Monday, January 25, 2010

Tax Cuts for the Rich

This tired old liberal mantra -- usually called "Bush Tax Cuts for the Rich" -- is beginning to wear thin. Just about every liberal commentator can't help themselves and will work it into the majority of their columns. A search on Google News today for the exact phrase "tax cuts for the rich" found 53 current news articles.

It's a bunch of verbal virtuosity (borrowing the term from Thomas Sowell) in an attempt to get you to believe that the tax cuts where only for the rich. They were not. Let's look at some facts.

Assume a median family of four income of $66,381, according to the U.S. Census Bureau. The figure is for Texas, which I picked because I live here. And for simplicity sake, let's assume that is taxable income, because there are so many varibles when it comes to deductions, it's hard to figure an average, though the IRS reports that there were 17.6 million people who made between 50,000 and 75,000, for an average of $61,000 per year. So it's close.

In 2001, a taxable income of $66,381 required a tax payment of $12,603 for a married couple filing jointly.  In 2009, this tax is $9,121. 

These tax cuts are set to expire next year. Not just for the rich, but for everyone. So if Congress doesn't do anything, this average family of ours will see their tax bill go up $290 a month.

If you're in a lower tax bracket, it's just as bad. For example, with a taxable income of $25,000, the tax in 2001 was $3,754 for married filing jointly. In 2009, it's $2,919.

If your're fortunate enough to have a taxable income of $95,000, the tax in 2001 was $20,468. In 2009, it is $16,119. If you have a taxable income of $95,000, you're well off, but are you "rich"?

These figures don't include Social Security taxes of 6.2 percent, or the medicare tax of 1.45 percent, for an extra tax burden of 7.65 percent.

On the expiration of the “Bush” tax cuts, the tax brackets will change as follows:
Brackets 10, 25, 28, 33 and 35 percent will be increased by 50%, 12%, 10.7%, 9.1% and 13.1% percent, respectively, to 15, 28, 31, 36 and 39.6 percent. Those of you at the bottom of the income chart will see a 50% tax increase. Still think that those tax cuts are strictly for the wealthy? The child tax credit will be cut in half (even for those wealthy families with children) so in reality, the upper and lower classes benefited the most from the tax changes, with the lower class receiving far and away the largest benefit. Yet, we seldom hear this in our daily news. The phrase “tax cuts for the rich” has been repeated so many times that the majority of the people simply believe it.

But it's not true. And if this happens, the recession will come roaring back. We'll be in worse shape than we are now.

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