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Sun Jan 6, 2013, 09:23 PM

 

Fiscal cliff deal = most progressive tax code since 1980 = propaganda.

If the media was licensed, the New York Times story, “After Fiscal Cliff Deal, Tax Code May Be the Most Progressive Since 1979,” would be grounds for disbarment. I flagged the piece as a Big Lie in comments yesterday, and figured that since anyone who was either old enough to have been paying taxes in the 1980s or had minimal Google skills could ascertain its claims were nonsense, that it would be debunked elsewhere. Instead, it was apparently tweeted actively by soi-disant liberals on Saturday.

This piece is one of a series of changes over the last month of so of a ratcheting up in the propaganda war against what is left of middle class America. It appears that the effort to sell citizens the necessity of cutting Social Security and Medicare has led our fearless leaders to take us across an event horizon into a late Soviet “all propaganda all the time” footing...

The Times article is remarkably lazy; it relies on an analysis made by the Tax Policy Center which claims that the top 1% will pay an “average federal tax rate” of 36% this year. The sneaky bit here is the use of “average federal tax rate.” This term is not defined and is most decidedly not a standard, recognized term. The only thing you care about in analyzing tax burdens is the marginal tax rate (how much do you pay on each new dollar earned) and the effective tax rate (taxes paid/income). Everything else is bullshit. That 36% is most decidedly NOT an effective tax rate; the top marginal tax rate (on income in excess of $450,000 for couples filing jointly) will be 39.5%. And I cannot fathom how they claim the top 1% paid less in taxes in the early 1980s. I did my own taxes in 1982, I was not in the top 1%, and as a new MBA my top rate was in the top marginal tax bracket (50%).

It’s simply bollocks to claim this deal makes taxation all that progressive, much the less as progressive as it was in the 1980s. Did the Tax Policy Center forget that we ended welfare as we knew it, for instance? The mavens of income inequality, Thomas Pikkety and Edmund Saez, base their work on tax returns, and point out that they focus on the high end because they can’t get the data to look at what happens to non-taxpayers, specifically, how much they benefit from transfers. Those have been strangled over the last three decades.

The fiscal cliff fix is only a small reversion of the Bush-era big breaks to the rich. Dividends are still taxed at capital gains rates (they were taxed at ordinary income rates before); estate taxes are vastly lower than they were in the 1980s and 1990. And even on the Federal income tax front, this chart gives you an idea of how little the pact does to change the distribution of income across income groups, and actually leaves a big chunk of the affluent but not rich better off...But the Times gave us a balanced view, by going to a tax expert from the right wing American Enterprise Institute, who says the taxes for low income people in the Carter era were really high! See! I’d like to have them unpack their analysis. The federal income tax rate on the marginal dollar of someone earning the minimum wage in 2012 is 15%. In 1982 it was just barely in the 17% bracket. But payroll taxes were 5.4% in 1982 versus 6.2% now, which is a major offset, since that is charged on every dollar of wages...

This search for “balance” is merely a way to reinforce the message that we really do live in the best of all possible worlds...

Read more at http://www.nakedcapitalism.com/2013/01/new-york-times-article-tells-big-lies-on-impact-of-fiscal-cliff-deal-on-rich-v-ordinary-americans.html#IaLM5Hgcmkf6Orw3.99

