Please help refute the "Tax Tsunami" meme

[Common Sense Party]

A right-winger friend sent this to me, typical business establishment hand-wringing and hyperventilating about tax increases next year. The friend is warning that these tax "hikes" are going to hurt middle class, not just affect the wealthy. It looks like much ado about nothing. What do you say?

http://www.investors.com/NewsAndAnalysis/ArticlePrint.aspx?id=541131

(snip)

The lowest bracket for the personal income tax, for instance, moves up 50% — to 15% from 10%. The next lowest bracket — 25% — will rise to 28%, and the old 28% bracket will be 31%. At the higher end, the 33% bracket is pushed to 36% and the 35% bracket becomes 39.6%.

But the damage doesn't stop there.

The marriage penalty also makes a comeback, and the capital gains tax will jump 33% — to 20% from 15%. The tax on dividends will go all the way from 15% to 39.6% — a 164% increase.

(snip)

[kenfrequed]

1. uhm...

Considering Obama has already put forth tax cuts for the working folk and those making under 100k, and that the tax breaks for the wealthy are the ones scheduled to sunset, I think this bullshit analyst's little article (which, by the way fails to break down the brackets in terms of income and fails to take into account aforementioned subsequent tax cuts) is a load of malarky.

[Statistical]

12. 'not quite- the lower bracket bush tax cuts are also scheduled to sunset'

All of the tax cuts enacted in 2001 and 2003 will expire in 2011.

Obama has "promised" to extend the tax cuts for those making <$250,000 (which is a weird number because it doesn't correlate to any tax bracket) but that is just a promise. Until any such extension passes both houses (including 60 votes in Senate) and is signed by the President it will expire on Jan 1, 2011

There are 3 possibilities:
a) they need to extend all the cuts to get 60 votes - so everything extends.
b) they are able to get votes to only extend cuts for middle class & poor - I think is unlikely but we will see.
c) no legislation or Obama vetoes - everything expires.

On edit: edited for accuracy.

[kenfrequed]

18. So...

Actually rather than saying 'not correct' shouldn't you be correcting with a subject line saying 'not quite- the lower bracket bush tax cuts are also scheduled to sunset'?

Your subject line makes it sound as though the Bush tax cuts on the wealthy AREN'T scheduled to sunset.

Also, you fail to acknowledge that Obama passed his own tax breaks on the working class completely seperate from the ill-conceived and poorly targeted Bush-breaks.

So a factual correction (which I appreciate) without context and badly framed.

Good Job.

[Statistical]

23. Your right. Edited for accuracy.

Also, you fail to acknowledge that Obama passed his own tax breaks on the working class completely seperate from the ill-conceived and poorly targeted Bush-breaks. So a factual correction (which I appreciate) without context and badly framed.

Bad news is Obama tax cuts also expire in 2011 unless extended. The "making work pay" tax credit was originally only for 2009 but was extended to 2010 also. As of yet is hasn't been extended to 2011.

So while I was unclear the facts remain. Unless the Democrats act decisively (and get 60 votes via compromise) All the tax brackets revert to 2000 levels (but still adjusted for inflation). I did the math for my household that is about $2,200 more in taxes.

[GOTV]

2. It seems like the most obvious criticism is ...

... that these claims are what would happen only if the Bush tax cuts are allowed to expire and nothing else is done about it. The problem is no one is talking about simply letting the taxes cuts expire. Obama wants to continue some of those tax cuts. He says he wants to continue tax breaks for those earning under 250K. Which means he might let the estate tax be reinstated but he won't raise the 10% tax rate to 15%.

Also one could get into specifics of why married people living together with no kids should pay more than they would when single and living separately (more disposable income) or why there should be an estate tax.

[Common Sense Party]

7. Has President Obama specifically stated that only the 33% and 35%

brackets are going up? Everyone else will stay the same? I've heard the $250K statement, but I haven't heard any specifics on brackets.

[GOTV]

8. I don't know. I've also not heard details about which brackets will be changed.

[Warpy]

3. OH MAH GAWD! WE'RE GONNA HAVE TO PAY 50%!

There's a reason they expressed the return of the lowest bracket from 10% to 15% as a 50% tax hike and put that number first, they know stupid people will jump to the wrong conclusion.

Also, they're lying right out of the gate. There is no plan to cancel the cuts for the bottom 90% of taxpayers. Those cuts are extended and there will be no "50% hike" on the lowest earners.

This is a classic example of how to lie with numbers.

Yes, the capital gains tax will probably be restored to the higher level, but how many of the people who are targeted by this spam pay those? Thanks to the crash in the stock market, they'll be carrying forward capital losses in perpetuity. Again, they're lying with numbers, screaming about a percent increase as though that will actually be the tax rate, itself.

I really loathe these people.

