Thursday, December 9, 2010

Peon on a Rant I

Peon was trying to be more positive during the holiday season. She really does want to concentrate on good food, pretty decorations (and inflatables on the front lawn are not pretty) and better driver behavior. She really does. But then she got up and read the newspaper.

How could Obama sign off on a tax plan that gives bunches more money to already rich people? The vast majority of taxpayers would see no increase in taxes if the Bush taxes were allowed to lapse. Yes, the vast majority.

But first, one of the changes whacks low income workers. Workers making a bit less than the national median household income would be better off (read: get more money) from the Making Work Pay tax credit that was part of the stimulus last year. That's the $400 per worker that was part of your refund. Giving lower wage workers a payroll tax reduction instead means that they'll (a) get less money and (b) won't get it as a lump sum. (Yes, getting it as a lump sum is good for lower income workers. We then can plan for its use--and lower income workers have plenty of possibilities when faced with a $400 windfall.)

But it gets even worse. For most taxpayers the tax cut was always minimal. For many taxpayers there wasn't a tax cut at all. For couples with a taxable income between $17,000 and $57,650, the marginal tax rate under the Bush system is 15%. If the tax cuts expire, the tax rate for these taxpayers is, yup, 15%. Taxpayers making above $57,560 would pay higher taxes, but that's because flattening the tax bands pushes them into the same band as those making $140K, with a marginal tax rate of 28%.

The people who really clean up, though, are taxpayers with high incomes. Their highest marginal rate is 35%. Yeah, people who make half a million a year have a marginal rate only 10% higher than people with an income of $70K. Bring back the 90% marginal rate! But what this really points out is that it makes more sense to maintain the tiny tax cut for lower-income taxpayers, while allowing them to expire for the rich.

I wonder how many people who can't do the math think that they got a windfall from the Bush tax cuts, and would find, if they did the arithmetic, that their tax cut was about $24. And if this is what the Democrats have on offer, why did I bother to vote?

Peon is so mad about this that she intends to bank every sou of the payroll tax cut.

And if you're not already sufficiently angry/depressed, read this.

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