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Reply Fiscal cliff deal = most progressive tax code since 1980 = propaganda. (Original post)
HiPointDem Jan 2013 OP
SidDithers Jan 2013 #1
ProSense Jan 2013 #2
HiPointDem Jan 2013 #4
ProSense Jan 2013 #8
HiPointDem Jan 2013 #10
ProSense Jan 2013 #11
HiPointDem Jan 2013 #12
ProSense Jan 2013 #13
HiPointDem Jan 2013 #15
ProSense Jan 2013 #16
HiPointDem Jan 2013 #17
ProSense Jan 2013 #18
HiPointDem Jan 2013 #19
hfojvt Jan 2013 #21
jeff47 Jan 2013 #3
HiPointDem Jan 2013 #5
jeff47 Jan 2013 #6
HiPointDem Jan 2013 #14
jeff47 Jan 2013 #25
HiPointDem Jan 2013 #27
jeff47 Jan 2013 #28
HiPointDem Jan 2013 #29
jeff47 Jan 2013 #31
HiPointDem Jan 2013 #32
jeff47 Jan 2013 #33
HiPointDem Jan 2013 #34
HiPointDem Jan 2013 #35
jeff47 Jan 2013 #36
HiPointDem Jan 2013 #38
jeff47 Jan 2013 #39
cthulu2016 Jan 2013 #7
ProSense Jan 2013 #9
hfojvt Jan 2013 #20
Faryn Balyncd Jan 2013 #22
HiPointDem Jan 2013 #30
gollygee Jan 2013 #23
HiPointDem Jan 2013 #26
ProSense Jan 2013 #24
kentuck Jan 2013 #37

Response to HiPointDem (Original post)

Sun Jan 6, 2013, 09:40 PM

1. Is naked capitalism your new wsws?...nt

Sid

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Response to HiPointDem (Original post)

Sun Jan 6, 2013, 10:06 PM

2. No, what you posted is propaganda.

The fact is the short-term capital gains rates on the top 1 percent are the highest they've ever been: 43.4 percent.

The lower-income brackets are taxed less than they were during the Clinton years, 10 percent now vs. 15 percent in the 1990.

That's progressive. Period.

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Response to ProSense (Reply #2)

Sun Jan 6, 2013, 11:02 PM

4. First, short-term capital gains were taxed at regular income tax rates before the deal, & still

 

are. All that's changed is that the top rate for regular taxes went up to 39.6% -- thus, so did the short-term capital gains rate. Note: the rate is *not* 43.4%. You added the medicare tax in: naughty naughty.

Second, that is the *top* rate. Just as with regular income, cap gains income is taxed at various rates. Only short term cap gains income over $300K was taxed at the top rate in 2012. In 2013, only income over $400K will be. Short-term cap gains income *under* that threshhold is taxed at lower rates.

Third, top short-term capital gains tax has been *much* higher in the past, most notably 1917-1920, when it was 67-77%.

Fourth, even in the recent past it has been higher, as it tracked top rates:




Fifth, every provision in the bill needs to be scrutinized. A change in the definition of 'taxable income' for example, can make the rest of the bill a joke.

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Response to HiPointDem (Reply #4)

Sun Jan 6, 2013, 11:31 PM

8. Oh,

First, short-term capital gains were taxed at regular income tax rates before the deal, & still
are. All that's changed is that the top rate for regular taxes went up to 39.6% -- thus, so did the short-term capital gains rate. Note: the rate is *not* 43.4%. You added the medicare tax in: naughty naughty.

...you want to ignore reality to fit your perspective? The tax is on capital gains, which is why the long-term rate is 23.8 percent.

You're arguing nonsense.

Clinton taxed incomes up to $22,000 at 15 percent. Incomes up to $50,000 were taxed at 28 percent. Under Obama, incomes up to about $9,000 are taxed at 10 percent, $9,000 to $36,000 at 15 percent and $36,000 to 53,000 at $25 percent. Lower income Americans make out much better under Obama's plan. The top one percent see a tax increase to Clinton rates, and capital gains rate higher than the Clinton years, especially the short-term rate of 43.4 percent.

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Response to ProSense (Reply #8)

Sun Jan 6, 2013, 11:43 PM

10. medicare tax is a surcharge on *most* capital income over a cap, not just on S-T cap gains.

 

its own tax, a one off, & it was put in place *before* the fiscal cliff deal (in 2010, to go into effect in 2013).

sorry, you can't add it to every capital gains tax and claim that that's the new rate. it's not the new rate. the new rate for short-term cap gains is the same as the income tax top rate.

The medicare tax is a surcharge on ALL UNEARNED INCOME ABOVE A CAP (which I presume is now $400K rather than $200K, though that isn't immediately clear).

That is, if you had $100K of short-term cap gains, $200K of long-term cap gains, & $99K of stock dividends, you'd only be charged the 3.8% on income above the cap -- in this case, nothing.


