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http://online.wsj.com/article/SB1000...464445594.html
Welcome back to the 1970s Obama is Jimmy Carter II...only worse. He's repeating all of Carter's mistakes. Does history mean nothing? But after all these taxes on the "rich," we're headed back to the taxes that prevailed under Jimmy Carter, when the highest tax rate was 70%. A 62% Top Tax Rate? Democrats have said they only intend to restore the tax rates that existed during the Clinton years. In reality they're proposing rates like those under President Carter. By STEPHEN MOORE Media reports in recent weeks say that Senate Democrats are considering a 3% surtax on income over $1 million to raise federal revenues. This would come on top of the higher income tax rates that President Obama has already proposed through the cancellation of the Bush era tax-rate reductions. If the Democrats' millionaire surtax were to happen—and were added to other tax increases already enacted last year and other leading tax hike ideas on the table this year—this could leave the U.S. with a combined federal and state top tax rate on earnings of 62%. That's more than double the highest federal marginal rate of 28% when President Reagan left office in 1989. Welcome back to the 1970s. Here's the math behind that depressing calculation. Today's top federal income tax rate is 35%. Almost all Democrats in Washington want to repeal the Bush tax cuts on those who make more than $250,000 and phase out certain deductions, so the effective income tax rate would rise to about 41.5%. The 3% millionaire surtax raises that rate to 44.5%. But payroll taxes, which are income taxes on wages and salaries, must also be included in the equation. So we have to add about 2.5 percentage points for the payroll tax for Medicare (employee and employer share after business deductions), which was applied to all income without a ceiling in 1993 as part of the Clinton tax hike. I am including in this analysis the employer share of all payroll taxes because it is a direct tax on a worker's salary and most economists agree that though employers are responsible for collecting this tax, it is ultimately borne by the employee. That brings the tax rate to 47%. Then last year, as part of the down payment for ObamaCare, Congress snuck in an extra 0.9% Medicare surtax on "high-income earners," meaning any individual earning more than $200,000 or couples earning more than $250,000. This brings the total tax rate to 47.9%. But that's not all. Several weeks ago, Mr. Obama raised the possibility of eliminating the income ceiling on the Social Security tax, now capped at $106,800 of earnings a year. (Never mind that the program was designed to operate as an insurance system, with each individual's payment tied to the benefits paid out at retirement.) Subjecting all wage and salary income to Social Security taxes would add roughly 10.1 percentage points to the top tax rate. This takes the grand total tax rate on each additional dollar earned in America to about 58%. |
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CJR: http://www.cjr.org/the_audit/a_62_pe...j.php?page=all
Stephen Moore of The Wall Street Journal editorial board hacks out an instant classic on how to mislead people with numbers. ... The top marginal tax rate is just 35 percent now, of course. So how does Moore come up with the idea that Obama and the Democrats are pitching a 62 percent tax rate for the rich? Disingenuously. First, here’s a classic example of misleading readers with an apples and oranges comparison: If the Democrats’ millionaire surtax were to happen—and were added to other tax increases already enacted last year and other leading tax hike ideas on the table this year—this could leave the U.S. with a combined federal and state top tax rate on earnings of 62%. That’s more than double the highest federal marginal rate of 28% when President Reagan left office in 1989. Welcome back to the 1970s.For Moore’s headline purposes he includes state taxes to get to 62 percent, but when he compare it to rates under Reagan, he doesn’t include state taxes. The comparison is much more misleading than that, really. Moore is also including things like payroll taxes to come up with his fake 62 percent number, while not including them in that 28 percent Reagan figure. You can’t do that, boss. ... There’s also this: Today’s top federal income tax rate is 35%. Almost all Democrats in Washington want to repeal the Bush tax cuts on those who make more than $250,000 and phase out certain deductions, so the effective income tax rate would rise to about 41.5%. It’s unclear how Moore gets to 41.5 percent here. Repealing the Bush tax cuts would return the top marginal rate to 39.5 percent. Deductions affect effective tax rates, which are far lower than marginal rates. Since he doesn’t explain it, and since the backdrop is the rest of this misleading piece, I’m going to assume that this 41.5 percent number is false (I believe Moore is talking about the PEP and Pease taxes, but those don’t apply to people making more than $525,000, so they can’t be included in a total tax rate that includes a millionaire’s surtax.) ... And again those are marginal tax rates. Unfortunately, most people don’t understand the difference between marginal rates, which is how much tax you pay on the last dollar you earn, and what people actually end up paying. The Carter administration didn’t confiscate 70 percent of rich people’s money in income taxes. The effective federal tax rate for the top 1 percent in 1979 was just 22 percent (including all taxes, particularly corporate income tax, the overall effective federal tax rate for the top 1 percent was 37 percent, well above 2007’s 30 percent rate, which is surely lower today.) Then there’s this stunner: Despite all of this, the refrain from Treasury Secretary Tim Geithner and most of the Democrats in Congress is our fiscal mess is a result of “tax cuts for the rich.” When? Where? Who? The Tax Foundation recently noted that in 2009 the U.S. collected a higher share of income and payroll taxes (45%) from the richest 10% of tax filers than any other nation, including such socialist welfare states as Sweden (27%), France (28%) and Germany (31%). And this was before the rate hikes that Democrats are now endorsing.Moore’s logic: Since the U.S. collected a higher share of taxes from the richest 10% than other nations then that means we haven’t cut taxes for the rich. I don’t think I need to explain that one. ... The folks on the WSJ edit page are no dummies. They know all this stuff. But spreading disinformation is just fine as long as it serves their larger purpose. And sure enough, the zombie lie is starting to spread. |
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