Kevin’s Handy Tax Table for Innumerate Rich People | Mother Jones

Dave Weigel complains today that too many rich people have no idea how income taxes work. They’ve heard that Obama wants to raise tax rates on people who make more than \$250,000, so they’re working on ways to keep their income right at \$249,000. After all, if they go over the threshold, they’d suddenly have to pay the higher rate, and it would be a net loss.

This isn’t true, of course. Obama is only proposing to raise tax rates on income over \$250,000, so if your income goes up to \$251,000, you only pay the higher rate on the extra \$1,000. The tax bill on your first \$250,000 stays exactly the same.

But that’s hard to explain, and we’re all about solutions here, not petty griping. So I have the answer: an EZ-to-Read table that compares total taxes paid under the old Bush rates and the proposed Obama rates. It starts at \$241,900 because that’s \$250,000 minus the standard deduction, and it’s for married couples filing jointly.

Example: under the current Bush tax rates, a couple making \$300,000 pays \$75,802, or 25.27% of their total income. Under Obama’s plan, the rate goes up on the amount over \$241,900, so they pay a whopping \$2,000 more, or 25.85% of total income. Millionaires will pay \$32,000 more. Raw data here. Share this with all your rich friends!

### Romney’s tax plan just isn’t mathematically feasible

I can describe Mitt Romney’s tax policy promises in two words: mathematically impossible.

Those aren’t my words. They’re the words of the nonpartisan Tax Policy Center, which has conducted the most comprehensive analysis to date of Romney’s tax plan and which bent over backward to make his promises add up. They’re perhaps the two most important words that have been written during this U.S. presidential election.

If you were to distill the presumptive Republican nominee’s campaign to a few sentences, you could hardly do better than this statement of purpose from the speech Romney delivered in Detroit, outlining his plan for the economy: “I believe the American people are ready for real leadership. I believe they deserve a bold, conservative plan for reform and economic growth. Unlike President Obama, I actually have one — and I’m not afraid to put it on the table.”

The truth is that Romney is afraid to put his plan on the table. He has promised to reduce the deficit, but refused to identify the spending he would cut. He has promised to reform the tax code, but refused to identify the deductions and loopholes he would eliminate. The only thing he has put on the table is dessert: a promise to cut marginal tax rates by 20 percent across the board and to do so without raising the deficit or reducing the taxes paid by the top 1 percent.

The Tax Policy Center took Romney at his word. They also did what he hasn’t done: They put his plan on the table.

A tax calculator released by the Obama campaign compares your burden under his and Romney’s tax plans.

### Intuit (makers of TurboTax) spent \$9 million on lobbying to make it annoying to do your taxes

Here’s a chart of Intuit’s lobbying expenditures in Congress, courtesy of Open Secrets. I suspect that some of that nine million dollars of lobbying by that company since 2008 has gone to making it more annoying for you and me to file our taxes.

Here’s what I mean.

In some countries, the equivalent of their IRS sends citizens a form listing what they owe.  In California, the state has a program called ReadyReturnthat lets you do this for California state taxes.  You sign it and send it back, and it takes a few minutes. But for most of us, this isn’t how it works.  We gather our tax forms and various banking information, and spend the weekend facing a difficult bureaucratic set of forms, hoping we did it all correctly.  Or we use a costly tax filing service or software.

Candidate Barack Obama promised to end this nightmare.  He said he would “dramatically simplify tax filings so that millions of Americans will be able to do their taxes in less than five minutes.”  The IRS would use information it “already gets from banks and employers to give taxpayers the option of pre-filled tax forms to verify, sign and return.”  Experts, he said, estimated this would save 200 million total hours or work and \$2 billion.

You can file this under yet another broken campaign promise.  And why?  Who doesn’t like an idea that is so simple and convenient and just generally helpful?  Well, the large software makers, for one.  Intuit in fact lobbied incredibly hard to kill the California program Ready Return (complete with attacks from right-wing tax groups).  Intuit wasn’t completely successful, but under their pressure, California budgeted only \$10,000 to get the word out to residents about the program.

And the risk to Intuit is real – here’s what Intuit said in its investor report, describing risks to its business model.

