Bush-Era Tax Cuts

During George W. Bush’s term in office, he proposed two tax cuts, better known as the Bush-Era tax cuts.  Congress eventually passed these tax cuts but had expiration tags attached to them, set to expire in 2010.  During Obama’s term in office, he extended the acts that were passed to expire in 2012.  Now that we are nearing the 2012 Presidential Election Day, each candidate has a different take on whether or not to continue and keep the Bush tax cuts.  Obama wants these tax cuts to expire for the wealthy while Romney wants to renew it for all classes with a low tax rate.  As much as it may sound good to decrease the percentage of tax placed on Americans, all it has done was add to the country’s deficit. 

The 2001 tax cut was known as the Economic Growth and Tax Relief Reconciliation Act. This act made a lot of important changes to income tax rates, real estate, 401k plans and much more.  Those making more than about $312,000 had their taxes cut from 39.6% to 35%.  The next category decreased from 36% to 33%, and so decreasing each bracket by 3% by 2006.  This act also created a new category for those making less than 12,000, cutting their taxes from 15% to 10%.  Under this act, the alternative minimum tax exemption was raised to $49,000 for couples and about $35,000 for singles. The 2003 tax cut was known as Jobs and Growth Tax Relief Reconciliation Act.  This act decreased the capital gains and was made to speed up the process from the 2001 act.  This act also increased the exemption for the alternative minimum tax.

The main goal of these was to reduce the tax rate over the span of several years.  It has not helped the economy grow in any way and is actually considered to be the top U.S. debt contributor.  According to Harry Bradford, of The Huffington Post, if the Bush tax cuts are not renewed, it is projected that over 10 years the deficit would be reduced by about 1 trillion dollars.  

The Democrats want the Bush tax cuts to expire on the wealthy but will renew it for those making less than $250,000. Paul Krugman, a well-known economist, once stated, “Wealthy Americans who benefit hugely from a system rigged in their favor react with hysteria to anyone who points out just how rigged the system is.” In reaction to the Democrats’ proposition, the Republicans are threatening to vote against it if it came down to Obama winning and moving forward with that plan.   As we’ve seen from Clinton’s presidency, allowing the wealthy to pay more in taxes will help the economy in the long run because it will lower the deficit and help create more jobs, all in all creating a good economy.  

The Republicans are opposing the Democrats’ view and actually want to renew the Bush tax cuts on all classes. The Republicans believe that if it were to be renewed only for the lower and middle class, like the Democrats want; it would affect economic growth and job creation, referring to the “trickle down”.  As we have seen from past, attempts of placing more money in the hands of the rich in order to create more jobs and get the economy growing has not worked, so what would make it any different now?

Last Edited on November 16, 2012.

References

Bradford, Harry. (2012. Aug. 8) Bush-Era tax cuts will cost U.S. nearly $1 trillion over the next decade.  Retrieved from <http://www.huffingtonpost.com/2012/08/24/bush-era-tax-cuts-revenue-expire_n_1828657.html#slide=1428571>

Gale, William and Harris, Benjamin. (2008. Jan. 23). How did the 2001 tax cuts change the tax code? Retrieved from <http://www.taxpolicycenter.org/briefing-book/background/bush-tax-cuts/2001.cfm>

Gale, William and Harris, Benjamin. (2008. Jan. 23). How did the 2003 tax cuts change the tax code? Retrieved from <http://www.taxpolicycenter.org/briefing-book/background/bush-tax-cuts/2003.cfm>

Garofalo, Pat. (2012. July. 9). Why letting the bush tax cuts for the rich expire will not hurt the economy .  Retrieved from <http://thinkprogress.org/economy/2012/07/09/512741/charts-economy-bush-tax-cuts/?mobile=nc>

Jobs and Growth tax relief reconciliation act of 2003. In Wikipedia. Retrieved from <http://en.wikipedia.org/wiki/Jobs_and_Growth_Tax_Relief_Reconciliation_Act_of_2003>

