If you’re as sick as I am about the ridiculous Republican war on the government to protect George W. Bush’s income tax cuts, then maybe you’ll be interested in reading this. Federal tax rates, tax brackets, income cut-offs, rate rollbacks and sunsets, businesses getting whacked, blah blah — here’s a quick breakdown of the nonsense.
There are six federal income tax rates:
Where are the stated income cutoffs for the six rates? For persons filing as ‘single,’ using 2010 brackets and in very rough rounded terms, here are the income amounts vs. the federal tax rates:
What’s been under discussion is whether to allow the top four tax rates, between 25% and 35%, to return to where they were before President Bush, under Clinton. They were all 3% higher, except for the top rate. It was 4.6% higher.
So, Obama’s proposal was to write a bill to freeze the middle class tax rates. That would have stopped the increase on the 3rd and 4th marginal tax rates while the top two brackets reverted:
You can see that his proposal is extremely reasonable. People with stated incomes, after deductions and exemptions and such, of $170,000 and more (some much, much more) are doing fine. The government debt is large and getting larger, and I don’t see how a reversion to slightly higher tax rates will hurt them.
But that’s not what Conservatives like Newt Gingrich think:
What Republicans ought to do is say to people who create jobs, how many years does the tax code need to be extended for you to make an investment decision? I mean, the goal’s not to have an annual extension of the current tax code, and then have every business in the country trapped saying, “I don’t know. I want to make a 20 year investment in a factory.” … There is a number, but I would have the business leadership of the country describe the number.
This is pathetic. But it’s a frequent talking point: the tax code debate is causing businesses to quash the sorts of decisions that would stimulate the economy.
First: no one’s talking about the corporate tax rate. That’s 35%. Period. No debate.
Second: While they’d like to think the small business people operating as S-corporations and such, the supposed true engines of recovery, subject to the income taxes above, will get killed with the proposed reversions at the two top brackets, they’re lying. Let’s crunch the numbers.
Someone claiming a $250,000 profit as an S-corp will only take a 3% hit above $170,000. So 3% of $80,000 is . . $2,400. That’s less than 1% of the profit overall. Someone claiming $500,000 in profit takes a 3% hit between 170K and 370K, or $6,000. Add a 4.6% hit from 370K to 500K, and that’s an additional $5,980. A total of $11,980 in increased taxes for pocketing half a million dollars. That’s all. Not a problem.
Sure, you figured the Conservatives were histrionic toadies for the greedy. And in this time of recession and giant, mind-numbing debts? Now you’re sure.
ADD: Let’s not forget that Obama tried to compromise with the Republicans by offering a freeze on income tax rates for people claiming up to a million(!) dollars a year in income. That would mean extending his bill to include folks making $830,000 more a year than he originally planned — the richest of rich people in America. NBA players and such.
The Republicans refused. Corporatist Conservadem Senator Joe Manchin, from West Virginia: “While I have said repeatedly I prefer all the tax cuts be extended, I was open to a common sense compromise that would extend the cuts to those who make up to $1 million – or 99.9 percent of West Virginians,” he said. “Unfortunately, that did not happen…”