Republican stalemate lets the Bush tax cuts expire, the top dividend rate hits 39.6 percent.
Why tax cuts could be the wrong idea
Tax cuts of any kind are not the way to solve the economy’s problems, according to Diane Lim Rogers writing on CNN. Rogers said extending the Bush tax cuts or implementing the Obama tax plan commits the U.S. to many more years of lost revenue, an increasing deficit, reduced saving and limited economic growth. While Obama says raising taxes on the rich will save $700 billion over 10 years, the savings is just a fraction of the $2.2 trillion cost (not including interest) of extending the Bush tax cuts for everyone else. Lim Rogers writes that deficit-financed fiscal policies (read economic stimulus) have a bigger bang for the buck in terms of boosting demand for goods and services and creating jobs. Most importantly, she writes, a temporary extension of the tax cuts won’t solve the long-term deficit problem. This is because the U.S. government can’t be trusted to let expiring tax cuts expire–as it is proving now.
The majority of America has spoken. It seems Americans on both sides of the aisle and in the middle have had enough of the bureaucracy in Washington.
Way to cut/paste from the “redstate.com” website.
Yeah that’s impartial.
BTW they (and now you) are a bit bizarre for comparing 1990 and 2005 when referring to bills from 2001. What were the tax rates in, you know the year that the bill went into effect? In any case it’s irrelevant because the reason the folks at the top are paying a larger portion of the total income tax now than before is that THEY MAKE MUCH MORE than the bottom does now. It’s income disparity that is the problem here. And one way to fix income disparity is to create tax policy that allows people at the bottom to retain more of whatever low amounts of money corporations are giving them, while taking more from the folks at the top.
It’s all nonsense that job growth can only come from the folks at the top being able to retain their income and then invest it all back into new jobs. That’s a probability question – people have a *choice* of whether to put that money into new jobs or save it away or do a zillion other things with it. People at the bottom with 100% certainty will be spending whatever tax savings they get just to stay afloat. That spend goes directly into the economy. There is no doubt that the economy will be stronger by spending tax cut funds (if we spend any at all) on folks at the bottom than the top. Simple math.
Simple Math….
someone with a small business earning $300,000 taxed 28% now, 39% if tax cuts expire… That person pays $84,000 or $117,000. I am sure that the government will take the additional $33,000 and create a job. OR let that individual keep his hard earned money and invest it as he sees fit. Maybe he hires someone, maybe he buys a new machine to help his business. Either way he is investing in a way that immediately creates a job. The government doesn't not create any jobs.
my 2 cents
Your math is too simple for at least 2 reasons.
1. According to http://www.taxfoundation.org/research/show/26062…. the expiration of Bush Tax cuts would mean that the 28% tax bracket would go to 31%, an increase of 3%.
2. Remember that taxes are based on brackets. The 31% rate would only apply to each dollar made in excess of $82,400. If you consider tax brackets properly, using the tax rates from the Tax Foundation link above, and tax brackets from http://www.moneychimp.com/features/tax_brackets.h… the real numbers look much different.
With Bush Tax Cuts: $74655.50 If Bush Tax Cuts Expire: $85675.50, or a difference of about $11,000 in tax liability, NOT the $33,000 that you stated.
Let's not forget that small businesses will normally have items that are deductible to reduce their tax liability, such as equipment depreciation, and whatever they heck else they use to reduce their tax burden.
By the way, the actual increase under the Obama tax cuts is approximately $1500 for an income of $300,000 because the first 250,000 stay the same.
Simple Math: 300,000 – 250,000 = 50,000 X 3% = 1500
Gary I run a small business. I am never going to hire someone or buy new equipment because I have extra money (define extra money anyway). I hire employee's and buy equipment to make me more money or improve customer service so I can make more money.
You do know that the salaries for the new employees would come from the $300,000, which means that after I hire someone I'm below the $250,000 mark anyway. In the situation you describe the tax increase would give me an added incentive to start hiring or buy the equipment. I can't keep the money so I should try to get something for it.
I like lower taxes as much as the next guy, but if my taxes go down I going to keep my money in the bank.
…Under George W. Bush’s “tax cuts for the rich” the rich paid more in taxes in 2005 than any time in the prior 20 years. In fact, as the Wall Street Journal noted, thanks to George W. Bush’s tax cuts for the rich, the richest one percent went from paying 25% of all income taxes in 1990 to 39% in 2005. The richest 5% went from paying 44% of all income taxes in 1990 to paying 60% of all income taxes in 2005.
That's because the rich got richer and the poor got poorer. And along the way the debt just keeps growing. If we extend the cuts for another ten years the rich will be paying for 99% of the taxes, because no one else will have any money.
PJ – Some of those "examples" are not great acts to follow. The perception of Reagan as a "tax cutter" are not entirely accurate. Granted, he did slash taxes, but for the wealthy. Under Reagan, real wages for most Americans stagnated (which has continued since then) and the concentration of wealth in the United States funneled into the wealthiest 10 percent in proportions that had not been seen since practically the 1890s. Not to mention that he raised taxes in 1983, and deregulation policies also played a hand in the Savings and Loan collapse, as well as the 2008 collapse.
Furthermore, what a lot of Reagan's "cuts" went to were things like the Strategic Defense Initiative (which never worked and wasted $30 billion) and other defense spending which was utterly pointless (the USSR had been in the process of collapse and would have anyway), and tripled the national debt, which by the end of his term in office was at $3 trillion. David Stockman, Reagan's Budget Director actually resigned in disgust over his economic policies. The only things that have not been erroneously attributed to Reagan at this point are settling the Peloppenesian War and curing the Black Plague.
Also, what fails to be mentioned by anyone, and perhaps the most glaring truth about American tax squabbles, is how little Americans pay in taxes compared to the rest of the industrial world. The amount of services we receive contrasted with how little we pay in taxes (for instance, income tax starts at 40 percent in Great Britain – let me repeat – STARTS) quite frankly makes it seem like crying with two loaves of bread under your arm.
So, you pay additional taxes so I can have more disposable income, purchase an American made product and have that tax money go to the US treasury.
I would suggest that Diane Lim Rogers has no idea of what she's atlking about. Raising taxes in a stifled economy will further damage economic growth.
We need to follow these examples: Regan slashed taxes from the 70% to 27% and raised revenues unheard of and created 21 million NEW jobs. We're not talking "saved" jobs, but new jobs.
The 2001 Economic Growth and Recovery Tax Act was George Bush’s version of Barack Obama’s stimulus plan. However, instead of creating a bunch of temporary government jobs and subsidizing the expansion of government, it cut tax rates, increased the child tax credit, increased the standard deduction for married couples, and increasing contribution caps for a variety of savings programs. The result? The recession ended in November of 2001….
how?
If it is truly a bad idea, then why has tax cut been rated as such a bad investment, even by moody's?