“Our consumer tax business also faces significant competition from the public sectorwhere we face the risk of federal and state taxing authorities developing software or other systems to facilitate tax return preparation and electronic filing at no charge to taxpayers.  These or similar programs may be introduced or expanded in the future, which may cause us to lose customers and revenue. For example, during tax season 2010, the federal government introduced a prepaid debit card program to facilitate the refund process. Our consumer and professional tax businesses provide this service as well.

In other words, Intuit will lose a lot of money if the government makes it easier to file your taxes.  So how did Intuit manage to prevent the implementation of Obama’s campaign promise?  Here’s what Intuit had to say about its strategy.

Although the Free File Alliance has kept the federal government from being a direct competitor to Intuit’s tax offerings, it has fostered additional online competition and may cause us to lose significant revenue opportunities. The current agreement with the Free File Alliance is scheduled to expire in October 2014. We anticipate that governmental encroachment at both the federal and state levels may present a continued competitive threat to our business for the foreseeable future.”

What is the Free File Alliance?  It’s a coalition of 14 software makers that have signed an agreement with the IRS to provide tax preparation software to the public.  You see, the IRS was mandated to provide free online tax prep services to the public, so it outsourced this to existing commercial tax preparers.  This agreement was first signed with the Bush administration IRS in 2002, renewed in 2005, and then renewed again under the Obama administration in November, 2009.  Even today, despite the Obama campaign promise and demonstrated success around the world, the Free File Alliance indicates on its web page that “Treasury has indicated it does not want the IRS to enter into the tax software business.”  And Intuit said on its investor report that this alliance “has kept the federal government from being a direct competitor to Intuit’s tax offerings.”

### How Obama’s Corporate Tax Plan Calls GOP Bluff

Now that the dust has settled a bit on President Obama’s proposal – really, a framework – to reform the corporate tax code, let’s see what all the shootin’s fer.

To understand what’s going on here, you need some context.  For years, every tax reform conversation has gone like this:

Conservative: “Taxes are too high – they’re killing growth!”

Liberal: “No, they’re not; and anyway, we need the revenue to support the government!”

Lots of variations on “no, we don’t!” and “yes, we do!” … then:

Liberal: “Look, what if we lower tax rates and broaden the tax base by closing a bunch of loopholes – then you get the lower rates and I avoid losing revenue?”

Conservative: “Well … it is true that Ronnie Reagan himself agreed to something like that back in 1986 …. Of course, RR would be kicked out of the party as a centrist today, but … I might be able to agree to that.”

Clearly, since this ends in compromise, it is a contemporary fantasy. But it’s also the motivation behind the White House’s framework to reform the corporate income tax.

Here’s what you need to know about the mechanics of all this: The statutory corporate rate – what’s written in tax law – is 35 percent.  But, as shown in Table 2 here, the actual rate businesses pay on average is 26 percent.  The reason for the difference is the scads of loopholes in the code.  LIFO inventory (last-in-first-out) is favored relative to FIFO (first-in-first-out) inventory. (LIFO means you sell the stuff you most recently added to inventory; FIFO means you sell the stuff you added a while ago.) Offshore profits are favored relative to domestic profits (which is especially nuts).  Debt financing is hugely favored over equity financing.

### Study finds that the tax plans championed by GOP frontrunners will only make the national debt worse

The Washington Post - According to the report — set for release Thursday by U.S. Budget Watch, a project of the bipartisan Committee for a Responsible Federal Budget — former Pennsylvania senator Rick Santorum and former House speaker Newt Gingrich would do the most damage to the nation’s finances, offering tax and spending policies likely to require trillions of dollars in fresh borrowing.

Both men have proposed to sharply cut taxes but have not identified spending cuts sufficient to make up for the lost cash, the report said. By 2021, the debt would rise by about \$4.5 trillion under Santorum’s policies and by about \$7 trillion under those advocated by Gingrich, pushing the portion of the debt held by outside investors to well over 100 percent of the nation’s economy.

The GOP needs to knock off their fairy tale bullshit and come back to the real world.

### Obama proposes to cut top tax rate for corporations from 35% to 28% and pay for it by closing loopholes.

Reuters - The president proposed cutting the top corporate tax rate to 28 percent from 35 percent. This would address U.S. corporations’ long-standing gripe about the rate being too high. It is the world’s second-highest after Japan’s corporate rate.