It's not a tax on short-term capital gains. It's a tax on the sum total of capital income over a certain threshhold.

Your attempt to paint it as such is simply FALSE.

Where is the 3.8% tax found and when will it take effect?

Section 1402 of the Health Care and Reconciliation Act of 2010, which amends the Patient Protections and Affordable Care Act, outlines the new unearned income Medicare tax, and goes into effect January 1, 2013.

Who is subject to this tax?

Taxpayers with incomes or an adjustable gross income (AGI) over $200,000 who file individually or $250,000 for married couples filing jointly could be subject to this tax. The provision imposes a 3.8 percent tax (identical to the combined employer/employee tax rates on earned income) on income from interest, dividends, annuities, royalties and rents which are not derived in the ordinary course of trade or business, excluding active S corporation or partnership income.

Gross income does not include items, such as interest on tax-exempt bonds, veterans’ benefits, which are excluded from gross income under the income tax. If capital gains on a primary home sale exceed $250,000 for individuals or $500,000 for a married couple, and the income threshold is met, the excess realized gain is subject to the 3.8% tax.

How does this relate to the sale of a home?

There is no sales tax on home sales in the Reconciliation Act; instead, there is a tax which includes capital gains, rents, dividends and interest income that will only apply to taxpayers under limited conditions.

When determining if an individual or a couple is subject to the 3.8% tax:

A home sale MAY result in a capital gain that increases net investment income A home sale MAY result in a capital gain that increases a taxpayer’s AGI.

http://health.burgess.house.gov/uploadedfiles/one_page_on_unearned_medicare_tax.pdf

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Response to ProSense (Reply #11)

Sun Jan 6, 2013, 11:54 PM

12. You'd better read what i wrote again, & the source material i posted, because you're flat wrong.

 

And if you don't say "yes, i was wrong," after reading it, it will be pretty clear what you're doing.

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Response to HiPointDem (Reply #12)

Sun Jan 6, 2013, 11:58 PM

13. No,

" You'd better read what i wrote again, & the source material i posted, because you're flat wrong."

...I'm not: http://www.democraticunderground.com/?com=view_post&forum=1002&pid=2146156

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Response to ProSense (Reply #13)

Mon Jan 7, 2013, 12:14 AM

15. your link doesn't say what you're claiming.

 

The Act preserves the 25%, 28%, 33% and 35% brackets, which were set to rise at the beginning of 2013, and adds a new 39.6% bracket applicable to taxable income exceeding (i) $450,000 for married individuals filing jointly or (ii) $400,000 for individual filers.

The income thresholds for each bracket will now be adjusted for inflation.

Note that the Patient Protection and Affordable Care Act imposes additional Medicare taxes, also effective on January 1, 2013, of (i) 3.8% upon certain investment income and (ii) 0.9% on certain employee wages and self-employment income, each of which were previously subject to a 2.9% tax, including the employer portion of the Medicare tax on employee wages.

Generally, the additional Medicare tax on investment income applies to the extent that modified adjusted gross income exceeds $250,000 for married individuals filing jointly and $200,000 for individual filers, and the additional Medicare tax on wages and selfemployment income applies above a threshold of compensation income of $250,000 for joint filers and $200,000 for individual filers.

http://www.jdsupra.com/legalnews/the-american-taxpayer-relief-act-of-2012-14974/


Here's what you made of it:

Short-term 43.4 percent. Long-term 23.8 percent.

But it doesn't say that. It says a 3.8% tax on "certain investment income" over the cap.

It's a surcharge on total qualified investment income over the cap, not a tax on short-term or long-term cap gains.

Top rates on short & long-term cap gains = 39.6% & 20%. As stated in your link.

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Response to HiPointDem (Reply #15)

Mon Jan 7, 2013, 12:36 AM

16. It says exactly that, but

keep trying to deny it.

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Response to ProSense (Reply #16)

Mon Jan 7, 2013, 12:39 AM

17. where does it say 'exactly that'?

