Taxes Fall To Thirty Year Low Under Obama

July 11, 2012 — Ron Chusid

The right wing has been spreading many falsehoods about Obama, such as that he is a Muslim, he was born outside the United States, he is responsible for huge increases in the deficit, and that he has been raising taxes. All of these are false. The first two are outright lies, the increase in the deficit is a consequence of policies during the Bush years, and Obama has cut taxes since taking office. The Washington Post reports on the decreased tax burden under Obama:

Americans paid the lowest tax rates in 30 years to the federal government in 2009, in part because of tax cuts President Obama sought to combat the Great Recession, congressional budget analysts said Tuesday.

A sharp decline in income — especially among the wealthiest Americans, who pay the highest tax rates — also played a role, according to the report by the nonpartisan Congressional Budget Office. Household income fell 12 percent on average from 2007 to 2009, with income among the top 1 percent of earners decreasing by more than a third.

Still, at the very moment anti-tax protesters were emerging as the most powerful force in American politics, handing Republicans landslide control of the U.S. House, the data show that people were sending the smallest portion of their income to the federal government since 1979.

During Obama’s first year in office, the average tax rate paid by all households fell to 17.4 percent, down from 19.9 percent in 2007, according to the CBO. The 2009 rate was significantly lower than the previous low of 19.4 percent in 2003 and well below the 30-year average of 21 percent.

The tax burden — which includes all forms of federal levies, including income, payroll and corporate taxes — lightened for households across the board, the result in part of Obama’s signature “Making Work Pay” tax credit and other tax cuts passed as part of the 2009 economic stimulus package, the CBO said.

The lowest fifth of earners benefited the most, sending just 1 percent of their before-tax income to the federal government in 2009, compared with 5.1 percent in 2007. The top fifth of earners paid 23.2 percent, compared with 24.7 percent in 2007.

The average federal income tax rate also reached a new low, settling at 7.2 percent in 2009 — two points lower than in 2007, the CBO said. Although detailed data are available only through 2009, the CBO said more recent estimates suggest that effective tax rates remained at historically low levels in 2010 and 2011.

“However much Republicans try to perpetuate false claims, the facts speak for themselves: Tax rates have never been lower than under President Obama,” said Rep. Sander M. Levin (Mich.), the senior Democrat on the House Ways and Means Committee, which has jurisdiction over taxes.

Even with Obama’s proposal to repeal the Bush tax cut on taxable income over $250,000 per year, only about two percent of the country will face higher taxes (and this will be a very small tax increase for most). Republican claims of higher taxes under the Affordable Care Act are also false. In contrast, the Republican plan supported by Mitt Romney will result in higher taxes for the middle class.

 

Posted in Barack Obama, Economy, Mitt Romney. Tags: , , . 2 Comments »

Tax Increases For Very Few

July 10, 2012 — Ron Chusid

I really hate it when Obama and other Democrats talk about increasing taxes on families making over $250,000 because they are  making their tax plans sound worse than they are. We then see conservatives use scare tactics that people will stop working once they reach $250,000 in income to avoid paying higher taxes, but this makes no sense to those who understand how marginal tax rates work. Even if one earns enough to fall under the higher rates, taxable income under $250,000 will still be taxed at the same rate as before the proposed increase. Only taxable income over $250,000 will be taxed at the higher rate, resulting in a modest increase in taxes for most upper income earners. Steve Benen provided this table (via Kevin Drum) explained:

If your family makes $250,000 a year, under Obama’s plan, every penny in income will get the tax break. If your family makes $260,000 a year, under Obama’s plan, you’d get the tax cut for your first $250,000, then pay slightly higher taxes on the $10,000.

As a result, everyone with an income would get a tax break. Even those at the very top would end up paying less in taxes than they did under Clinton because Obama would still give them a break on their first quarter-million.

Good explanation, but there is still one key point left out. It takes an income closer to $300,000 to have a taxable income of $250,000. Few people earning over $200,000 aren’t putting a good chunk of income in retirement accounts, and there will be other tax deductions such as mortgage interest and local taxes. This reduces even further the number of people who will have to pay an extra 3 percent on a portion of their income.

Despite all the talk about “job creators,” only 3 percent of small business owners make over $250,000 per year.  As Jonathan Capehart pointed out, “As the president said yesterday, letting the Bush tax cuts expire for the wealthy would not impact 98 percent of American wage earners and 97 percent of small-business owners.”

Besides, as a business owner, I would also point out that minor changes in taxes have zero impact on how many people I hire. I hire employees based upon what is needed for business purposes. I’m not going to avoid hiring another employee if one is needed should I have to pay a few hundred dollars more a year in taxes if taxes are increased. Democrats are also offering more tax breaks for small business as well as the middle class, but even without these breaks I’d  be willing to pay a few hundred dollars more a year in taxes under the Democrats as opposed to voting for a party which is anti-science, pro-theocracy, and hostile to individual liberty.