Presidential Debate Round 2: Taxes

During the second Presidential Town Hall debate, specifically at 21:25 minutes into the session, a question was asked by Mary Polano towards governor Mitt Romney. The question asked was "You have stated that if your elected president you would plan to reduce the tax rates for all the tax brackets and that you would work with the congress to eliminate some deductions in order to make up the lost in revenue, concerning these various deductions, the mortgage deduction, the charitable deduction, the child's hacks credit, and education credits, what would be your position on those things which are important to the middle class?" Mitt Romney replied that he wishes to bring rates down, simplify the tax code, and have middle income tax payers to have lower taxes. Barack Obama respond to the question by stating that he wishes to giver lower and middle income tax payers relief and he has done that by 3,600, and 18 tax cuts towards small businesses. He says he is going to continue doing so and make upper class citizens pay more in taxes. The reason why he this hasn't gone through yet is because republicans wish to have tax breaks for upper class citizens and basically not cooperating with him.


Click Links Below To View Summarized Views On Each Candidates Tax Reform
Mitt Romney on Tax Reform
Barack Obama on Tax Reform         

Obama's "Buffett Rule"

In the article Obama Tax Plan Would Ask More of Millionaires written by Jackie Calms was published in the New York Times back in September 2011 we learned that President Obama plans on taxing those who make more than one million a year pay a tax rate that will be close enough if not equal to the rate of taxes people who belong to the middle class. The idea of this proposal came from a billionaire known as Warren E. Buffett. The New York times article wrote that “the billionaire investor who has complained repeatedly that the richest Americans generally pay a smaller share of their income in federal taxes than do middle-income workers, because investment gains are taxed at a lower rate than wages.” This also leans towards the idea that the rich get richer while the poor stay poor. One of the reasons for Obama wanting to get “Buffett Rule” is because he believes it is fair for those making more money pay more taxes. Obama also believes that it’ll help our economy’s deficit begin to disappear.

A counter argument for this idea however is that there may be discouragement for people to invest. Or at least that’s what the Republican Party claims. In another article “Rebuffing Obama’s gimmicky ‘Buffett Rule’” written by Dana Milbank from the Washington Post from this year back in April also discusses some of the reasons as to how and why this plan may not work out well. In the article by Milbank wrote that “A search of the White House Web site yields 17,400 mentions of the Buffett Rule a proposal that would bring in $47 billion over 10 years, much of that from 22,000 wealthy households. By contrast, the alternative minimum tax gets fewer than 600 mentions on the site. The AMT, if not changed, will take about $1 trillion over a decade from millions of taxpayers, many of whom earn less than $200,000 a year.” He doesn’t believe the “Buffett Rule” makes much of a difference nor will it be good. Find out what the Obama’s “Buffett Rule” would do for you in the tax calculator link below.


Tax Calculator



The picture above is of Warren E. Buffett

Vice Presidential Debate on Taxes

 

The Vice Presidential debate took place on Thursday, October 11.   It is said that the Vice Presidential debate is not really considered important because when people vote, they vote based on which President brings forward their best, not which Vice President.   As we have seen from the first Presidential debate, we did not receive much information about many topics, including taxes.  This Vice  Presidential debate gave us the chance to dive deeper into each party's platform on the issue.   

Martha Raddatz, the host of this debate, asked them if their party were to win who would pay more taxes than the other?  

Joe Biden stated that the middle class would pay less and those that continue to make more money would pay more.  Biden gives the example of the Bush tax cuts, being in his party's opinion, that it should expire.  He stated that there is no reason to continue giving an 800 billion tax cut to those making more than 1 million, especially in the current economic status.  The Democratic party wants to permanently keep the tax cuts for the middle class stating that the recession hit them hard and they deserve a break.

Paul Ryan stated that if their party were to win, the main focus is to help the economy grow and create more jobs.  He gives the example that under the Republicans, they would tax small business' 28% whereas his opponent would tax about 45% from small business owners.  He also stated that even if you double the percentage of tax on small business', it still wouldn't be enough to cover the deficit.  

The video shows more of the two candidates going back and forth with the issue of taxes.

Here are some things that were tweeted during and after the debate.