In return for lowering the tax rate on businesses, the plan calls for broadening the corporate tax base by ending a number of tax breaks, some spelled out previously in Obama’s budgets, and most sure to be resisted by powerful corporate interests.

### What a GOP cave looks like - The House’s top Republicans desperately want to retreat on the payroll tax – if the Tea Party lets them

Since the 112th Congress was seated more than a year ago, the Republican House Conference has served as a generally reliable reflection of the Tea Party movement’s passions and priorities. A significant chunk of its members — mainly freshmen, but also some veterans — are explicitly aligned with the movement, while those who aren’t know better than to break too loudly or too publicly with it, lest they fall victim to a primary challenge.

This is why Speaker John Boehner, a Capitol Hill lifer whose political biography invites automatic Tea Party suspicion, has been repeatedly forced to subordinate his best judgment to the zeal of purity-obsessed rank-and-filers. And it’s why Boehner’s surprise decision yesterday to support a payroll tax cut extension even if it’s not paid for represents a real gamble — one that seems grounded in a reasonable calculation but that still has the potential to create another serious political mess for him and his party.

The political logic of his move is obvious: If an extension isn’t implemented by the end of the month, tens of millions of middle-class Americans will face an election year tax increase — one for which congressional Republicans, who’ve seen their poll numbers drop lower and lower with each showdown they’ve forced with President Obama, will likely take the blame. Given the relatively low cost of an extension, it hardly seems worth risking further damage to the GOP brand, especially since the party’s hold on the House is somewhat tenuous.

Translation: They have realized their party politics are starting to piss people off.

Tags: politics tax GOP

### Contrary to popular belief, taxes are lower under Obama than they were under Reagan.

In 1983, when Reagan was trying to get the economy out of recession, revenues were 17.5 percent of GDP. In 2010, when Obama was trying to guide the economy into a recovery, revenues were 14.9 percent of GDP.

Taxes are so low under Obama in large part because of the Bush tax cuts and the effects of the financial crisis. But they’re also low because of the tax cuts passed by Obama in the stimulus bill. And remember — Obama’s number here is for 2010. In 2011, Obama further extended and enlarged the Bush tax cuts in the 2010 tax deal.

Nor are revenues resulting from Obama’s tax policies expected to rise above Reagan’s totals in the near future. In 1988, when Reagan left office, revenues were 18.2 percent of GDP. Under the Congressional Budget Office’s alternative-fiscal scenario — which is their most realistic projection — revenues only rise (pdf) to 18.4 percent of GDP by 2021. If Obama manages to pass his most consistent tax-policy demand and sunset the Bush tax cuts for income over \$250,000, that would rise by less than half a percentage point. In other words, taxes were never as low under Reagan as they are under Obama, and Obama’s policies would not lead to a significantly different tax burden than Reagan’s policies did.

### The GOP’s Weird Obsession With Poor People Not Paying Enough Taxes

Republicans complaining about the households not paying enough who also want to cut taxes overall are asking the poor to subsidize a tax cut for the rich

Here’s a fresh quote from the latest non-Romney front-runner in the GOP presidential race. “This dividing of America [between] 99-1,” Rick Santorum said this morning in New Hampshire, “It’s anybody that makes money and pays taxes and everybody who doesn’t. That’s the 99-1.”

Santorum (like Michele Bachmann before him) is picking a fight with the millions of Americans who make money and don’t pay federal income taxes. For the last few years, this group represents about half of the country. Indeed the statistic inspired a website,  “We Are the 53 Percent,” which called out the 47% (or more) of households who owed no federal income tax in 2010 and again in 2011, because their credits and deductions wiped out their liability.