 

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Response to HiPointDem (Reply #17)

Mon Jan 7, 2013, 12:41 AM

18. It says

someone is pissed that lower tax rates on lower income Americans and higher tax rates on high income earners is more progressive than under Clinton.

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Response to ProSense (Reply #18)

Mon Jan 7, 2013, 12:46 AM

19. i take that as an admission that it doesn't say what you just claimed.

 

'more progressive than under clinton' is debatable; for example, long-term cap gains were taxed at 28% under clinton. you'd have to do an indepth analysis to make your claim; i doubt you have.

nor does that mean the same thing as 'most progressive since 1980,' which was your earlier claim.

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Response to ProSense (Reply #2)

Mon Jan 7, 2013, 12:50 AM

21. yeah sure

tax cuts that give 65% of their benefits to the top 20% are progressive. Period.

Because they also include small cuts to those with lower incomes.

That's propaganda. Period.

And the estate tax was raised by the deal too. Obama said so.

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Response to HiPointDem (Original post)

Sun Jan 6, 2013, 11:01 PM

3. Wow is this article wrong

it relies on an analysis made by the Tax Policy Center which claims that the top 1% will pay an “average federal tax rate” of 36% this year. The sneaky bit here is the use of “average federal tax rate.” This term is not defined and is most decidedly not a standard, recognized term. The only thing you care about in analyzing tax burdens is the marginal tax rate (how much do you pay on each new dollar earned) and the effective tax rate (taxes paid/income). Everything else is bullshit.

Because the paper was sent to an economics journal. It wasn't a press release for mass consumption that decided to use a more easily understood term in place of effective tax rate.

Oh wait, I got that wrong.

That 36% is most decidedly NOT an effective tax rate; the top marginal tax rate (on income in excess of $450,000 for couples filing jointly) will be 39.5%.

Because people in the top tax bracket only have normal income, and don't have any capital gains. Also, 100% of their income is taxed at 39.5%, as we don't have graduated tax brackets in our system.

Oh wait, I got those wrong too.

I did my own taxes in 1982, I was not in the top 1%, and as a new MBA my top rate was in the top marginal tax bracket (50%).

Because all income is ordinary income. There is no such thing as a capital gain.

Damnit! I got that wrong too!

Did the Tax Policy Center forget that we ended welfare as we knew it, for instance?

Because welfare is exactly the same as taxes.

Oh crap! That's wrong too!

and point out that they focus on the high end because they can’t get the data to look at what happens to non-taxpayers, specifically, how much they benefit from transfers. Those have been strangled over the last three decades.

Because the EITC and other tax credits don't exist. Also, all income is taxed, there isn't a graduated income tax in the US.

Oops, those are wrong too.

Dividends are still taxed at capital gains rates (they were taxed at ordinary income rates before);

Wrong. http://en.wikipedia.org/wiki/Qualified_dividend Bush made dividends capital gains, and the "deal" reverted them to normal income.

estate taxes are vastly lower than they were in the 1980s and 1990.

Yes, the 6 people that pay the estate tax got a break.

There's a saying among the wealthy - if you are paying the estate tax, you need a new tax attorney. It's trivial to avoid the estate tax with trusts and other financial tools.

And even on the Federal income tax front, this chart gives you an idea of how little the pact does to change the distribution of income across income groups

Because income taxes are used to slash the income of the wealthy so that we have income equality.

Damnit! There I go again with another error.

The federal income tax rate on the marginal dollar of someone earning the minimum wage in 2012 is 15%. In 1982 it was just barely in the 17% bracket. But payroll taxes were 5.4% in 1982 versus 6.2% now

Because payroll taxes are exactly the same thing as income taxes.

Ut-oh. That's also wrong.

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Response to jeff47 (Reply #3)

Sun Jan 6, 2013, 11:15 PM

5. not sure what you're claiming here, but:

 

"Because payroll taxes are exactly the same thing as income taxes."

she doesn't say that. she says that the claim that people making minimum wage are taxed less than they were in 1982 is false. They're taxed the same, because of the increase in SS taxes.

