Obama Tax Cut Plan would Increase Taxes for the Poor

http://www.cbsnews.com/8301-503544_162-20025087-503544.html

Most Americans would benefit from President Obama's tentative deal with Republicans for extending the Bush tax cuts, and economists largely agree it would help stimulate the economy. Yet the plan would actually slightly increase taxes for the poorest Americans, economists say -- at a time when some leaders in Washington are trying to bring attention to the nation's widening income disparity.

The level of income disparity in the U.S. "is really an unacknowledged crisis in our country," Rep. Jan Schakowsky (D-Ill.) told Hotsheet.

Schakowsky and other House Democrats met with Vice President Joe Biden Wednesday afternoon to talk about the tax cut deal. Several members of Congress have voiced concerns - both in that meeting and publicly - that the deal gives too much to the wealthy. Not only has the president said he would accept a two-year extension of the Bush tax cuts for the highest-earning Americans, but he has also accepted an estate tax level that will keep most estates from having to pay anything.
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We really can't afford tax cuts for anyone but the thought that it would increase taxes for the poorest Americans is unconscionable.

They're comparing the proposed deal to the current tax structure. But they should be comparing it to what's going to happen on January 1st. As it stands right now, taxes would go up for everyone.

Can it be any simpler than that?

The Making Work Pay credit expires at the end of the year. If the deal fails, the Making Work Pay credit still expires, it was part of the stimulus package.

It means a few dollars less that the $400 to $800 from the Making Work Pay credit, but the alternative is losing about $400 to $800.

If they can get the Making Work Pay credit extended that's one thing, but it is not related to the middle-class tax cuts.

There are also other stimulus credits that are being extended that were scheduled to expire.

It's interesting that, with the exception of a few, no one talked up the benefit of the Making Work Pay credit until this point.

There's no question that the "deal" is better for this group than what would have happened if no action had been taken. But it's also undeniably true that the "deal" results in them paying more in taxes than they've paid in the last couple years.

Their taxes will be higher next year while most of the rest of us will see out taxes go down. You can't say "no" to that because it's a simple statement of fact.

The exchange of MWP for the 2% payroll cut is an additional benefit for higher-income taxpayers.

"There's no question that the "deal" is better for this group than what would have happened if no action had been taken. But it's also undeniably true that the "deal" results in them paying more in taxes than they've paid in the last couple years."

Now, how is that different from this: It means a few dollars less that the $400 to $800 from the Making Work Pay credit, but the alternative is losing about $400 to $800.

The deal leaves the taxes at the level it was three years ago, prior to the stimulus package.

I hate to say it (because I know your record is better than this), but why are you buying into the RW extortion? "the alternative" is only losing $400 because they say "this is my best offer, take it or leave it". Why are you comparing their offer to their threat?

It may very well BE the best we could get out of this deal (though certainly few here seem to agree), but that doesn't change the fact that it's still a step backward.

If we extend the MWP credits for twelve months... and then another year... and another and another, how long do you think people will buy they spin that it's a new tax cut each year when they pay exactly the same amount each time? Republicans probably have little concern over the two-year extension of tax rates (instead of a permanent "cut") because it allows them to be for lower taxes yet again two years from now... without actually lowering taxes.


It means a few dollars less that the $400 to $800

That's certainly true (though the lower the income, the greater the disparity), but we're talking about income levels where a few dollars is still a big difference. Keep in mind that it's a refundable credit, so the married couple with one unemployed spouse and one earning minimum wage - will get several hundred less.

"I hate to say it (because I know your record is better than this), but why are you buying into the RW extortion? 'the alternative' is only losing $400 because they say "this is my best offer, take it or leave it". Why are you comparing their offer to their threat?"

How the hell is stating a fact a RW distortion?


Me: It means a few dollars less that the $400 to $800

You: "That's certainly true" (though the lower the income, the greater the disparity), but we're talking about income levels where a few dollars is still a big difference. Keep in mind that it's a refundable credit, so the married couple with one unemployed spouse and one earning minimum wage - will get several hundred less.

Are you stating a RW distortion?

How the hell is stating a fact a RW distortion?

Because you forget that you used it to say "no" to a clear statement of fact. The taxes on people who earn less than 20k/40k will be higher next year than they are this year. You can't dispute that by claiming that they're lower than they would have been.

