Showing posts with label tax policy. Show all posts
Showing posts with label tax policy. Show all posts
Saturday, September 20, 2008
Estimating your tax burden
Via Ezra Klein, a tool that estimates the change in your tax burden under Obama's plan as well as McCain's plan. Of course, all this is based on what each candidate is proposing; what will actually come out of Congress is likely to be a lot different (especially in light of the $700,000,000,000 bailout package that is in the works).
Tuesday, September 16, 2008
Best tax chart yet
Thursday, September 4, 2008
Why we say, "the GOP is out of ideas"
The following chart shows the top US marginal income tax rate from 1913 to 2003:
In 1980, when Reagan was elected, every dollar you earned past $215,400 was taxed at a rate of 50% (70% for unearned income). After the tax revolt of the 80s, that rate was drastically reduced: to 28% at its lowest point. In the Clinton years that rose back up to 39.6% for dollars earned past $250,000 or so.
Under George W. Bush, that rate was reduced to 35%, where it remains through today. Under Obama, the top rate would move back up to where it was under Clinton: about 40%.*
From the way that Republicans have been pounding their fists and shouting to the rafters, you would think that Obama was proposing a top income tax rate increase of epic proportions. In reality, he is proposing an increase of 5%. That's right: a difference of a nickel of every dollar earned after about $300,000. And the top rate would still remain low overall by historical standards--well under the >50% seen in most of the 20th century.
But what about capital gains (i.e., money earned from investments rather than a paycheck)? The current rate is the lowest it has been since 1933: 15%. Obama would raise that to somewhere in the neighborhood of 25%, which is about where it was in the Clinton years and somewhat higher than it was during much of the 80s. So let's put that increase at 10%.
The final tally, then: the top income tax rate increased by 5%, and the capital gains tax increased by 10%--both levels raised to what they were during the prosperous Clinton years.
The Republicans carry on as if the tax revolt of the 1980s never happened--as though the wealthiest Americans--the investors, the entrepreneurs--were still forfeiting over half of their post-$200,000 income to Uncle Sam. But they are fighting a battle that Reagan already won, and that the Democrats already conceded. There is not one serious politician left who advocates that we return to the pre-Reagan tax rates. And yet still, impossibly, bloody-mindedly, the Republicans insist on more tax cuts--despite dramatically increased federal spending (on both entitlements and two concurrent wars), and despite ballooning deficits. And they continue to depict Democrats as if they were advocating the absurdly high marginal rates of the Great Society years.
We cannot, as the backwards saying goes, have our cake and eat it too. To acknowledge the necessity for a modern infrastructure, a quality education system, a functional healthcare scheme, and a superior military is to acknowledge the necessity of a tax rate that is high enough to cover these tremendous costs. Perhaps there was a time when we could believe that the Republicans would offset their tax cuts with reductions in federal spending, but George W. Bush and his agenda of big government conservatism--and his pet war, Iraq--put that idea to rest.
I've noticed lately that I've been describing the Democrats as "adults" and Republicans as "children". No where is this more true than in fiscal policy. While the Republicans shout gleeful impossibilities in between schoolyard taunts--"Obama is a celebrity! I'll pay for $1000 billion worth of tax cuts by cutting $72 billion in earmarks!** Obama eats arugula!"--the Democrats reasonably suggest, as a starting point, that we return to a tax rate scheme that has been shown to work in the past. It is almost as if the Republicans themselves don't really believe that they'll be in power, and that all they have left is the grim catharsis of pretending to be Ronald Reagan in front of an audience of their peers.
*Hm..but is this quite right? According to one blogger, the de facto rate could be higher: "Senator Obama would raise the top individual tax rate back to 39.6 percent, impose an additional 2 to 4 percent tax on earnings for some over the existing Social Security wage cap, and bring back the phase-out of the personal exemption and certain itemized deductions for higher-income taxpayers. When added up, the top effective marginal tax rate rises...from 37.9 percent to roughly 48 to 50 percent." If true, this argues against my point--however, it is unclear from this post whether the additional nickel and diming would affect a large number of wealthy people or a relative few, or what. Also, it would be unfair to factor in these hidden costs of Obama's plan without also factoring them into the historical tax rates that form the baseline we are comparing against. So I think the most reasonable thing to do is ignore the de facto tax rates for now, and look naively at the explicit tax rates to give us a general idea of where Obama's plan stands historically.
**"Permanently extending the tax cuts would reduce tax revenue by $1 trillion over four years. If Mr. McCain eliminated every earmark (including money for the gas pipeline that Ms. Palin wants to build in Alaska), the savings would total about $18 billion a year. He hasn’t offered any idea of where he’ll get the rest of the money." (NYT editorial)
In 1980, when Reagan was elected, every dollar you earned past $215,400 was taxed at a rate of 50% (70% for unearned income). After the tax revolt of the 80s, that rate was drastically reduced: to 28% at its lowest point. In the Clinton years that rose back up to 39.6% for dollars earned past $250,000 or so.