[Statistical]

10. Ok simpler still $400 extra in taxes per person.

Now it isn't millions but just that one change is going to reduce post tax incomes by $400 per person (for anyone who maxes out 10% bracket). $800 for 2 person household.

Now $800 may not be HUUUUUUUGGGGGEEE but it is real money and it is going to be pain.

"Those cuts are extended and there will be no "50% hike" on the lowest earners."
Those cuts are only extended if Congress actually gets around to extending them before the deadline. HCR took what 7 months to pass? 9 months? We have 5 months till tax cuts expire.

I wouldn't say it is 100% a foregone conclusion that they will be passed. Takes 60 votes. What if some Republicans/blue dogs hold out votes to get all taxs cuts extended? An all or nothing proposition?

[Warpy]

27. You failed to get the point of how they lied with numbers.

While literally true, those numbers were presented in the most hysteria producing fashion possible.

It has been the intention of this administration to keep the necessary tax cuts for the bottom 90% and only allow the budget busting tax cuts for plutocrats to expire.

[gratuitous]

4. This goes back to the original Republican tax cut legislation

The Republicans had to put in these provisions in 2001 or they couldn't pretend their ruinous policies weren't revenue neutral, as required by the rules they instituted under the Contract On America. So if the overrich are all torqued off about having to pay a fairer share to maintain the society that has enriched them so much in the last 10 years, while consigning millions of their fellow citizens to poverty, the blame should be placed squarely on the Bush administration and the Republican congressional majorities in power nine years ago.

Next!

[sinkingfeeling]

5. If all the Bush taxes go away, those bracket changes look about right. Dems are pushing to keep all

but those making above $200,000.

Ask them where they were in 1980, when I was a single mother paying 42% on a $30,000 a year income.

[Warpy]

6. Bracket creep was destroying people

because the progressive tax system, long known as the only equitable system that would also fund the government, had stupidly been tied to fixed dollar amounts. That's why Reagan was able to sell his "flatter, fairer tax" scam to people who really should have known better.

What had been a princely salary just 30 years later was still being taxed the way a princely salary should be taxed. Nothing had been indexed to inflation, especially the double digit inflation of the 1970s.

If we are ever fortunate enough to go back to a progressive tax system, let's insist this time that some mechanism to index it to inflation be written into it. That way single mothers making $40,000 a year won't be taxed as though they are executives making ten times that amount.

[Statistical]

11. Brackets are fixed. they are indexed to inflation.

For example the 10% bracket is taxable income from $0 to $7,000 in 2003. It is now $0 to 8,375 (2010).

Most everything else is indexed to inflation too. Standard decutions, IRA maxes, personal exemptions, cut offs for various tax breaks, etc.

The only things that are not indexed to inflation tend to be tax credits. This is why $600 tax credit per child was a lot when increased in 1980s but worth much less in real terms by 2000s. Bush tax cuts raised that to $1000 which adjusted for inflation is slighly worse than it was in 1980s.

[Warpy]

26. They weren't when we had a truly progressive tax system

One year a full third of my low retail wages went to taxes. I think that was 1978 or so. Had they been indexed, we'd still have that tax structure.

[Gaedel]

17. Biggest Democratic Party Mistakes

1. Not indexing the income tax brackets to inflation which drove the middle class into brackets conceived for the filthy rich.

2. Not envisioning two income families in the tax rules which had the same consequences as above (simple fix, allow married couples to use the individual tables if both have income).

3. Consolidating the federal budget to hide the deficit with Social Security inflows.

These mistakes plus the inflation of 1968-1982 destroyed public consensus for a progressive income tax system.

[Statistical]

20. A correction tax brackets are indexed for inflation.

However slightly related.
1a. Not indexing AMT to inflation so while regular taxes go down (in nominal amounts) each year more Americans get pushed into AMT. AMT was originally designed not even for the "rich" but for the "oh my god it should be a sin to have that many zeros in your income".

Of course either party could change that every year but they never do. Leaving AMT un-indexed is a source of power for both parties. The limits have to be manually bumped and both parties can attach all kinds of riders & earmarks to it. Anyone voting against that is voting to "raise taxes on working class families".

Personally if I didn't think it was futile I would push for an amendment that requires any and all tax legislation to be indexed to rate of inflation.

[Statistical]

9. He is right. (Unless the Bush tax cuts for middle class and poor are extended)

People seem to forget that the Bush tax cuts DID cut taxes for poor and middle class too. Without an extension all that goes away in 2011.

Any money currently taxed in 10% bracket -> would be taxed in 15% bracket in 2011. Works out to about $450 or so more in taxes per person.

25% bracket goes to 28%. Could be another hundred or so per household depending on income. Largest pain will be people with children. The $1000 tax credit per child drops to $600. Have 3 kids? You tax bill is going up $1200. Marriage penalty is no joke. First year Bush tax cuts went into effect it saved us about $1200 in taxes.

