Obama Unveils New Tax Brackets
This chart (click to enlarge) from the WSJ shows we’re still a long way off from the tax burdens of year’s past:
Obama’s new proposed tax rates will increase for those who are married and filing jointly, starting at $235,000 in taxable income. The first point that caught my eye was that $235K is well below the $250K level the Obama camp mentioned during the campaign. Of course, the truth is more complicated than this: a couple “earning” $250K are likely already below the $235K in taxable income threshold once they take into account their deductions. Yet at first glance, this number does seem inconsistent. When you’re trying to pass a large-scale tax increase during a recession, perceptions matter: you need the public on your side.
According to the Journal:
The Treasury Department’s description, known as the “green book,” showed that the new 36% rate would apply to an adjusted gross income of $250,000 “less the standard deduction and two personal exemptions.” Those items effectively represent the minimum that a couple could subtract from adjusted gross income, officials said. A senior administration official estimated that that produces taxable income of about $235,000.
Many couples with adjusted gross income of $250,000 have itemized deductions that would put their taxable income well below that $235,000 threshold.
And yet with all the fuss about the catastrophically high tax rate, the highest marginal tax rate under the Obama plan would only be 39.6%. Take a look at that chart from the Journal again: it would be lower than it was during most of the Reagan years!
The real news is that the Federal Government will have to borrow fifty cents for every dollar it spends this year. With this kind of leverage, you need to shore up your revenue base, which in this case means raising taxes.