"Wrong. http://en.wikipedia.org/wiki/Qualified_dividend Bush made dividends capital gains, and the "deal" reverted them to normal income."

All dividends were supposed to revert to being taxed as ordinary income when the Bush tax cuts expired. Part of the fiscal cliff deal is that this reversion won't happen.

The qualified dividend rate was not mentioned by TATRA and will therefore remain tied to capital gain rates. Under previous law, qualified dividends were taxed as adjusted net capital gains. TATRA did not change this, and as such, qualified dividends will be taxed at the same rates as capital gains and in the same manner.

http://www.jdsupra.com/legalnews/tax-law-blog-fiscal-cliff-deal-adjusts-89463/


I won't attempt to go through your post point-by-point because it's not very clear what your points are in some cases.

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Response to HiPointDem (Reply #5)

Sun Jan 6, 2013, 11:26 PM

6. You really should read the article

"Because payroll taxes are exactly the same thing as income taxes."

she doesn't say that.

Well, she's ranting about income taxes. Then she brings up payroll taxes out of the blue and suddenly lumps that in to income taxes in order to justify her claim.

The qualified dividend rate was not mentioned by TATRA and will therefore remain tied to capital gain rates

You need to read better bloggers.

Bush's tax cuts made qualified dividends into capital gains.
The law which created Bush's tax cuts expired.
The new deal does not mention dividends.

So what happens to dividend tax rates now that the law which made them capital gains expired?

They go back to being regular income. Because there's no law keeping them as capital gains.

Why, exactly, would they remain capital gains when the law expired?

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Response to jeff47 (Reply #6)

Sun Jan 6, 2013, 11:59 PM

14. you didn't hear me. no sense talking to you.

 

The qualified dividend rate was not mentioned by TATRA and will therefore remain tied to capital gain rates. Under previous law, qualified dividends were taxed as adjusted net capital gains. TATRA did not change this, and as such, qualified dividends will be taxed at the same rates as capital gains and in the same manner.


http://www.jdsupra.com/legalnews/tax-law-blog-fiscal-cliff-deal-adjusts-89463/

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Response to HiPointDem (Reply #14)

Mon Jan 7, 2013, 09:27 AM

25. Again, your blogger is wrong.

The qualified dividend rate was not mentioned by TATRA and will therefore remain tied to capital gain rates.

The law that made dividends capital gains expired. The new law doesn't mention dividends. So how can they still be capital gains? You are arguing that an expired law is still in effect.

"not mentioning" dividends doesn't mean they are treated the same as 12/31/12. Because the law changed without any action by Congress and Congress did nothing to stop that change.

Your blogger is wrong. And lots of other people get this right.

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Response to jeff47 (Reply #25)

Mon Jan 7, 2013, 03:56 PM

27. the 'blogger' (a tax lawyer) is not the only person saying so.

 

Qualified Dividends: The highest tax rate for qualified dividends had been 15%, but that rate was set to expire at the end of 2012. Under the fiscal cliff scenario, these dividends were scheduled to be taxed at ordinary income tax rates -- resulting in higher tax bills for dividend stock owners.

The new legislation preserves a favorable qualified dividend tax rate -- albeit a little higher for the highest income bracket. The qualified dividend tax rate for those making more than $400,000 will increase to 20% from 15%. For all other taxpayers, the dividend tax rate will be the same as it was in 2012 -- 0% for those that don't exceed the 15% personal income tax bracket and 15% for the balance.

http://www.streetauthority.com/income-investing/heres-why-fiscal-cliff-deal-great-news-income-investors-460276


The Act extends capital gains rate treatment for qualified dividends. Without this extension, dividends paid after December 31, 2012 would have been subject to tax at rates of up to 43.4 percent in 2013. Under the Act, qualified dividends will be continue to be taxable at 15 percent for most taxpayers, but the rate will increase to 20 percent for taxpayers with income above $400,000 (for single filers) or $450,000 (for joint filers). Generally, qualified dividends include dividends received from a domestic corporation or a qualified foreign corporation on stock held by the taxpayer for more than 60 days during a specified 121-day period. Note that dividends may also be subject to the 3.8 percent Obamacare tax, depending on the individuals income levels

http://www.jdsupra.com/legalnews/fiscal-cliff-tax-changes-61446/


establishing a 15/20% tax rate structure for long term capital gains and qualified dividends depending on the taxpayer’s level of income.