Biden did very well. He did what Pres Obama didn't do last week: attack#VPDebate
— Jonathan Capehart (@CapehartJ) October 12, 2012

Just because Ryan didn’t sound flustered doesn’t mean he wasn’t beat.
— Jamelle Bouie (@jbouie) October 12, 2012

Biden helping himself hugely for the 2016 primary. He's a hero to Democrats tonight. #vpdebate #tweetsthatIshouldsavefor2016
— James Downie (@jamescdownie) October 12, 2012

Ryan closing strong.
— Marc Thiessen (@marcthiessen) October 12, 2012

Ryan is a nervous Walmart manager. Biden is an irate customer with the receipt, the warranty & he's friends w/ the store owner. #debate
— Patton Oswalt (@pattonoswalt) October 12, 2012

Paul Ryan comes off like a 5 year old under a tree telling his friends what the rules of tag are #debate
— Kat Dennings (@OfficialKat) October 12, 2012

I love how Ryan doesn't answer the questions when asked for details he can't give them!
— Eva Longoria (@EvaLongoria) October 12, 2012

What were your thoughts about this debate?  Who do you think did a better job?

The "47 Percent"

Going back a couple of weeks to September 17, a leaked video showed Mitt Romney stating,

"There are 47 percent of the people who will vote for the president no matter what.  All right, there are 47 percent who are with him, who are dependent upon government, who believe they are victims, who believe the government has a responsibility to care for them, who believe that they are entitled to health care, to food, to housing, to you-name-it--that that's an entitlement.  And the government should give it to them.  And they will vote for this president no matter what...These are people who pay no income tax...my job is not to worry about those people.  I'll never convince them they should take personal responsibility and care for their lives."


When you first hear that you wonder, ‘what 47 percent didn't paying taxes’? 

According to a study done by the Tax Policy Center in 2011, about 47 percent of Americans did not pay individual income tax.  The fact that they did not pay any income tax does not mean they were excused from all other forms of tax (federal payroll, excise, state and local income, sales, and property taxes).    Here are two pie charts presented by the TPC:

From the first pie chart, we can see that yes, as Romney stated, there are 47 percent that did not pay income tax.  But again, income tax is only one form of tax.  The second pie chart further presents that from those 47 percent, only 18 percent do not pay payroll taxes (which includes withholding of income tax through wages, Social Security, Medicare, and unemployment taxes).  So about 28 percent who do not pay income tax do pay payroll tax.

This third pie chart, also provided by the TPC, gives us the reasoning behind the 18 percent that did not participate in paying federal income or payroll taxes.  The 18 percent included the elderly and the poor.  The elderly receive most, if not all, of their income from the Social Security checks.  These checks are non taxable therefore making it clear that their taxable income simply does not exist, so they are exempt from paying either form of tax.  The poor, that made less than 20,000, were exempt from paying either forms of taxes too as a result of the tax credit and the deductions.

Romney said that the 47 percent will vote for Obama "no matter what".  There is no proof between the 47 percent of people and the votes.  So Romney  focused on the 47 percent, without actually providing all information of who is included in that group (the elderly and the poor) and without providing proof that there is a relationship of that group and the number of votes that it goes towards his opponent, Obama.

Romney stuck by his statement until the time around the first presidential debate because he realized that it has taken a negative effect on his chances of winning.  During the first presidential debate we see that Romney never talked about the 47 percent comment and Obama didn't even call him out on his statement.  Two days after the first presidential debate, Romney decides to apologize and say that he was "completely wrong".

Sources:
Why Do People Pay No Federal Income Tax?
Payroll Tax
Romney's 47% That Don't Pay Taxes
Fast Checking Romney's '47 percent' Comment
Five Myths about the 47 Percent

On October 3, President Obama and Governor Romney had their first presidential debate. During the debate both parties told our nation what their plans and ideas were on taxes. President Obama had pointed out that Romney’s plan has been to cut taxes for the rich. Romney’s response to this was that he does not want to cut taxes for the rich, he however had made the comment that "We're going to cut taxes on everyone across the country by 20 percent, including, the top 1 percent" in a debate earlier this year. In the article below you can read a bit more about what Romney has been stating about taxes.

What Romney has to say about Taxes

In the link below you can see the entire video of the first presidential debate that took place this Wednesday, October 03, 2012. You may also see what Obama had to say about his ideas on taxes if you scroll down to the twelfth minute in the debate. 

Obama believes the economy is doing best when the middle class is doing well financially which is the reason why he has been cutting back taxes on the middle class for the past few years.

What President Obama said during the debate on Wednesday about Taxes