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.