The Obama Tax Cuts

[zaj]

The Bush tax cuts died last night.

Please be among the first to dispense with the term "Bush Tax Cuts".

Obama needs to be given full credit for providing tax cuts for the middle class and resetting a properly progressive tax system.

Kudos to our President for creating the Obama Tax Cuts.

[Honeycombe8]

1. Well, it's not quite that. PART of the income of the wealthy will go up a bit.

That's it. The cuts are not reversed for the wealthy. If someone makes $1 million, he doesn't pay 39% on $1 million. He pays the lower rate of 33% on $450,000, and 39% on the remaining $550,000. Resulting in a lower tax rate than before the Bush tax cuts. AND they get to keep the deductions and loopholes.

Capital gains taxes go up a bit, so there's that. But then, that also affects everyone, not just the wealthy. Unless there are exemptions, lots of seniors live on savings from which they get capital gains. If they sell their house and go into a nursing home, they have to pay capital gains tax on the profit. A lot of middle class people have modest investments in mutual funds, which give capital gains.

[zaj]

2. Every tax policy works that way.

It's why a progressive tax system is constitutional. Every American faces the exact same tax code whether they make $10,000 per year or $10,000,000 per year. Not sure what that has to do with my point though.

[Honeycombe8]

4. You've said that before. You are wrong. Ultimately, what it means is that we are NOT reverting

to pre-Bush-tax-cut years as far as the tax rates for the wealthy. Just stating a fact.

If someone's income is within a certain range, a certain rate of tax applies to that. Before the Bush tax cuts, the rate was 39% for ALL income of someone earning $1 million. NOW, that person continues to pay the LOWER rate of 33% on almost half of it, and 39% for the other half. Meaning he is NOT paying 39% tax rate.

The wealthy has gotten part of the Bush tax cuts either extended or made permanent.


Also...our tax system is progressive whether the top rate is 33% or 39%, so nothing has changed in that respect.

[spooky3]

5. not exactly--if you're single, the first $8700 of taxable income is taxed at 10%; the rate goes up

for other parts of income and doesn't hit 33% until ~ $180K of taxable income, then 35% for amounts over ~ $388K.

http://www.moneychimp.com/features/tax_brackets.htm

Your point is basically correct, but the rates are lower than 33% for parts of the income.

[Honeycombe8]

10. It doesn't matter HOW the govt came up with 33%....

it could be zero taxes on all but $1, and then 1,000% on the $1, making an effective tax rate of 33%. But 33% is the tax rate for someone in a certain income range, period.

[spooky3]

12. No, it is NOT. Check the link. The 33% is a marginal rate on income above a certain level and

below the level on which the 35% is imposed.

You need to read up on the difference between average and marginal tax rates.

The new law preserves the lower (than 33%) rates for everyone's income below certain levels.

[Honeycombe8]

14. Okay, let's give this one last try.

Rates in 2000 and 2012:

Tax Year:
2000

If your taxable income is $288,350 and above, your tax bracket is 39.5%.

Tax Year:
2012

If your taxable income is $288,350 and above, your tax bracket is 35%.

http://www.moneychimp.com/features/tax_brackets.htm


Tax Year:
2013

If your taxable income is over $400,00 (for an individual), your tax bracket is:
33% for the taxable income up to $400,000...and
39% for the taxable income over $400,000.

Making your tax bracket less than 39%. AND if your taxable income is $288,350, you still fall in the 33% bracket, unlike the 39.5% in the year 2000 (as referenced above).

It's really pretty simple. I think you're speaking about something else. You're not talking about income tax brackets. It's straightforward. See the numbers above. It's clear as can be. There's nothin' fancy about it. 39.5% in the year 2000, less than that in 2013.

[spooky3]

15. I am a former IRS agent--are you? I again would urge you to read up until you fully understand

what the law provides and what the other posters have said. You have changed your position several times here.

I'll try one more time -- "Tax brackets" refers to the income over a certain level. Go to the IRS site and read its official publications if you still don't understand--don't rely on websites where the owners may or may not know what they are talking about. You are making things more complicated than they need to be, and playing into common misconceptions, by collapsing across all income levels. "Tax tables" were simply a convenience used for certain taxpayers in certain levels.

[Honeycombe8]

18. I have filed income tax returns for over 40 years. Have you?

I know my rate of income tax. Not you.

I am correct. I am sorry you don't understand your own field.

