The Poor Get Screwed by the Obama-McConnell Plan

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.
Argh.

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6 Responses to The Poor Get Screwed by the Obama-McConnell Plan

  1. John says:

    While I agree that it is frustrating – I’m not sure I understand your particular objection. I disagree with how Obama is handling this as well, but from a different perspective.
    Hiring people to “do stuff” is difficult now since small business is being pushed out by new administration policies – complicated by the increased minimum wage and burden for employer health care.
    I have also seen no evidence to support the idea that people lower on the income ladder spend money, or tax cuts, any more than the middle class or wealthy. Moreover you can’t give people a break on income tax if they are not paying any. The bottom 50% of wage-earners in this country are not paying any income tax at all – thus what I believe you would be looking for in this scenario is a tax-stipend, which feels a little too robin hood-esque for me.

  2. Ema Nymton says:

    Holy shit, John!
    You’re really fucking stupid!

  3. Joemac53 says:

    The bottom 50% don’t have any money left to pay taxes with. Damn food, rent, heat!!

  4. D. C. Sessions says:

    I have also seen no evidence to support the idea that people lower on the income ladder spend money, or tax cuts, any more than the middle class or wealthy.

    I certainly have. In a company which didn’t lay off anyone over the last two years but cut pay and hours, the complaints from the management was about how they could have scored big on stocks when they were down. Meanwhile the company administered a program where those of us who could kicked in to a fund for the ones who were really hurting, and the production workers were buying bulk staples (rice, for instance) and essentials like soap — and still having trouble getting by.

  5. stripey_cat says:

    From personal experience, when you’re hard up, and you get extra money (maybe for a birthday present or something) you spend it straight away on things like groceries, new shoes or specs, getting the car serviced or the boiler replaced. When you’re comfortably situated, extra money goes into a savings account, a pension, or paying off the mortgage faster.

  6. Rob Monkey says:

    John, you are banned from discussing taxes ever again until you get the following fact through your fucking thick skull: most people in this country do not pay income tax. This isn’t a bug, it’s a feature, and to those of us who aren’t fucking retarded, it’s getting tired and old explaining it to you fucking troglodytes. I work in a professional job that requires a college degree, and I make an ok living. I don’t pay income tax. Neither does anyone in my immediate circle of friends or family. Does this mean we get off scot-free? No, because like most wage-earning, hard-working people, we don’t pay the income tax, we just pay the sales tax, the payroll tax, FICA, SS, blahdeblahdeblah. Just because I don’t make enough to pay the income tax is meaningless, it’s only there to catch those who make shitloads of money. So do you have a point, or is it enough to drive-by and insinuate that most people in this country don’t pay any taxes? I’ve heard this sloppy, stupid, Republican (redundant) statement for years, and not one of you assholes is willing to admit you know it’s a crock of shit, no more meaningful than death panels. Either that, or you really are so fucking dumb you actually think that most of this country doesn’t pay taxes. In the age of the Internets, fact-checking that little tidbit would take you about 30 seconds, but that’s 30 seconds you can’t troll your bullshit, eh?

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