Merry Christmas! Guess who would see their taxes increase as a result of the Obama-McConnell plan? Well:
The wealthiest Americans will also reap tax savings from the proposal’s plan to keep the cap on dividend and capital gains taxes at 15 percent, well below the highest rates on ordinary income…..
In fact, the only groups likely to face a tax increase are those near the bottom of the income scale — individuals who make less than $20,000 and families with earnings below $40,000.
Contrast this with who gets new tax cuts–this is not keeping the Bush cuts, but adding a whole new set of cuts:
“The key word here is “new,” wrote Bernstein “This piece of the agreement goes beyond extending policies that were already in place and is widely recognized as a potent way to generate jobs and growth.”
But poor families will lose income, compared to 2010, according to Roberton Williams, an economist at the non-partisan Tax Policy Center.
An individual who earns $10,000 a year would lose half of the $400 he or she received in 2010 under Making Work Pay. Every family earning less than $20,000 a year would end up losing money under the proposal, according to Williams.
On the other hand, taxes will drop dramatically for those earning $95,000 a year or more, who made too much to qualify for the Making Work Pay credit, said Williams. The $400 credit under Making Work Pay starts phasing out for individuals more than $75,000 a year and disappears above $95,000; but under the proposed payroll tax cut, all earners get a 2 percent tax cut, no matter what their total income, up to a maximum per-family credit of $4,362.
A rough estimate is that this new tax cut will deliver from $3,800 to as much as $4,362 for the highest-earning 14 percent to 15 percent of the population. This is a new tax cut, Williams, noted, beyond the continuation of current rates for the wealthy that got most of the attention in the tax debate.
Two frustrating things here:
1) Tax cuts aren’t nearly as good at creating jobs as hiring people to do stuff would be.
2) If you are going to use tax cuts, you want to give them to people who will spend the money–those lower down on the income ladder. The issue we face is poor demand, and, in an economy where job prospects are poor, those who are earning will save more money than they otherwise would.