Since 2000, the poorest 40% of households have averaged a federal income tax rate below zero. The graph below shows federal income taxes since 1979, from the lowest quintile (on the bottom) to the top 1% (at the top). The big picture is that we have a progressive tax system where federal income tax rates have fallen slightly for every class of taxpayers:

FEDERAL INCOME TAX RATES

But federal income tax isn’t the only tax out there. In fact, FIT accounts for only 40 percent of total government revenue. Another 40ish percent comes from payroll taxes, which all working families pay up to about \$107,000. The rest comes from corporate income taxes and excise taxes on things like gas. When you add all of those taxes together, you get the overall tax burden that economists call the “effective tax rate.” Here is the graph of effective federal taxes for the same groups as above (it’s a similar story of gradually falling rates for every group, with some jumpiness at the top):

TOTAL EFFECTIVE FEDERAL TAX RATES

Three big points, here. First, the fact that all the lines in the second graph are above zero suggest that the vast majority of households that don’t pay federal income taxes do pay federal taxes. (The few that don’t might still owe local and state taxes.) Second, the reason most poor families don’t pay federal income taxes is that Republicans and Democrats keep cutting their taxes. Third, just about everybody has shared in the tax cut parade of the last 30 years. We haven’t shared equally, but we’ve all gotten a break.

According to Santorum’s quote, the most important class division in America is between income tax payers and non-income tax payers. This is a weird fight to pick for the Republican party, and particularly for Santorum, whose tax scheme would probably increase the number of households who owe no federal income tax.*

More broadly, it’s surreal for Republicans to complain about taxes being too low on the poor while they also propose tax cuts for the wealthiest Americans.

### Romney’s tax plan saves top 1 percent \$82,000

The Tax Policy Center has released its formal analysis of Mitt Romney’s tax plan. The result? Regressive, but not as regressive as the tax plans of his rivals. Compared to current rates, Romney’s plan would cost a family in the bottom 20 percent \$157 and save a family in the top 1 percent \$82,000. That looks pretty tilted toward the rich. But here it is against the other GOP tax plans the Tax Policy Center has assessed — and against President Obama’s September proposal to the supercommittee:

The Tax Policy Center hasn’t modeled Rick Santorum’s tax plan yet, but Howard Gleckman did take a first look. “Like other Republican tax planks, Santorum’s would benefit corporations and high-income individuals. No surprise there. But unlike his rivals, he’d also cut taxes for many families with children. Santorum is no bleeding heart, however. Even as he’d cut their taxes, he’d shred direct government spending for programs aimed at assisting these same households.”

[SOURCE]

### The White House Finds Out \$40 Is a Depressing Number

To break down the payroll tax cut and the repercussions of the stalemate into simpler terms, the White House took to Twitter and asked the masses what \$40 meant to them and came away with sad snapshots of American life in 2011. \$40 is “what officials estimate the average American would lose from his or her paycheck every two weeks, starting in January without an agreement on an extension of the tax cut. The \$40 is based on someone earning about \$50,000 a year and paying about \$1,000 more in taxes annually,” writes Jennifer Preston of The New York Times. The White House sent a tweet two days ago asking America about that \$40 (right), and have posted, what seems to be the most heart-breaking collection stories on its blog. The latest round of answers is up.  ”#40dollars means I can buy a pair of shoes that don’t have holes in the soles so my feet stay dry,” wrote one tweeter.  Another writes:

“I have a significant physical disability (born without arms or legs). I have worked all my life, and have always paid out-of-pocket for my personal attendant care. I would have to give up many hours of personal attendant care each month without the \$40 per paycheck from the payroll tax cut.  These are essential services to me that allow me to work and remain independent.  And my attendant would suffer as well. “

Of course it’s probably someone’s job to sift and pick and choose the most poignant answers—the White House Facebook page asked the same answer and partisan rancor seems to have dominated that page—but from people losing their homes to not being able to buy groceries, \$40 in America has never looked more depressing.

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More:

Some of the biggest companies in the United States have been firing workers and in some cases lobbying for rules that depress wages at the very time that jobs are needed, pay is low, and the federal budget suffers from a lack of revenue.

Last month Citizens for Tax Justice and an affiliate issued “Corporate Taxpayers and Corporate Tax Dodgers 2008-10″. It showed that 30 brand-name companies paid a federal income tax rate of minus 6.7 percent on \$160 billion of profit from 2008 through 2010 compared to a going corporate tax rate of 35 percent. All but one of those 30 companies reported lobbying expenses in Washington.

Another report, by Public Campaign, shows that 29 of those companies spent nearly half a billion dollars over those three years lobbying in Washington for laws and rules that favor their interests. Only Atmos Energy, the 30th company, reported no lobbying.