Under George W. Bush, that rate was reduced to 35%, where it remains through today. Under Obama, the top rate would move back up to where it was under Clinton: about 40%.*
From the way that Republicans have been pounding their fists and shouting to the rafters, you would think that Obama was proposing a top income tax rate increase of epic proportions. In reality, he is proposing an increase of 5%. That's right: a difference of a nickel of every dollar earned after about $300,000. And the top rate would still remain low overall by historical standards--well under the >50% seen in most of the 20th century.
But what about capital gains (i.e., money earned from investments rather than a paycheck)? The current rate is the lowest it has been since 1933: 15%. Obama would raise that to somewhere in the neighborhood of 25%, which is about where it was in the Clinton years and somewhat higher than it was during much of the 80s. So let's put that increase at 10%.
The final tally, then: the top income tax rate increased by 5%, and the capital gains tax increased by 10%--both levels raised to what they were during the prosperous Clinton years.
The Republicans carry on as if the tax revolt of the 1980s never happened--as though the wealthiest Americans--the investors, the entrepreneurs--were still forfeiting over half of their post-$200,000 income to Uncle Sam. But they are fighting a battle that Reagan already won, and that the Democrats already conceded. There is not one serious politician left who advocates that we return to the pre-Reagan tax rates. And yet still, impossibly, bloody-mindedly, the Republicans insist on more tax cuts--despite dramatically increased federal spending (on both entitlements and two concurrent wars), and despite ballooning deficits. And they continue to depict Democrats as if they were advocating the absurdly high marginal rates of the Great Society years.
We cannot, as the backwards saying goes, have our cake and eat it too. To acknowledge the necessity for a modern infrastructure, a quality education system, a functional healthcare scheme, and a superior military is to acknowledge the necessity of a tax rate that is high enough to cover these tremendous costs. Perhaps there was a time when we could believe that the Republicans would offset their tax cuts with reductions in federal spending, but George W. Bush and his agenda of big government conservatism--and his pet war, Iraq--put that idea to rest.
I've noticed lately that I've been describing the Democrats as "adults" and Republicans as "children". No where is this more true than in fiscal policy. While the Republicans shout gleeful impossibilities in between schoolyard taunts--"Obama is a celebrity! I'll pay for $1000 billion worth of tax cuts by cutting $72 billion in earmarks!** Obama eats arugula!"--the Democrats reasonably suggest, as a starting point, that we return to a tax rate scheme that has been shown to work in the past. It is almost as if the Republicans themselves don't really believe that they'll be in power, and that all they have left is the grim catharsis of pretending to be Ronald Reagan in front of an audience of their peers.
*Hm..but is this quite right? According to one blogger, the de facto rate could be higher: "Senator Obama would raise the top individual tax rate back to 39.6 percent, impose an additional 2 to 4 percent tax on earnings for some over the existing Social Security wage cap, and bring back the phase-out of the personal exemption and certain itemized deductions for higher-income taxpayers. When added up, the top effective marginal tax rate rises...from 37.9 percent to roughly 48 to 50 percent." If true, this argues against my point--however, it is unclear from this post whether the additional nickel and diming would affect a large number of wealthy people or a relative few, or what. Also, it would be unfair to factor in these hidden costs of Obama's plan without also factoring them into the historical tax rates that form the baseline we are comparing against. So I think the most reasonable thing to do is ignore the de facto tax rates for now, and look naively at the explicit tax rates to give us a general idea of where Obama's plan stands historically.
**"Permanently extending the tax cuts would reduce tax revenue by $1 trillion over four years. If Mr. McCain eliminated every earmark (including money for the gas pipeline that Ms. Palin wants to build in Alaska), the savings would total about $18 billion a year. He hasn’t offered any idea of where he’ll get the rest of the money." (NYT editorial)
Tuesday, August 19, 2008
Actual information
A report on the candidates' tax plans by the nonpartisan Tax Policy Center has been making the rounds today (via Paul Krugman's blog). Some highlights:
- Both McCain and Obama would greatly increase the national debt, although McCain's plan would increase it by roughly 40% more than Obama's:
...without substantial cuts in government spending, both plans would sharply increase the national debt. Including interest costs, Obama would boost the debt by $3.5 trillion. McCain would increase the debt by $5 trillion.
- Lower/middle income families would see their after-tax incomes rise under both plans:
[Obama plan:] By 2012, middle-income taxpayers would see their after-tax income rise by about 5 percent, or nearly $2,200 annually.
[...]
McCain would lift after-tax incomes an average of about 3 percent, or $1,400 annually, for middle-income taxpayers by 2012. - Those in the top 1% will experience lower after-tax incomes under Obama's plan, but significantly higher after-tax incomes under McCain's plan:
[Obama plan:] Those in the top 1 percent would face a $19,000, or 1.5 percent, reduction in after-tax income.
[...]
But, in sharp contrast to Obama, [McCain] would cut taxes for those in the top 1% by more than $125,000, raising their after-tax income an average 9.5 percent.
- Significantly more people will have health insurance under Obama's plan than McCain's plan, but neither plan offers universal coverage:
TPC projects the McCain plan would trim the uninsured by 1 million in 2009 and nearly 5 million by 2013, although their numbers would slowly rise thereafter because the tax credit would fail to keep pace with premiums. Obama would reduce the uninsured by 18 million in 2009 and 34 million by 2018. Even under the Obama plan, however, 34 million Americans would still lack insurance in 2018.
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