Now Obama has promised to extend these lower income cuts but he has no direct control over what passes in the Senate.

[Kalyke]

13. I think the House Dems are attempting to fix that particular bracket

and keep the tax at 25 percent.

http://www.reuters.com/article/idUSTRE66C5G720100713

[Statistical]

15. Well that would be good for me.

Still the 25% -> 28% is the smallest source of pain for middle class.

If I had to rank them I would say the most pain would be:
a) Child tax credit going from $1000 -> $600. On multiple child households that can be a monster burn.
b) Marriage penalty. Rough. In a household with 2 working spouses (most of America) the second one is taxed higher.
c) 10%->15% bracket. Works out to about $450 more in taxes if you max out 10% bracket. Doesn't take much income to do that.

[Zavulon]

14. And a lot of lower and middle class can't afford it.

Maybe if some jobs become available it wouldn't be as bad, but right now more taxes would crush my household, despite Joe Biden's "Get patriotic!"

As someone who makes under $250K (currently, as someone unemployed and making nothing), I was promised that none of my taxes would go up a dime. If they do, with us holding both houses and the White House, that's when I fucking give up and stop voting entirely.

[Statistical]

16. I agree. I think it is LIKELY they will be extended. I am just saying it isn't guaranteed.

Lots of promised things haven't happened yet. DADT, Marriage Equality (and/or civil unions), ending wars, etc. Maybe some of these things will eventually happen but it shows that at a minimum achieving promises takes time.

This isn't something the Democrats can't simply wind down the clock. If they don't act (and manage to get 60 votes in Senate) then everything WILL expire.

All I can say is write to your Congressman. While in nominal amounts +$600 in taxes may not seem like a lot to some people, anyone who is barely making ends meet that is like getting a $50 a month paycut at the worst possible time.

[Zavulon]

19. Thanks, he's already heard from me.

I personally think the clock will run out, because the Repugs will force an "all or nothing" on us and hope the fallout falls on us when the lower and middle class get saddled with more taxes. I hope you're right and I'm wrong, but if I had any spare cash to bet I'd bet that the clock WILL run out.

Hate to say it because the rich get enough breaks now, but as it stands in my household I'd rather see the tax cuts continue for everyone than see my taxes go up. People can call that selfish, but this isn't simply a matter of me having less cash for recreation, it's a matter of me being able to make ends meet.

[Statistical]

21. "all or nothing" is there strategy. That is my guess.

I think they know that is there "last best hope" to force the issue.

"Hate to say it because the rich get enough breaks now, but as it stands in my household I'd rather see the tax cuts continue for everyone than see my taxes go up"

I don't call it selfish; I call it survival. I also strongly beleive the GOP is smart enough to know this. This is there trump card. Maybe I am wrong but I don't see how Democrats have 60 votes to only raise taxes on the rich.


The big question is if a complete extension gets to Obama desk does he sign it? I think he does. He made a promise to raise taxes on the rich but also made a promise to not raise taxes on middle class. So either way he breaks a promise. I think he would sign the bill.

[Motown_Johnny]

24. what is needed is a new tax cut bill that cherry picks the best of

what will expire and leaves out the rest. Have it take effect the day after the Bush cuts expire.


This forces the (R)s to either vote against tax cuts or vote for a (D) tax structure.


You don't vote to raise taxes on the rich. You simply allow those cuts to sunset and you vote on "new" tax cuts for everyone making less than $200,00/yr..

[Statistical]

25. That would be a smart way to structure the issue. Only one problem.

The added PR bonus is that it wouldn't be the Bush tax cuts anymore (they will have expired). It would be "the Obama tax cuts for working class America".

The only problem....
It would require bold decisive action from the Democratic leadership in Congress.

Let's just say I have my doubts. :)

[Motown_Johnny]

22. First point out that these were the Bush tax cuts that exploded our deficit and

destroyed our economy.

Next point out that it is the (R)s that are taking the "all or nothing" approach to this and they won't vote for extending the breaks on the lower brackets unless we also extend them on the upper ones.


Finally you can point out that the (R)s are in big trouble with this one. What will happen once these expire is the (D)s will then be able to offer a new tax cut bill for the lower brackets and leave the upper brackets out. At that point the (R)s need to either vote against tax cuts or vote for a Democratic tax proposal.


There is some short term political loss to this issue but the long term prospects are very promising, both for our party and for our nation.

[FooshIt]

28. easy refute: taxes are much too low

on capital gains, wealth, income over 50K, luxury goods etc

[Common Sense Party]

29. Income over $50K?

Why not income under $50K, then, as well?

President Obama repeatedly promised not to raise ANY taxes on any of us that earn less than $250K. You want lots of tax increases on people that only earn $51K and up?

[FooshIt]

30. because under 50K its get tough nt