Here Come the Tax Increases

by Crocker on July 13, 2009, 6:27 am

in Economics,Politics

If we’re free associating and I say “Charlie Rangel”, you would say – what?

Corruption? Well, how about after corruption? Taxes? Bien sur.

It seems that old Corrupt Charlie needs to raise an additional $540 billion to pay for Obamacare (even though $540 billion won’t even begin to fill that particular rat hole). From the Cybercast News Service, which has aggregated sources:

Subsequent AP stories and a report in the Washington Post cited Democratic sources as saying that the massive new tax increase would come in the form of a “surtax” on people filing taxes in the upper brackets of the income tax code.

The upper tax brackets are already set to increase after next year when the income-tax cuts signed into law by President Bush in 2001 expire. President Obama and the Obama Treasury Department have indicated they intend to let those tax cuts expire for the upper two income brackets—meaning any individual or small business earning more than $200,000.

The “surtax” the House Democrats are planning now would further increase the income tax rate for people and small businesses paying taxes in the top brackets.

“Rangel didn’t describe details, but one official said the surtax would apply to individuals with adjusted gross incomes over $280,000 a year, and couples over $350,000,” the AP reported. “A senior House aide said the surtax would be 1 percent for the first group of high earners, those households making $350,000 or more. The levels for the other two groups, those above $500,000 and $1 million in annual income are still being determined, said the aide.”

Although apparently there’s some dispute about the threshold, I suspect Rangel will choose the lowest possible number, so this means that the effective rate will go up to 36% on every dollar of taxable income over $200,000 for individuals. The class warriors will love it, even though it makes no sense at all. Currently in the US, the bottom 40% percent of households effectively pay no income tax at all. For tax year 2006, here’s the breakdown (numbers from the IRS, via the National Taxpayers Union):

Percentiles Ranked by AGI
AGI Threshold on Percentiles
Percentage of Federal Personal Income Tax Paid

Top 1%
$388,806
39.89

Top 5%
$153,542
60.14

Top 10%
$108,904
70.79

Top 25%
$64,702
86.27

Top 50%
$31,987
97.01

Bottom 50%
<$31,987
2.99

Note: AGI is Adjusted Gross Income
Source: Internal Revenue Service

This was utterly predictable – and it figures that House Democrats would save this bit of news for the Friday night news dump.

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{ 2 comments }

Polaris July 13, 2009 at 11:16 am

Before we go all wingnutty here, there’s three facts (yes actual facts) that put things into perspective :

1. You will have a hard time finding a “small business” that makes up to $200,000 per year.

2. The Bush tax cuts did major harm to the country’s finances and had no affect on job creation. Bush’s job creation percentages are the lowest since the Eisenhower era and a quarter of the jobs created by the Clinton administration.

3. In terms of the quality of health care the WHO ranks the USA at 37th. Just behind Cost Rica and just ahead of Slovenia

admin July 13, 2009 at 2:25 pm

While we do appreciate all comments here at BBL (enlightened discussion being a good thing, even among people who disagree), you’ve had two turns at bat and each time you’ve chosen to lace your comment with ad hominem attack and vulgarity. I noted in my posting on NHS salesmanship that advocates of the welfare state feed on grievance. You seem to prove my point – with angry references to the ‘filthy rich’, insurance companies and republicans. And yet you call me paranoid. Hmmm. As to getting out – I’m both a US lawyer and a UK solicitor. I read honours at Durham University, taking my degree in 1979. I was in the UK during the great economic and labor upheavals of that time. I regularly travel to the UK and have friends and colleagues there. I can also read the UK papers, which are filled with NHS horror stories – confirmed by the people I know there. In my business, I travel literally around the world, and I observe what goes on in other countries as well. I also know that the hospitals in Maine (where I live) along the New Brunswick border are filled with Canadian patients who either (1) couldn’t obtain a particular treatment in Canada, or (2) couldn’t wait the months to get it in Canada.

As to the WHO rankings, they really don’t mean much. Here’s an analysis from a U of Toronto researcher criticizing the WHO, which, by the way, placed Canada 30th on the list.

http://www.longwoods.com/product.php?productid=17238

As to taxes, who said anything about ‘small business’? Unlike you, I don’t think that a ‘beggar thy neighbor’ approach to taxation is appropriate – revenge against the ‘filthy rich’ is not good tax policy. While I would have to check the job numbers, as Arthur Laffer has shown, tax cuts result both in higher goverment revenue and stimulate the economy – that’s why even the Russians and Chinese are cutting their rates at the moment. While I’m no great fan of President Bush, remember that the country did have to contend with the bursting of the tech bubble and the 9/11 attacks. Actual tax revenues to the government dramatically increased after the Bush tax cuts – it’s just that Congress spent it all and then some.

In any event, we’re glad that BBL irritates you enough to return and comment. In the future, however, we’d appreciate a different tone.

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