http://www.forbes.com/sites/matthewcampione/2013/01/07/fiscal-cliff-deferred-tax-legislation-is-only-part-of-the-equation/



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Response to HiPointDem (Reply #27)

Mon Jan 7, 2013, 04:52 PM

28. You just contradicted your first blogger

The new legislation preserves a favorable qualified dividend tax rate

Except your previous source said the new legislation did not mention dividends.

So which is it? Your first source which claims the rate reverts to an expired law, or your new sources that claims the new law explicitly covers dividends?

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Response to jeff47 (Reply #28)

Mon Jan 7, 2013, 05:25 PM

29. the first source doesn't claim the rate reverts to an expired law. you're blowing smoke, goodbye.

 

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Response to HiPointDem (Reply #29)

Mon Jan 7, 2013, 05:28 PM

31. Go look up 4 posts.

The qualified dividend rate was not mentioned by TATRA and will therefore remain tied to capital gain rates.

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Response to jeff47 (Reply #31)

Mon Jan 7, 2013, 05:36 PM

32. and the new legislation doesn't mention qualified dividends & does remain tied to capital gains

 

rates, which have been changed in the new law, not tied to an old law.

you're blowing smoke, goodbye.

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Response to HiPointDem (Reply #32)

Mon Jan 7, 2013, 05:45 PM

33. You're almost there.

and the new legislation doesn't mention qualified dividends

Which means the new law can't modify the state of qualified dividends.

So what happens to them?

Well, they were converted to capital gains by the Bush tax cuts. But that law has expired.

So they revert to their pre-Bush tax cuts status, right?

That's normal income. Not capital gains.

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Response to jeff47 (Reply #33)

Tue Jan 8, 2013, 12:46 AM

34. the links say otherwise. you're blowing smoke.

 

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Response to jeff47 (Reply #33)

Tue Jan 8, 2013, 01:33 AM

35. please provide me with a source that supports your claim that qualified dividends no longer

 

exist and thus are now taxed as ordinary income.

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Response to HiPointDem (Reply #35)

Tue Jan 8, 2013, 09:26 AM

36. I already did. Look up the thread for the Wikipedia link.

Also, basic logic and your own links support my position - the link you've provided over and over again goes to great lengths to mention that the "deal" did not mention dividends.

If the deal doesn't mention dividends, by what mechanism would they remain capital gains?

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Response to jeff47 (Reply #36)

Tue Jan 8, 2013, 09:29 AM

38. i've provided 5 links, all saying the same thing. i'm not going to search this thread for a

 

wikipedia link. you're making the claim, post the link.

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Response to HiPointDem (Reply #38)

Tue Jan 8, 2013, 09:43 AM

39. You can't find post #3?

You know, the first one I responded to you with?

Again, if the deal did not mention dividends, by what mechanism would they remain capital gains?

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Response to HiPointDem (Original post)

Sun Jan 6, 2013, 11:28 PM

7. rec

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Response to cthulu2016 (Reply #7)

Sun Jan 6, 2013, 11:32 PM

9. It's nonsense. n/t

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Response to HiPointDem (Original post)

Mon Jan 7, 2013, 12:46 AM

20. while I agree with the title

the analysis is not very good.

First, I would say it is propaganda the same way the Bush administration used propaganda to "show" that the Bush tax cuts made the tax code more progressive.

Amazing but true, according to their analysis (or projections) the rich would end up paying a higher share of taxes in the future than they did before the Bush tax cuts were passed.

Amazing how that can happen after tax cuts that favored the rich, isn't it. But, like they say "some people use statistics the way a drunk uses a lamp post. Not for illumination, but for support."

Now, once again, Obama passes tax cuts that favor the rich http://www.democraticunderground.com/10022130101 and tries to claim that this makes the tax code more progressive.