The RW spin is that you can only compare the results of the plan to what they threatened to allow to happen... rather than to what IS.

"The taxes on people who earn less than 20k/40k will be higher next year than they are this year."

Forget the middle class tax cuts: Will taxes be higher when the Making Work Pay credit expires?

"The RW spin is that you can only compare the results of the plan to what they threatened to allow to happen... rather than to what IS."

The spin is to conflate two unrelated things to claim that a plan to prevent a significant loss of income ($400 to 800) is bad because it represents a minor loss of income (a few dollars).

Forget the middle class tax cuts:

Why? I thought we were dealing with reality? If you want to compare some other imaginary world to this plan, go right ahead. Heck, Increased taxes are better than a kick in the head. let's pretend THAT was going to happen and they'll all be grateful for a few less dollars in their pockets.

The spin is to conflate two unrelated things to claim that a plan to prevent a significant loss of income ($400 to 800) is bad because it represents a minor loss of income (a few dollars).


Nope. The spin is that a minor (and we can ignore that it's the RW who most thinks that it's "minor") loss of income is really a gain because the cut could have been much bigger.

And you know what? On second thought, no... let's not ignore it. That couple with one minimum wage wife and unemployed husband is going to pay about $500 more in taxes next year than they did this year (assuming she's even working full-time). Shall we tell them that it's "minor"?

it isn't worse.

Comparing the Making Work Pay credit to the payroll tax cut ignores all the other benefits in the package.

If they continued 1,000 beneficial plans, that just leaves those rates/credits/etc in place. It's still you comparing what will be to what might have been... not comparing it to what is.

means a few dollars less than the $400 to $800 from the Making Work Pay credit and that represents an increase over this year, but the alternative is losing about $400 to $800.

The deal leaves taxes at the level it was three years ago, prior to the stimulus package.

Who else has to spin like that to feel better?

Almost everyone else will pay less than this year and less than what would have happened if no deal was made.

In the negotiations, someone was looking out for the folks who could be hit by the AMT... and someone was looking out for the folks who could be hit by revived estate taxes... and someone was certainly looking out for the folks in the top 2%... and someone was looking out for the businesses who are afraid to invest.

The working poor got the shaft. But hey! That's ok. The shaft could have been bigger.

Agree? Regardless of what the package looks like, it's the alternative to no extension. It's not the alternative to something that doesn't exist.

But no... if I agreed I wouldn't have posted my #3, would I? The post I replied to made that very same premise... that we shouldn't compare the plan to what currently exists, but rather to what would happen next year if nothing was done at all.

Regardless of what the package looks like, it's the alternative to no extension.

It's also the alternative to 1,000 other possible futures that might have come true. Can we dress it up by comparing it to even more unfavorable situations that also don't exist?

Their taxes are going up. They aren't going down just because they could have gone up more. Up is still up... while everyone else's is going down.

How doe the rest of the package, extending other stimulus provisions, offset the loss of a few dollars?



Those provisions were also set to expire.

If you paid X dollars in taxes this year and you end up paying X+$250 next year... your taxes went up.

I'm not saying that there was a better deal to be made... I'm just saying let's not pretend that some people got the short end of the stick - and it's the people who had little stick to begin with.

A few dollars in nothing compared to the rest of the package.

That's why the point being made is bogus: It only makes sense in isolation.

Taken "all in", they will STILL pay more next year than they pay this year.

I can't make it any simpler. You can come up with 100 examples of hypothetical ways that things COULD be worse than this deal... but nothing chages what IS.

An expiring tax credit from the stimulus that amounts to 2 bucks a paycheck doesn't mean a god damn thing. THATS what is.

than what they had this year.

And who else is worse off next year compared to this one? Not many.

My argument isn't "it could have been worse". My argument is the expiration of the MWP tax credit is irrelevant and I don't give a damn about it. How do you like that huh? I don't give a shit if some poor person's taxes are 2 dollars a week higher next year than they were next year. It doesn't bother me AT ALL. And anyone that is PRETENDING that its some meaningful talking point is making a blithering fool out of themselves.

Why else would anyone take issue with the OP? It simply says that the deal results in higher taxes for the lower-income groups, yet someone wanted to claim that was BS. I made the same simple statement and ProSense said "no".

