Backdoor Taxes To Hit Middle Class
NEW YORK (Reuters.com) --The Obama administration's plan to cut more than $1 trillion from the deficit over the next decade relies heavily on so-called backdoor tax increases that will result in a bigger tax bill for middle-class families.
In the 2010 budget tabled by President Barack Obama on Monday, the White House wants to let billions of dollars in tax breaks expire by the end of the year -- effectively a tax hike by stealth.
While the administration is focusing its proposal on eliminating tax breaks for individuals who earn $250,000 a year or more, middle-class families will face a slew of these backdoor increases.
The targeted tax provisions were enacted under the Bush administration's Economic Growth and Tax Relief Reconciliation Act of 2001. Among other things, the law lowered individual tax rates, slashed taxes on capital gains and dividends, and steadily scaled back the estate tax to zero in 2010.
If the provisions are allowed to expire on December 31, the top-tier personal income tax rate will rise to 39.6 percent from 35 percent. But lower-income families will pay more as well: the 25 percent tax bracket will revert back to 28 percent; the 28 percent bracket will increase to 31 percent; and the 33 percent bracket will increase to 36 percent. The special 10 percent bracket is eliminated.
Investors will pay more on their earnings next year as well, with the tax on dividends jumping to 39.6 percent from 15 percent and the capital-gains tax increasing to 20 percent from 15 percent. The estate tax is eliminated this year, but it will return in 2011 -- though there has been talk about reinstating the death tax sooner.
President Obama’s budget seeks an end to tax break for the middle class
Grappling to contain record deficits, President Barack Obama is seeking to end a middle-class tax break he once said would be permanent.
That’s a switch from last year, when Obama’s budget called for making the tax credit permanent.
The cut costs the federal government about $63 billion in annual revenue while putting up to $400 in the pockets of workers making less than $95,000. It was approved for the first time in last year’s $787 billion stimulus package.
An administration official said the tax credit reflects changing realities in Congress on climate change legislation.
The tax initially was intended to compensate middle-class families for increased energy costs related to a cap-and-trade mechanism that would have capped greenhouse gas emissions by businesses while setting up a system allowing emissions credits to be bought and sold, the official said. The credit was to be paid for by revenue from the cap-and-trade system.
Now that Congress is considering different ways of compensating middle-class families for higher energy costs related to a cap-and-trade bill, using the Making Work Pay credit is not necessary, the official suggested.
The 2010 budget said that with “families squeezed, this tax cut will put needed money in their pockets for them to make ends meet and cover the costs of necessities.”
The $3.8 trillion budget request rolled out by the White House on Monday would renew the Making Work Pay tax credit for fiscal 2011, but then would have it sunset.
Oh how I love the Barack Obama administration, it's like a bad joke that just keeps on giving. I know politicians aren't the most honest people on the world, but Obama is looking like a pathological liar, and at the very least, a master of nuance. At what point do the vast majority of Americans stop believing the words that are coming out of his mouth?
By the way, I also wonder how the permanent campaign led by David Axelrod and Rahm Emmanuel will respond to such charges that dare to challenge The Hero of The Working Class.