Friends, the most important election in our lifetimes is coming up this fall. As of right now, today, the Bush tax cuts are scheduled to expire next year. This doesn’t mean tax increases only for the rich (what happened to tax increases only for those making over $250K?) – it means tax increases for everyone.
A single person who makes $17725 (which equates to $8375 after deductions) will see their federal income taxes go from $837 to $1256. That’s a 50% tax increase on a person who is not exactly wealthy. A single person who makes $60K after deductions (equivalent to about $69350 if they take the standard deduction) will see their taxes go from $11181 to $12380. Do you really have an extra $1200 on hand to pay in taxes when we’re already in tough times?
Turbo Tax has a good summary of coming changes. There are a lot of other tax increases coming that may affect you – like reducing the child tax credit and reducing the tuition tax credit. Capital gains and dividends taxes will also go up, further discouraging investment.
In terms of dollars, an ABC blog from last year said that these tax increases would represent $989 billion over ten years. Do we really want to suck $100 billion out of the economy right now? Nancy Pelosi has the strange idea that unemployment benefits are a great stimulus to the economy. It’s funny to hear Democrats argue that unemployment benefits stimulate growth, while tax cuts do not. Rather, unemployment benefits discourage recipients from earnestly seeking a job and encourage those who are near retirement or otherwise looking to exit the labor force to instead pretend to look for a job just to collect a check. When unemployment benefits ran out in June, the labor force actually shrunk by 652,000. Those were 652,000 people who were looking for a job for the purposes of receiving unemployment, but once the check stopped, they stopped pretending to look. The New York Times – not exactly a rightwing rag – had a blog entry about this in March. The New York Times gets it, but Nancy Pelosi does not.
The President assures us that if we hadn’t spent trillions of dollars on pork projects for Democrat districts stimulus spending, we would have been even worse off. Well, if this stimulus was so essential, it’s even more essential that we don’t rip hundreds or thousands of dollars out of the hands of ordinary Americans. Again, we’re not talking about tax increases on those evil rich people the media loves to demonize – we’re talking about tax increases on everyone – including the poor and middle class. Really, it’s a disproportional increase. If you make some arbitrarily large amount of money ($1 billion) your effective tax rate goes from 35% (well, 34.999%) to 39.6%. That’s an increase of 13%. If you make $17725 – less than 200% of poverty – your income taxes go up 50%.
(If you’re curious how much your income taxes will go up, you can look at this site for the current marginal rates. For 2011, the 10% rate goes away, the 15% rate stays the same, 25% goes to 28%, 28% goes to 31%, 33% goes to 36%, and 35% goes to 39.6%. The cutoffs for each bracket will probably not change significantly – they are inflation-indexed and there isn’t any inflation right now. Obviously, this does not include tax changes not tied to the income tax rate.)
Our current fiscal path is unsustainable. Raising taxes during a recession is insanity. We need a congress that doesn’t believe the lie that the government can tax and spend the country into prosperity. I hate to say I told you so about Obama, but, well, I told you so. We’re on an unsustainable path, but that can be changed. I have no particular love for the Republican party – I don’t think anyone can deny that one-party rule in the 2000s was a disaster. But one-party rule on the other side is an even bigger disaster. I hope and pray that it’s not too late to reverse our path.
