Wednesday, June 27, 2012

Are our taxes higher today? How much has Obama raised our taxes?

Are taxes higher today than they were a few years ago, under the last President, or the President before him? In this discussion, I'll be using dollar amounts adjusted for inflation.

Tax rates were higher in 2002 and have been at current, lower rates from 2003 until today.

In 2002, someone making $50,000 a year would have paid a 27% marginal tax rate (tax rate of the income in the highest bracket) while that rate today is 25%. In 2002, someone making over $382,967 would have paid 38.6% on their income over $382,967 while that rate today is 35%.

Last time we had a highest tax bracket equal to or lower than our own: 1931.
Last time tax rates were as low as they are now for what is today's average income ($50,000): 1945 when the highest tax rate was 94%.

In 1986, the Tax Reform Act decreased taxes for higher income earners and raised taxes on those making less than $75,339. Thanks, Reagan. The amount of income one could earn before that income got taxed 50% was more than doubled (from about $80,000 to $180,000). In 1987, the top rate dropped to 38.5% while everyone making less than $106,659 saw their taxes increase.

For tax years 2009 and 2010, the Obama administration and Democrat-controlled Congress provided a Making Work Pay tax credit of up to $400 for individuals and up to $800 for married taxpayers filing joint returns. That credit expired in 2011, and a split Congress replaced it with a 2% payroll tax cut which experts say hasn't been quite as effective.

From the facts, it's apparent we're enjoying tax rates as low as the lowest rates in 67 years, meaning that taxes have been on a downward slide for sixty some years. Not only has President Obama not raised taxes on Americans, but he's signed into law tax deductions for every year he's been in office. It's true that he'd like to eliminate the 2003 tax cuts that applied to those making over $250,000 (eliminating the Bush tax cuts for higher income Americans would affect 2% of taxpayers); however, the Making Work Pay credit he gave to all Americans was prevented from renewal by a Republican-controlled House. I rather wish Republicans would stop raising my taxes. I guess it's their Reaganomics strategy of lowering the top tax rate while raising taxes for everybody else.

There's a claim that the Affordable Care Act (Obamacare) is a $500 billion tax. Over the next 10 years, the government will have to spend $500 billion less to fund Medicare than predicted without Obamacare because Obamacare will slow the rate of the price increase of Medicare. However, the government will still be increasing how much they spend on Medicare, just less than predicted. So unless the government saving money is the same thing as a tax, the person making that claim is a liar and twister of words. I know, that seems unheard of for a politician, right?

The individual mandate is of course a tax for not carrying health insurance; however, the penalty tax is less is expected to hit 3-5% of taxpayers or less. In 2009, only 1 percent of Massachusetts residents paid the penalty tax for the Romneycare mandate. Additionally, Obamacare states that there can be no criminal penalties for not paying the penalty tax. All the IRS can do is keep part of your refund to cover the cost if you choose not to pay it. So, the mandate is a tax for a specific behavior and therefore isn't a general tax increase.

Some people will tell you that because cigarette taxes have gone up and because the health care law adds tanning bed taxes that this means Obama has raised taxes. However, they usually just claim that Obama has "raised taxes" which gives the impression that your yearly taxes have increased instead of the price of cigarettes and tanning increasing. It's deceitful. Under the Bush administration, both Republicans and Democrats were fine with raising cigarette taxes. Taxes on unhealthy luxury items have often been taxation targets for both parties. However, pointing the finger at the other guy for doing what you've done yourself is politics as usual.


History of Income Taxe Rates: Adjusted for Inflation

Why Congress should bring back the Making Work Pay tax credit

Romney’s claim that Obama has raised taxes on ‘millions of Americans’ gets two Pinocchios

Fact-Checking Romney: Does Health Reform Cut Medicare, Levy $500 Billion Tax?
(data comes from the Centers for Medicare and Medicaid Services and Kaiser Family Foundation)

"both political parties seem inclined to pay for it through a tax on an unpopular group, cigarette smokers." -,2933,298663,00.html

Obama, the Tax-Cutter

Why The Individual Mandate Is Not A ‘Massive Tax Hike’ On The Middle Class

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