It is mind-boggling how that can work. You can actually give $2.4 trillion in tax cuts to the top 20% and $800 billion to the bottom 60% and still make the tax code MORE progressive.

Of course, like you say, the tax policy center also adds in the new taxes from Obamacare which really were not part of the betrayal (er, I mean, the deal).

And in that regard, I need to call the IRS tomorrow to find out if I now have to pay medicare taxes on my own capital gains income this year.

Oh, and just for kicks you can check out how the Bush tax cuts made the tax code more progressive http://journals.democraticunderground.com/hfojvt

Look, average tax rates for the bottom 50% went down by 35% between 2000 and 2005 whereas average tax rates for the top .1% only went down by 20% and the average tax rate for the top 1% only went down by 16%.

Wow, the tax code sure got more progressive.

As long as you don't bother to calculate that a 1.62% rate cut on income below $31,000 is less than $502 whereas a 5.68% rate cut on income over $1.8 million is over $102,000.

But who wants to do that when according to Tax Policy Center standards both Obama and George W. Bush are progressive heroes!!!

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Response to HiPointDem (Original post)

Mon Jan 7, 2013, 08:45 AM

22. In at least one important area the article UNDERSTATES the situation.




It falsely assumes the right wing/corporatist spin that workers only bear the tax burden of the 6.2% "employee" portion of the FICA tax.



This understates the real tax burden:

First, significant numbers of low income taxpayers are self-employed. (The IRS reports that the average net income for a Schedule C/Sole Proprietorship return, which includes both full time and part time ventures, is $20,854. Clearly, there are significant numbers of low income self-employed Americans who pay their SS and Medicare contributions as a combined 12.4% FICA tax and 2.9% Medicare Self-Employment tax. As SE taxes are calculated on 92.35% of SE income, this works out to an actual SE tax rate of 14.129%).

But it is not just those Americans who are self-employed (including "independent contractors) who in reality bear the full tax burden (both "employee" and "employer" contributions). Economists have long recognized that the so called "employer" contribution is reflected over time in lower wages/salaries for those workers who are categorized as employees, as opposed to "independent contractors" who are responsible for paying the full SE tax on their own. Consequently, an individual who is hired by an employer who must pay 7.65% payroll tax "employer contributions" in addition to wages, will only willing to pay lower wages than if the payroll tax dis not exist.

The total payroll tax is 15.3% (12.4% FICA and 2.9% Medicare). From the standpoint of true tax burden, it makes no difference if this tax for employees is deducted and paid as "employee" or "employer" contributions. In both cases the tax burden in in fact born by employees, not the employer. The employee, by direct deductions, pays 7.65% as a 6.2% FICA and 1.45% SS "employee contribution". And the employee pays for the 7.65% "employer contribution" by receiving lower wages than he/she would otherwise receive. That is to say, they bear the tax burden of the full 15.3%, just as much as they would if they were suddenly transformed into "independent contractors" (actually, slightly more, since for independent contractors the tax is calculated on 92.35% of SE income, resulting in a 14,129% rate).

Right wing and corporatist commentators generally like to ignore the reality that employees bear the entire 15.3% payroll tax burden, just as they conveniently ignore the many low income Americans who own home based businesses or are classified (either correctly or incorrectly) as "independent contractors" and pay a "SE tax" of 15.3% instead of a "payroll tax" with its fiction of the employer bearing half the burden.

The swallowing of these false right wing frames by the corporate media is ubiquitous.

So ubiquitous that the above author (whose general thesis is correct) actually UNDERSTATES his case by incorporating right wing frames into his calculations, as when he states "payroll taxes were 5.4% in 1982 versus 6.2% now", which not only ignores the 2.9% Medicare tax, but ignores the reality that the full tax burden of the 12.4% FICA tax is born by workers, regardless of whether they are:

(1.) part of the invisible "low income self employed",

or whether they are

(2.)employees who pay half of that burden in the form of an itemized deduction on their paycheck, and half of that burden in the form of the lower wages that are a consequence of the so-called "employer contribution".



