My argument is the expiration of the MWP tax credit is irrelevant and I don't give a damn about it.

That's so kind of you.

The working poor and those of us who care about them (which used to be pretty common in progressive circles), do give a damn.

I don't give a shit if some poor person's taxes are 2 dollars a week higher next year than they were next year. It doesn't bother me AT ALL.

Are you sure that you're on the right board?

$500 a year for a couple making $15,000 sure sounds like quite a bit.

It's particularly painful when they realize that the couple making $250k/yr not only got to keep all of their tax cuts, but they also replaced their $800 MWP credit with an additional three or four thousand dollars.

But hey! At least it doesn't bother you.

I can see that it doesn't bother you.

It should.

Like a 50% increase in taxes on the poorest during a jobs recession bothers me. This package prevents that. Anything that leads to a SUBSTANTIAL increase bothers me. This chump change horse shit does not.

When did that change?

...for earnings that exceed like $106,000. That means that it will only apply to incomes at that level or lower. Any income beyond that threshold will NOT benefit from the payroll tax holiday.

Any income beyond that threshold will NOT benefit from the payroll tax holiday.

Yet those making the higher income will STILL benefit from the "holiday" up to that $106k.

For a married couple each earning over that amount, it means that they replace their $800 MWP credit with a $4,240 payroll tax savings. Thus "The exchange of MWP for the 2% payroll cut is an additional benefit for higher-income taxpayers" is an entirely correct statement.

The exchange actually benefits anyone earning above that 20k/40k line... which is certainly the vast majority of us. I'm not complaining... I'm just recognizing that it hurts others.

When you say higher incomes, everyone is going to assume you are talking about the 250k threshold. Thats just how it works. Thats higher income. They won't benefit. So I'm still right and you are still just trying to be obnoxious, hoping that you can talk everyone in circles until they give up and then you can tell all your friends that you won the Internet.

When you say higher incomes, everyone is going to assume you are talking about the 250k threshold

I don't see why. I clearly compared those with incomes lower than a certain level to those with incomes higher than that level.

They won't benefit.

Yes... even by that standard (which I didn't make), they still benefit by the swapping of MWP credits for a 2% cut on that first 106k. They don't benefit any more than someone making 106k... but they sure benefit more than 40k.

The horrendous give aways to the wealthy aside (no one is denying that), under this deal, the poorest's taxes are cut significantly more than the original Democratic plan of middle class tax extension only or the original Republican plan of that + tax cuts for the wealthy.

The rich get richer and the poor get taxed.

The taxable part of my income comes to a little over 22K. I'm taxed at single/no dependents on that amount. I pay about 1200 in taxes - 100 dollars a month - 5% of my taxable income before adjustments. There is no way I am going to see a 400-800 dollar increase in my taxes.

The FICA line comes off of your gross income (not adjusted taxable).

The MWP credit comes after you look up your taxable income in the chart. If you're single, that means that your taxable income would have resulted in a $1,600 tax (in the table) which you then subtract credits from ($400) to get your $1,200 tax.

That will remain for that taxes you file in a few months, but it's gone for next year (and was scheduled to go away). So without other changes, your 2011 income taxes will be closer to $130/month. BUT your FICA tax will decline by 2% of your gross salary.

The net effect should work slightly to your favor, but remember that it's just for the one year AND that your need to check your witholding to make sure that you don't get a surprise in early 2012.

income taxes. I was going to look it up to see what the difference was going to be.

thanks for the info.

http://www.nytimes.com/2010/12/08/us/politics/08impact.html?_r=1

...it will nonetheless lead to higher tax bills for individuals with incomes below $20,000 and families that make less than $40,000. That is because their payroll tax savings are less than the $400 or $800 they will lose from the Making Work Pay credit.

“It will come to a few dollars a week,” said Roberton Williams, an analyst at the nonpartisan Tax Policy Center, “but it is an increase.”

It's the difference between 2010 rates/credits/etc compared to the "deal". The essential change (for this group) is the replacement of the Making Work Pay credits with the 2% payroll tax reduction.

In short, when 2% of your gross income exceeds $400/$800, you benefit. To the extent it falls below that level, you lose.

The debate above does not dispute this. It merely argues whether the proper perspective is to compare the current tax scheme to the new "deal", or whether it's better to compare the deal to what would have been the case next year if no action had been taken at all.