We’ve all heard this week’s dire warnings emanating from GOP elected officials, conservative talk show hosts and just about everyone with access to a right-leaning blog or microphone. It goes like this—enact the Obama tax proposal raising taxes on those earning more than $250,000 a year and watch as what little job and economic growth we have catastrophically dissolves into the recessionary abyss.
At the same time, the White House would have supporters of the President believe that the proposed tax increases to be levied on those who earn a very substantial living will put the responsibility for cutting our errant finances back on the shoulders of those who can best afford it-the infamous “one percenters.”
To both sides I say … bull.
Actually, let me be a bit clearer in my response—to both sides I say this is utter, complete, non-debatable and unadulterated bull.
You see, there is a dirty little secret when it comes to understanding what the Obama tax plan actually proposes and it is not some complicated, hidden bit of legislative doublespeak buried deep in the language of the proposal.
No, this simple detail is as clear as the nose on your face yet completely inconvenient when it comes to the politics of the proposal, an inconvenience that fails to serve the rhetorical needs of Republicans or Democrats in this election year.
Republicans do not wish for you to focus on what the Obama tax plan really means in terms of ‘real dollar costs’ as this would strip away much of the anger from a base thirsty for some electoral blood. At the same time, the White House is equally content to avoid a discussion of the actual numbers, knowing that the progressive base will be severely disappointed should they lock in on what much of what the top 1 percent is really going to be required to pay in additional taxes.
The Obama plan to raise taxes on earning in excess of a quarter million bucks a year proposes only a marginal rise on the rate paid by those earning over $248,000—leaving the amounts earned under the threshold to be taxed at the current, Bush Tax Cut rates.
Ideologues are obscuring the real numbers, leaving the public (conservatives, liberals and independents) to base their opinion on a potentially false understanding of what the tax changes under consideration really mean.
The President’s plan raises the tax rate from 33 percent to 36 percent but only on the amount of earnings exceeding $247,000 and less than $398,000. Anyone pulling down more than $398,000 in taxable income will see a 4.6 percent increase in the marginal tax rate paid on those earnings over the $398,000 but only on those earnings over $398,000.
On the face of it, this may not sound like a particularly shocking revelation. As I said, it is not particularly complicated.
But what I suspect you may not have focused on is what it all means in terms of actual dollar increases that would be paid by upper-income taxpayers, small businesses, job creators or whatever descriptor suits your ideological needs.
Thanks to the Tax Foundation—the non-partisan to right-leaning think tank that has been producing research studies on federal and state tax policy since 1937—you can now access an easy to use, online calculator to work out what your tax bill would be under the three possible scenarios—taxes you will owe if things remain as they are today; taxes you will owe should the Bush tax cuts be fully revoked for everyone; and taxes you will owe should the Obama tax plan be adopted.
According to the Tax Foundation—and I highly encourage you to go to the on-line calculator and run the numbers for yourself— what do you imagine the tax increase will be for the average American household with taxable earnings between $250,000 and $300,000 a year?
That’s not a typo. If you read one dollar short of two hundred dollars a year, you have read the number correctly.
I don’t know about you, but I’m having considerable difficulty buying into the notion that the loss of sixteen dollars a month for those earning $300,000 a year is going to mean the difference between a job created and a job lost—even if that job belongs to the kid who mows your lawn during the summer or the impact on barristas everywhere that might result if the the top 1 percent suddenly drinks three less mocha java lattes a month.
With all the sturm and drang that has accompanied the President’ tax proposal, how can this turn out to be about $199 a year for the many small businesses that provide a very nice living of $300,000 a year to their owners—the people Speaker John Boehner tells us are the very heart of the American job creating class?
Were the President proposing that taxes on all income return to the pre-Bush tax cut rates (the scenario we would encounter if all of the Bush tax cuts are permitted to expire)—rather than just marginal increases for those earning more than $250,000 —we’d be talking some real money. A return to the pre-Bush tax cut, Clinton era tax rates on all income would see households bringing in $250,000 to $300,000 a year paying a little more than $10,000.00 a year in additional taxes.
But this is not what President Obama has put on the table. The Obama proposal only affects the marginal rates charged on taxable income above $248,000.
Extending the calculations out to those who earn even more money, we find that the typical American household, one with two kids and a car in the garage, earning $400,000 a year would see their tax bill rise by $3,541—a decent chunk of money but hardly enough to be the deciding factor between hiring a new employee or not.
The truth is—and again, I encourage you to work through this for yourself with the tax calculator available at the link provided above—we really don’t see the proposed tax increase reaching the kind of a hit that might arguably affect a small business’ ability to hire new workers until we get to those earning well into the millions of dollars a year …
Read the Rest: The Truth About The Obama Tax Hike Proposal