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Response to Faryn Balyncd (Reply #22)

Mon Jan 7, 2013, 05:26 PM

30. +1

 

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Response to HiPointDem (Original post)

Mon Jan 7, 2013, 08:48 AM

23. Most progressive tax code since Reagan isn't saying much anyway

Most progressive tax code since the neo-cons took over? Ok.

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Response to gollygee (Reply #23)

Mon Jan 7, 2013, 03:25 PM

26. ironic though; top rate was higher during most of reagan admin.

 

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Response to HiPointDem (Original post)

Mon Jan 7, 2013, 08:54 AM

24. For Obama, a Victory That Also Holds Risks

For Obama, a Victory That Also Holds Risks

By DAVID LEONHARDT

<...>

Perhaps the best prism through which to see the Democrats’ gains is inequality. In the 2008 campaign, Mr. Obama said that his top priority as president would be to “create bottom-up economic growth” and reduce inequality...In the 2009 stimulus, he insisted on making tax credits “fully refundable,” so that even people who did not make enough to pay much federal tax would benefit. The 2010 health care law overhaul was probably the biggest attack on inequality since it began rising in the 1970s, increasing taxes on businesses and the rich to pay for health insurance largely for the middle class.

As part of this week’s deal, Mr. Obama did make several major compromises. He accepted much less in overall tax revenue than the government would have received absent any deal. He allowed a payroll-tax cut, which applied to most households, to expire. And he yielded both on aspects of the estate tax and on the level at which the top marginal income-tax rate would start, moving it to $450,000 for couples, from $250,000.

Still, using inequality as a yardstick, he won much of what he had wanted. By holding firm to a top rate of 39.6 percent — up from 35 percent — he locked in a substantial tax increase for the very richest, who have received the biggest pretax raises in recent years.

On average, the top 0.1 percent of earners — whose incomes start at $2.7 million and go much higher — will pay $444,000 more in taxes in 2013 than they otherwise would have, according to the Tax Policy Center. The increases stem from both the fiscal deal and the new taxes in the health care law...the deal preserves the “compassionate conservative” part of President George W. Bush’s tax agenda — reducing federal income taxes on the working poor, sometimes to zero — while limiting the parts that most helped the affluent.

- more -

http://www.nytimes.com/2013/01/03/us/politics/for-obama-fiscal-deal-is-a-victory-that-also-holds-risks.html


Again:

Clinton taxed incomes up to $22,000 at 15 percent. Incomes up to $50,000 were taxed at 28 percent. Under Obama, incomes up to about $9,000 are taxed at 10 percent, $9,000 to $36,000 at 15 percent and $36,000 to 53,000 at $25 percent. Lower income Americans make out much better under Obama's plan. The top one percent see a tax increase to Clinton rates, and capital gains rate higher than the Clinton years, especially the short-term rate of 43.4 percent.

The Act preserves the 25%, 28%, 33% and 35% brackets, which were set to rise at the beginning of 2013, and adds a new 39.6% bracket applicable to taxable income exceeding (i) $450,000 for married individuals filing jointly or (ii) $400,000 for individual filers. The income thresholds for each bracket will now be adjusted for inflation. Note that the Patient Protection and Affordable Care Act imposes additional Medicare taxes, also effective on January 1, 2013, of (i) 3.8% upon certain investment income and (ii) 0.9% on certain employee wages and selfemployment income, each of which were previously subject to a 2.9% tax, including the employer portion of the Medicare tax on employee wages. Generally, the additional Medicare tax on investment income applies to the extent that modified adjusted gross income exceeds $250,000 for married individuals filing jointly and $200,000 for individual filers, and the additional Medicare tax on wages and selfemployment income applies above a threshold of compensation income of $250,000 for joint filers and $200,000 for individual filers.

http://www.jdsupra.com/legalnews/the-american-taxpayer-relief-act-of-2012-14974/

Short-term 43.4 percent. Long-term 23.8 percent.



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Response to HiPointDem (Original post)

Tue Jan 8, 2013, 09:28 AM

37. There is nothing progressive about any tax code...

...that sets the top limit at 39%.

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