How Does a a Very Small Tax on a Very Fortunate Few Become So Important?

Once the campaign silly season hits full throttle, we’ll hear much more about taxes (AAIIIEE!!!), especially how ‘socialist’ Obama’s plan is. What’s ludicrous, as I’ve explained before, is that the only increases (which are technically the ending of the ‘temporary’ Bush tax cuts which lasted for ten years) are on income over $240,000. Actually, it’s not just any income, but earned income. Things like dividends–which are a considerable source of income for the wealthy–aren’t taxed as earned income (and are taxed at a lower rate). And of course, there are all of the tax deductions which can lower the amount of taxable earned income. So the numbers I’m going to show you are overestimates–someone who makes a million dollars isn’t paying this much (some of the earnings will be discounted due to tax deductions, and some of those earnings are dividends).

With that being said, let’s consider how much more various people will pay in taxes under Obama’s godless heathen Marxist Kenyan tax plan, as compared to what they would pay during the Clinton era and what they would pay if all of the Bush cuts were retained (.xlsx file here).

The millionaire:

Clinton: $360,000
Obama: $352,490
Bush: $319,960

Total difference between Obama and Bush: $32,530
Percent increase of taxable income paid: 3.25%

$500,000:

Clinton: $162,000
Obama: $154,490
Bush: $144,960

Total difference between Obama and Bush: $9,530
Percent increase of taxable income paid: 1.91%

$250,000:

Clinton: $68,040
Obama: $60,530
Bush: $60,260

Total difference between Obama and Bush: $270
Percent increase of taxable income paid: 0.1%

Not only are these miniscule amounts for very wealthy people (and remember, this doesn’t include all income or tax deductions), but they don’t apply to most people (around two percent). And I have no idea why so many who wouldn’t pay this are bent out of shape–it’s hardly onerous or ‘confiscatory.’ Yet upon this, our freedom hinges. Or something.

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4 Responses to How Does a a Very Small Tax on a Very Fortunate Few Become So Important?

  1. Kele says:

    But given Modern Monetary Theory, is this tax debate all that important? By increasing taxes on the wealthy, the government is needlessly destroying money (but not a lot). Wouldn’t it be better to lower federal taxes to allow states to increase their tax rates?

    • I agree; I would like to see much higher marginal rates. The best policies would get rid of the carried interest exemption and treat dividends as earned income. That would go a lot further. But I’ll take what I can get.

    • Ema Nymton says:

      Is it needless? It can be argued that the increase in college costs is largely due to the ability of the wealthy to pay. It’s likely the case that the larger portion of money going to the top few percent is driving costs higher for everyone. Perhaps things might improve if more of that money was being destroyed.

  2. JohnV says:

    Only if they raise in mainly on the middle class.

    Am I doing it right?

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