Posted in Barack Obama, Economy. Tags: , . 3 Comments »

Despite GOP Scare Tactics, Most People Will Not Pay More In Taxes Under Affordable Care Act

July 5, 2012 — Ron Chusid

Mitt Romney might not be able to decide if the mandate is a tax or penalty, but for the most part Republicans are resorting to false claims about taxes in the Affordable Care Act to continue to scare and mislead voters.  The tax penalty in the mandate only affects two percent of the population, and overall the ACA is certainly not the largest tax increase in history as conservatives claim. It is far less than the Reagan tax increase of 1982, and few will actually wind up paying more in taxes.

Overall, Obama’s health-care law will increase federal revenues as a portion of gross domestic product. The nonpartisan Congressional Budget Office estimates that the law will reduce federal deficits by a relatively small amount—$210 billion, by 2021.

Here’s a nice chart from Ezra Klein which breaks down how the tax increases in Obamacare stack up against tax hikes passed by previous administrations. You can see that Obama’s tax increase will bring in less revenue as a portion of GDP than the tax increases put in place by presidents George H.W. Bush, Bill Clinton, or Ronald Reagan.

Lots of different tax hikes are tucked into the Affordable Care Act. If you’re a tanning salon, a medical device maker, a pharmaceutical company, a small business owner who doesn’t want to provide health insurance coverage to your employees, or an individual who refuses coverage, you’re going to have to cough up more money to the IRS in the form of penalties, fees, and yes, taxes. Individuals earning $200,000 or above and couples earning at least $250,000 will pay a 0.9% Medicare surtax and a 3.8% surtax on investment income. Some of these taxes—such as the 2.3 percent excise tax on the sale of medical devices—could be passed along to consumers.

If you’re just about anyone else, the health-care law is likely to be a net plus. People who earn up to 133 percent of the poverty line will become eligible for Medicaid. Families earning up to 400 percent of the poverty line—about $100,000—also get lots of subsidies for insurance on state-run exchanges whose goal is to bring down the cost of care.

Republicans such as House Speaker John Boehner (R.-Ohio) have been particularly keen on bringing up small business, arguing that Obamacare amounts to a tax hike for them. If you’re a business with up to 25 employees, you’re also going to get a big tax credit to help with your employees’ health-care bill. After 2014, that credit will cover up to 50 percent of employer contributions.

Taken together, claims that Obamacare amounts to the largest tax hike in the entire history of humanity—or even the last 20 years—don’t add up.

The Affordable Care Act is especially beneficial in promoting small business. A small percentage of small business owners make enough to be subject to the higher taxes while many will receive tax breaks to provide coverage for employees. This will help small businesses compete for employees, being able to offer coverage comparable to larger companies, along with helping business owners. Having health insurance become portable will also allow more people to leave larger companies to either work for small businesses or start businesses of their own.

Posted in Economy, Health Care, Mitt Romney. Tags: , , , . 12 Comments »

Republican Tax Plan Raises Taxes On Middle Class

June 20, 2012 — Ron Chusid

Republicans have been attracting votes by selling a number of falsehoods, such as that they spend less, tax less, and raise the deficit less than Democrats. All are false. In the case of taxes, Republican policies for several years have called for lower taxes for the ultra-wealthy, but higher taxes for the middle class This is seen in an analysis of the House plan, which has been supported by Mitt Romney:

The report, prepared by Senate Democrats and reviewed by nonpartisan tax experts, marks the first attempt to quantify the trade-offs inherent in the GOP tax package, which would replace the current tax structure with two brackets — 25 percent and 10 percent — and cut the top rate from 35 percent.

Those changes would benefit virtually every taxpayer, but they also would reduce federal tax collections by about $4.5 trillion over the next decade, according to the nonpartisan Tax Policy Center. To avoid increasing the national debt by that amount, GOP leaders such as House Budget Committee Chairman Paul Ryan (Wis.) have pledged to get rid of all the special-interest loopholes and tax shelters that litter the code.

Republicans have declined to identify their targets. However, some of the biggest “loopholes” on the books are popular tax breaks for employer-provided health insurance, mortgage interest, state and local taxes, and retirement savings, which disproportionately benefit the upper middle class.

So although households earning $100,000 to $200,000 a year would save about $7,000 from the lower tax rates in the GOP plan, those savings would be swamped by eliminating major deductions, according to the report by the Democratically controlled congressional Joint Economic Committee.

The net result: Married couples in that income range would pay an additional $2,700 annually to the Internal Revenue Service, on top of the tax increases that are scheduled to hit every American household when the George W. Bush-era cuts expire at the end of the year.

Households earning more than $1 million a year, meanwhile, could see a net tax cut of about $300,000 annually.

 

Posted in Economy, Republicans. Tags: , , . 6 Comments »
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