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Encore: Those %#@! Bush Tax Cuts

December 21, 2012

This Homa FIles brief was originally posted July 23, 2008. It’s long, … loaded with with pivotal facts.

Since expiration of the Bush tax cuts looks increasingly likely, I thought they’re worth another look — just as background

On the 2008 campaign trail, candidate Obama broad-brushed all of the Bush tax cuts as “for the wealthy”.

Now, OMB estimates that extending the Bush tax cuts in their entirety would cost $3.7 trillion over 10 years … of that amount over 80% goes to folks making less than $200,000 – $250,000 annually.

In other words, over 80% of the Bush tax cuts for the wealthy went to Obama-defined “non-wealthy” folks — some of whom pay income taxes, and many of whom don’t.

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Summary: We’ve all heard the rants about the cuts in the top bracket rate, capital gains rate, dividend taxes, and estate taxes.

But, when was the last time that your heard anybody mention the new 10% bracket, larger and refundable child and earned income credits, negative income taxes, elimination of the marriage tax penalty, or expanded college benefits?

Here are the details of the Bush tax cuts …

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How much can a family with 2 kids earn and still pay zero Federal income taxes?

September 25, 2012

The answer is about $45,000

Reminder: Median household income is just a tad over $50,000

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Here’s an analytical walk-through from the non-partisan Tax Foundation …

Start with the answer: assume a family of four making $45,000 in adjusted gross income.

Subtract a standard deduction of $11,600 and personal exemptions of $14,800 (four times $3,700) and the family’s taxable income is reduced to $18,600.

The family is taxed at 10 percent on their first $17,000 of income and at 15 percent for their remaining $1,600 of income, giving them a total tax liability of $1,940.

But, they allowed to deduct two tax credits of $1,000 for each of their two children.

And, they’re allowed to deduct an additional $214 due to the Earned Income Tax Credit, which is a credit designed to financially assist low to
moderate income working families.

Subtracting these tax credits from the family’s tax liability brings their $1,940 liability below zero.

However, since the child credits and Earned Income Tax Credit are so-called refundable tax credits, the family ends up receiving a check for $274 from the IRS for the remaining value of their tax credits.

For families who are eligible for other credits such as the child care credit, education credit, or the tax credit for purchasing a hybrid vehicle….. AGI can go higher than $45,000 with no tax liability.

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Ironic Twist

The same George Bush that the left demonizes is the President who signed the 10% marginal tax bracket, boosted the child credits, and introduced the refunable tax credits.

The irony: liberals should be praising him and conservatives should be dissing him.

If it weren’t for the evil Bush tax cuts, we wouldn’t be at the now famous 47% level of folks not paying Federal income taxes.

Tomorrow: Who pays taxes and who gets the benefits?

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Trick question: Did employment grow faster under Bush or Obama?

August 12, 2012

Team Obama says “Bush’s failed policies of tax cuts to the rich got us into this problem”.

Oh, really?

Team Romney says “The worst recovery ever”.

Oh really?

Let’s cut to the chase.

First, I assert that the housing crash was a bi-partisan effort brewed over several decades … hard to say that it was caused by Bush’s tax policies.

Second, I’ll give Obama that he inherited a mess … and, I’ll start counting from the trough.

Well, well, well.

Turns out that – with the above assumptions — the growth in employment under Bush and Obama (to date) is pretty much equal … at about a 1% compound annual rate.

Hmmm.

On one hand, Obama got handled a financial collapse … not just a garden variety business cycle recession.

On the other hand, Obama continued the Bush tax rates … and he (and the Fed) have expended trillions in fiscal and monetary stimulus.

But, Obama continues to run around saying that the Bush tax rates are the cause of all evil … and eliminating them for the wealthy will get us out of this mess.

Oh, really?