You keep talking in vague statements....please post exact numbers, from cited sources, as I did:

rate of earned income tax on $1 million dollars before Bush tax cuts
rate of earned income tax on $1 million dollars after Bush tax cuts
rate of earned income tax on $1 million dollars after this new deal takes effect

I'm checking out of this discussion for now. There is no getting through to you. This happens with people who work in certain field....they have forgotten the practical applications of the field, and they speaking in generalities and theories and underlying numbers. What we are discussing is the TOTAL and EFFECTIVE tax rate of a certain amount of earned income. Period. Nothing else. I cited the tax tables as a shortcut to show you the EFFECTIVE tax rate...mine is, in fact, THAT PRECISE TAX RATE, before deductions and credits. Is it a convenience? Yes. Is it correct? Pretty much, yeah. That's why it's used as a convenient shortcut, and the taxpayer is allowed TO INPUT THAT EXACT AMOUNT IN HIS TAX RETURN.

Is it true, or is it NOT true, that taxes on earned income after the new deal takes effect will be LESS than 39% on $1 million dollars in earned income, before deductions and credits, and not including capital gains or dividends?

Answer: That is true. If you disagree, post your cited sources stating that is incorrect, and what the effective tax rate on the total earned income of $1M will be. If it is LESS than 39%, the wealthy have not reverted to pre-Bush tax cuts.

It's really very simple. Forget what you've learned about theory and background informaiton and underlying calculations that lead to the final tax rate. None of that matters.

[spooky3]

16. Let me try to simplify this using one of your examples--then I give up.

Your "tax bracket" is NOT 33% for the taxable income up to $400,000 for 2013. On some parts of that t. income, it is much less than 33%. On your first ~$8000, you pay exactly the same tax rate as that for people who make a total of only ~$8000 in taxable income. That is what at least some other posters mean by the idea that the same tax code principles apply to everyone. Look at the very same website that you linked. The % rate applies only to the PART of your t. income that falls in that range. The lower parts of your income are taxed at lower rates.

[Honeycombe8]

19. You are incorrect.

The stated deal is 33% on earned income (not incl. capital gains and dividends) on up to $400 k for an individual. 39% over that.

[Pretzel_Warrior]

7. Are you seriously under the impression

That tax rates didn't work precisely the same way prior to Bush tax cuts?

[Honeycombe8]

11. No, people earning $1 million had a tax rate of 39% on $1 million.

People in my income range had a tax rate of 25 to 28%. Period.

How the govt arrives at the 39% doesn't matter. It could have tax rate of 15% on $15k, 20% on the next $20k, etc., etc. All that matters is what the effective tax rate is at the end. 39% it was before the Bush tax cuts. It is less than that now.

You pay income taxes don't you? You use the income tax tables, don't you? Does it say, if your income is $60,000, look in hte income range of $20,000 and fill out a return for that % tax rate for that income, then look in the income range of $25,000 and fill out the tax rate for that income, etc., etc.

No.....you look at the table, find your income tax range, and there is your percentage. (well, it's the amount, but you can calculate the %)

The percentage for millionaires before the Bush tax cuts was 39% (no matter how the govt arrived at that effective rate...that was the effective rate). NOW the percentage for millionaires will be LESS than 39%. I don't know how to explain it to you any more clearly than that.

I think you might be thinking that it was the same rate before. It was not. I'm talking about the total, final, effective tax rate. If you pay 33% on half of your income, and 39% on the other half, your TOTAL, EFFECTIVE TAX RATE for all your earned income is less than 39%, of course. Meaning it's less than pre-Bush-tax-cuts. (The new tax rate would, I guess, be 36%. 33% plus 39% divided by 2 = 36%)

[spooky3]

6. I believe that the changes that were just passed have a different cap. gains tax rate

on higher than lower income people (20% vs. 15%) and that some deductions are phased out or limited as incomes go up.

[spooky3]

17. Capital gains tax rates go up to 20% ONLY for people with income above certain levels. They remain

at 15% for most people.

[TXDem72]

3. Since when is $450,000 the middle class

Call the tax cuts what you will, but many well off people who don't need a tax cut just got one.

[zaj]

8. What's most important...

... is that the Bush Tax cuts died.

You and I might have preferred a lower threshold. But whatever that threshold actually is, the fact that there is such a threshold again at all is a good thing.

That one more thing with Bush's name on it is coming to an end is a great thing.

[TheKentuckian]

9. I'd eliminate the whole deal except for the bottom bracket, might even cut it.

I'm willing to pay the old rate and I don't make the new high end in a decade and probably do better than a great many.

Calling the end of the first round of the NBA draft salaries middle class is past pushing it. Of course I thought the 250 line was goofy too. Hell, accounting for high cost cities I'm out at 80k single/140k family TOPS, way tops for middle class. I'm more convincable downward, might be able to get a little wiggle up with a good case.

If it is that rough for the top 20% then the bottom needs a hell of a lot more help, hell the actual middle could use a hand or two.

[No Compromise]

13. The bush tax cuts and wars ruined the economy, we need to do the reverse to fix it

End the wars, hike taxes to higher than they were until we are even again.

I guess I just don't understand high finance...