How Obama Tax Cuts Benefit the Rich vs. Middle Class

When it comes to keeping tax cuts for the wealthy during a recession, I will echo one poignant statement: “The American economy thrived in the face of much higher taxes on well-off families during the 1950s and 1960s” (Paul Krugman/1993). Obama’s plan to keep Bush-era 35% tax rate caps in place is a spineless compromise, considering there’s no proof that trickle-down economics improves the national deficit or even the economy. Here’s the lowdown on what wealthy and middle class citizens might like in this tax proposal, which is akin to whipping the economy into shape with a wet noodle:

What the Middle Class Will Like

13 more weeks of unemployment benefits for those who have been on UI for 99 or more weeks.

Right now, middle class and poor taxpayers have higher values on the tax credits they can file, including the college cost tax credit, child credit and earned income tax credit, according to CNN. These credits would stay in place for the next two years.

For one year, reduce the amount of payroll tax that goes to Social Security from 6.2% to 4.2%. This is known as a payroll tax holiday.

What Wealthy People Will Like

Two more years of Bush-era tax cuts. Tax rates for singles, for example, will remain:

* 10% for those making less than $7,000/year
* 15% for people making up to $28,400
* 25% if you make up to $68,000
* 28% up to $143,500
* 33% up to $311,950
* 35% if you make more

Keeping taxes historically low for the rich has been doing nothing to stimulate the economy, so Democrats don’t want this plan to stick around. The plan, by the way, costs $458 billiion.

Estate tax exemption would have a top rate of 35% and increased exemption of $5 million per person. Without these changes, the estate tax would go back up to 55%/$1 million in 2011. In other words, it’s more tax relief for the wealthy.

Capital gains taxes will continue to have a top rate of 15% for the next two years (though this is especially good for wealthy investors, it’s not bad for everyday investors, either).

The alternative minimum tax is set to increase in tax year 2010 because AMT income hasn’t been indexed for inflation, according to the Wall Street Journal. “So a tax designed in 1969 to hit about 200 taxpayers may sock families with incomes as low as $60,000 a year.” The Obama plan proposes to stop the AMT from hitting for another two years.

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Comments

  1. Brent's Gravatar Comment by Brent on December 7th, 2010 at 12:23 pm

    Wow, this is a post I didn’t expect coming from this blog. Usually your posts are funnier or more business oriented. Maybe your views have just changed since your post in 2003: http://www.businesspundit.com/tax-cuts/

  2. Samuel Jones's Gravatar Comment by Samuel Jones on December 8th, 2010 at 12:17 am

    What a hypocrite. Our president said time after time that that those tax breaks will be repealed. So what does he do? how extends them in exchange, to be able to spend more of our money. What a joke.

  3. Taruna Oils's Gravatar Comment by Taruna Oils on December 9th, 2010 at 12:13 am

    Free lunch for everyone, check your wallet if your on Social Security, Medicare or Veterans benefits early next year you wont get your checks or they will be 40% smaller. The rich will get their reduced taxes and the elected members of Congress from the(TEA PARTY)is going to vote against the debit ceiling being increased. Obama the jellyfish will swing in the wind!

  4. Kevin Clark's Gravatar Comment by Kevin Clark on December 12th, 2010 at 7:49 pm

    More class warfare brainlessness. Liberalism/socialism is the greatest failure of thought of the last 300 years. It always fails. Always. Increasing socialism in the USA is predictably steadily impoverishing all citizens of the USA, in terms of both economic and liberty. But it doesn’t matter to liberals. Ignore the truth of steadily increasing wealth spread over more and more of the population. Ignore the dramatic erosion of freedom in this country over the last 40 years. Play on envy. Encourage hate. Blindly assume a superior moral character. There is no greater moral hypocrite in the world than a liberal with any degree of wealth.

    Don’t you understand? I don’t care that the wealthy are wealthy! As long as they acquired it legally and morally (almost all do). As for the rest, convict them! Stop using them as an excuse for your personal envy and greed.

    Here is a question: how low would someone’s integrity be if he wanted to level higher tax rates on someone else than he was willing to pay himself? Low. Very low. What top rate does this thinking lead to? Whatever rate the top 51% is willing to pay?

    Amazing stuff. Disgusting, venal, pompous and self-congratulatory… but amazing.

  5. Dr Mo's Gravatar Comment by Dr Mo on December 24th, 2010 at 11:24 am

    O-bum-a is a DIRECT beneficiary of this TAX code. His book sales and profits from his private ventures net him a TAX savings of close to 1/2 Million dollars. But NO ONE talks about that!?

  6. Tony's Gravatar Comment by Tony on February 19th, 2011 at 3:12 pm

    Take a break peeps it’s called extending the olive branch, other wise called being bipartisian :) You all seem to forget (so convienantly) what got our economy here in the first place :/ It was the GWB Admin that never refused a single spending bill in the 8 years (4 of which where controlled by same party) they where in office? The Medicare entitlment bill passed by (that same Admin) and a war that was initiated on lies and deception to the tune of 3 trillion dollars. But no one wants to mention that do they? No instead they side step and say oh um where conservatives, or tea partys activists lol !! Well if it looks like a pig and smells like a pig it is a pig weither , C, or Tea :) and DEr. Mo … how many millions where made by the companies like U.S. Military Inc. and companies chaired by Dick Cheney all because of ficticious lies created by the R, C, Tea pig party?

  7. Tony's Gravatar Comment by Tony on February 19th, 2011 at 3:22 pm

    nuff said :)

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