[FULL STORY]

Wonkbook: The GOP’s two conversations over taxes

There are two very different tax-policy conversations playing out in the Republican Party right now. In Washington, House Republicans are arguing with each other over how small of a temporary tax cut to give the middle class. Out on the primary trail, the Republican presidential candidates are arguing over how huge of a permanent tax cut to give the wealthy.

The Washington conversation is over the extension of the payroll tax cut. Some House Republicans say it should be allowed to expire altogether. Some think, either for economic or political reasons, it should be extended for another year. Not one Republican, to my knowledge, agrees with the Obama’s administration’s proposal to pass a larger payroll tax cut for 2012. Rather, the center of gravity in the party is between a plain extension of the current rates and no tax cut at all, and Speaker John Boehner is trying to win Republican support for the extension by turning it into leverage for a wholly unrelated priority: the Keystone XL oil sands pipeline.

Washington Republicans say their reticence to pass a larger payroll tax cut is explained by the deficit. But out on the campaign trail, the Republican candidates seem unburdened by any similar concerns. The Tax Policy Center has, at this point, assessed the tax plans of Herman Cain (remember, his campaign is merely “suspended”), Rick Perry and Newt Gingrich. Compared to the current tax rates — that is to say, compared to a world in which the Bush tax cuts never expire — Cain’s plan would mean a \$238,000 tax break, on average, for taxpayers in the top one percent. Perry’s plan would give that same group a \$281,000 tax break. Gingrich’s plan would give them a \$340,000 tax break.

[FULL STORY]

### Newt Gingrich’s tax plan revealed: would“add \$1.3 trillion to the U.S. budget deficit in 2015 alone,” and gives the top 0.1% a \$2.3 million reduction.

The competition to reward the wealthy

By Steve Benen | Washington Monthly

Just about all of the major Republican presidential candidates have unveiled tax plans they’d pursue if elected, and the result has become a competition with a competition — GOP contenders aren’t just fighting for votes, they’re fighting to see who’s willing to give the biggest tax breaks to those who are already very, very wealthy.

For now, it looks like disgraced former House Speaker Newt Gingrich has taken the lead in this race, too.

The Tax Policy Center has run the numbers on Newt Gingrich’s tax plan. The verdict? Gingrich’s plan does more for wealthy American households than any plan released by the other 2012 candidates — and increases the deficit by trillions.

Gingrich would give the top 1 percent of U.S. households an average \$430,000 tax cut, with their tax rate dropping 22 percentage points under the assumption that the Bush tax cuts expire in 2012. Households with an income of more than \$1,000,000 would get a whopping \$760,000 tax break on average, heavily weighted by the top 0.1 percent, who’d get a \$2.3 million tax reduction. By contrast, the bottom 20 percent would save only an average of \$649 under the Gingrich plan — with their tax rate dropping just 1.5 percentage points — and more than half of that group wouldn’t see any benefit at all. And those earning \$40,000 to \$50,000 would get a tax cut of about \$1,900 on average.

Those who make the least would get the least, with lower-income households getting almost no benefit at all. Those who make the most, meanwhile, would get the most, with multi-millionaires and billionaires — who’ve already benefited from exceedingly generous tax breaks over the last decade — poised to be rewarded even more in a Gingrich administration.

Matt Yglesias put together this chart, showing the breakdown by income, making clear that those in the top 0.1% — those making more than \$8 million a year — stand to get the bulk of the reward under the Gingrich plan.

Pat Garofalo added that, under this approach, “The end result of the plan would be millionaires paying a lower tax rate than middle-class families.” Remember the recent debate over the Buffett Rule? Gingrich plans to turn it on its head.

And what about the deficit that Republicans occasionally pretend to care about? Gingrich doesn’t bother with the pretense — his tax plan would “add \$1.3 trillion to the U.S. budget deficit in 2015 alone,” according to an analysis released yesterday by the nonpartisan Tax Policy Center.

President Obama was asked on “60 Minutes” the other day about the GOP presidential field, and he said, “It doesn’t really matter who the [Republican] nominee is going to be. The core philosophy that they’re expressing is the same. And the contrast in visions between where I want to take the country and where they say they want to take the country is going to be stark.”

Truer words were never spoken.

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