Friday, January 4, 2013

The Poor Get Screwed ... Again

This post should be short, as the graph speaks for itself.

Congress just passed, and Obama just signed, the "American Taxpayer Relief Act of 2012" (aka "ATRA").

Since Obama won the election, we know that ATRA shifted the federal tax burden from working people towards the top 2%. Right?

Wrong.

The percentage increase, by household income group, of federal tax burden, from last year to this year:


As expected, everyone's taxes went up. But the poor got hit with a 120.9% tax hike.

Before the comment section fills up, I do realize that those earning $500,000 pay more taxes in terms of absolute value than someone earning $20,000. (In fact, I used to be a Republican).

For example, a family earning $20,000 that had a $2,000 federal tax bill could see their taxes go up to $4,418 -- an increase of $2,418.

Meanwhile, a young stock trader making $500,000 on Wall Street might see his federal taxes go from $75,000 to $77,850 -- an increase of $2,850.

$2,850 is bigger than $2,418. Therefore, Congress is soaking the rich! Your logic is impeccable. Now go fuck yourself.

Seriously, which family can better absorb a big tax hike?

As the poor already pay much more in taxes as a share of their income, this is horrible news for those families hit hardest by the recession.

Mitt Romney famously said: "I'm not concerned about the very poor."

It appears that Obama and Congress feel the same way.

Source: Tax Policy Center

2 comments:

Anonymous said...

Eep.Scary! Is Wikipedia wrong on this and/or am I just reading it wrong?

"Marginal income and capital gains tax rates would increase relative to their 2012 levels for those with annual income over $400,000 for individuals and $450,000 for couples, but the rates below these levels would remain at their 2012 levels. The income rate would increase from 35% to 39.6%"

Seems like the dude making 500k would pay 198k in taxes now instead of 175k last year, a difference of 23k

Clay said...

Wikipedia is right, but that's not the whole story. ATRA also "fixed" the AMT (i.e. reduced taxes for high earners) and included a huge capital gains tax cut.

If the dude making $500K did it all by trading stocks, he's only paying 15% instead of 39.6%.

I assume the Tax Policy Center has decent data regarding the different types of income that tend to occur in different income groups.

A surgeon earning $500K is different than a day-trader earning $500K which is different from someone making $500K by selling their business.

Of course, these are all just projections. If the stock market plummets, capital gains income goes down, thus shifting the balance between "normal income" and capital gains.

You can read the fine print here:

http://www.taxpolicycenter.org/numbers/displayatab.cfm?Docid=3756&DocTypeID=2