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Archive for Saturday, February 28, 2009

Typical family would get tax cut under Obama budget

February 28, 2009

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— A typical American family would get a tax cut under President Barack Obama’s budget proposal, and their low-income neighbor would fare even better.

Their wealthier counterparts, however, would face some steep tax increases, starting in 2011.

Families making as much as $50,000 would owe no federal income taxes, as long as they have at least two children, according to an analysis by Deloitte Tax LLP. Others making as much as $150,000 would see big tax cuts, especially if they have children in college.

The budget outline unveiled Thursday continues Obama’s policy of targeting tax cuts for middle- and low-income families. In the presidential campaign, Obama promised tax cuts for the middle class, and he delivered some temporary relief in the economic stimulus package enacted this month.

Most of the tax cuts for individuals in the stimulus package would be made permanent in Obama’s budget proposal. They would be offset by tax increases on businesses and on couples making more than $250,000. Single filers making more than $200,000 would also be hit with a tax increase.

At the other end of the spectrum, millions of Americans who don’t make enough money to pay federal income taxes would receive government payments at tax time through refundable tax credits.

A typical family of four making $50,000 a year would receive a payment of $40, according to the Deloitte analysis. Before the stimulus package was enacted, that same family would have owed $760 in federal income taxes.

A similar family making $35,000 a year would get a payment of $4,100, an increase of $1,200. The median household income was $50,233 in 2007, according to the Census Bureau.

The stimulus package provided most working couples with a new tax credit of up to $800 for 2009 and 2010 — single filers get up to $400. Obama’s budget proposal would make the credit permanent for families making less than $190,000 and individuals making less than $95,000.

An expanded $1,000 child tax credit would be made permanent, as would an expanded $2,500 tax credit for college expenses. Families making up to $160,000 a year would be eligible for the full college credit.

Obama “did what he said he would do in the campaign,” said Clint Stretch, Deloitte’s managing principal of tax policy. “And he had a surprise hit for those on the high end.”

Obama promised during the presidential campaign to eliminate tax cuts for the wealthiest Americans, which was enacted under former President George W. Bush. Obama’s budget proposal would allow them to expire in 2011, increasing the top income tax rate for couples making more than $250,000 from 35 percent to 39.6 percent.

The budget proposal also would enact new limits on itemized tax deductions for those same couples, including deductions for charitable donations, mortgage interest and state and local taxes. The tax increases would be delayed until 2011, when the economy will presumably be improved.

Comments

Godot 5 years, 7 months ago

Under the Obama wealth redistribution plan, it does not make sense for anyone to work hard, or to own anything. Just plod along in mediocrity and let the Big O take care of you.

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AjiDeGallina 5 years, 7 months ago

it is an opinion that most families will get tax cuts?

It sounds like a fact to me.

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womanwarrior 5 years, 7 months ago

So, Godot, you don't believe in tax cuts?

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grammaddy 5 years, 7 months ago

No Godot and Madmike want to hoard all the money for themselves. We all know that the less- fortunate made their own mess.

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Godot 5 years, 7 months ago

That 13 bucks is taxable. Just thought you should know.

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Chris Ogle 5 years, 7 months ago

Typical family: Divorced, 1.6 kids. jobless... and broke.

Come on big O.... we need a job.

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just_another_bozo_on_this_bus 5 years, 7 months ago

"Yeah 13 bucks a paycheck, and in return you agree to go into the debt in the amount of 20,000 dollars."

That debt is going to happen regardless of what Congress and the President do-- courtesy of the deficit spending by the last administration to finance tax cuts for the wealthy (so they could speculate in Wall Street pyramid schemes) and its imperial military adventures.

Too bad the friends of Bush already socked away their $billions in ill-gotten gains, and have no intentions of giving any of it back. The rest of us will just have to muddle through as best we can (and the stimulus bills are just part of that.)

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monkeyhawk 5 years, 7 months ago

"No Godot and Madmike want to hoard all the money for themselves"

You need to insert "their" in place of "all the".

I understand that those on unemployment are receiving an increase in their benefits that amounts to almost double the increase that those who are actually employed are going to get.

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Godot 5 years, 7 months ago

The typical family will get a welfare check. The typical family does not pay income taxes.

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Godot 5 years, 7 months ago

You are right Monkeyhawk. Except that the $25 per week to the unemployed is a real increase; the $13 per week for workers is an accounting trick. Withholding is being reduced, not the tax rate.

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camper 5 years, 7 months ago

I don't see it as a redistribution of wealth. I see it as a redistribution of paying the tax bill. For example, if Joe the Plumber made 300k instead of 250k, his extra federal taxes (on a graduated scale) would be approximately $3,000. If I were making that much money, it would not deter me one bit. And as a wise man said (my father) paying taxes right now is a good problem to have....ie many businesses are losing money.

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camper 5 years, 7 months ago

But, I really think a flat tax might just be the fairest solution. And I do believe it would be best to keep it as low as possible but still cover our collective needs for service.

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beatrice 5 years, 7 months ago

Mikey, you are absolutely correct! Many of the loans never should have been approved in the first place -- this is why we need regulation on the banking industry. It is the greed of the financiers who gave away loans to people they knew would never be able to afford them, then packaged the loans and sold them to investment groups. De-regulization as stressed by the likes of Ronald Reagan, George Bush, and John McCain during his (fortunately) failed campaign led to the mess we are in.

Or are you claiming that the banking industry leaders are all a bunch of liberals, because if you are you are one crazy young bastard!

In the meantime, if we don't attempt to stop the downward spiral of housing values, it will have a devestating effect on all of us. I agree that it is a bad situation, but to ignore it would make it worse for all, and we can't afford that.

Finally, don't you remember McCain talking in the debates about his plan to buy up mortgages? He wasn't talkng about using Cindy's money, so quit pretending that the GOP wouldn't have tried something similar had they made it back into office -- although the attentiion likely would be more on protecting the banks than the citizens.

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just_another_bozo_on_this_bus 5 years, 7 months ago

Why is it that all those who complain about "redistribution" only complain when it's being redistributed from the rich to the poor, (which hasn't really been happening) and never the other way around (which has been what's really happened over the last nearly 30 years of trickle down.)

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mom_of_three 5 years, 7 months ago

SO from what I am reading, no one on this blog will benefit from Obama's tax plan, so you are all against it?
Hope your situation never changes, and you make less than 40,000 a year as a family, because then you would have to give the tax benefits back....because you opposed it in the first place, right.... Yeah, that's what I thought.
There are many hard working families who work less than 50,000 a year. Don't categorize them into something they are not.

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beatrice 5 years, 7 months ago

Giving tax cuts for the vast majority of Americans while rescinding the remarkably favorable tax breaks previously given to the wealthy -- darn that Obama for keeping his campaign promises!

Any of you unhappy to be getting a tax cut, feel free to send it to someone wealthier than you. I'm sure they wouldn't mind.

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average 5 years, 7 months ago

Obama barely has the Congressional support to raise the top marginal rate back to Clinton's 39.6%.

Reagan, it should be noted, didn't have the balls to push for a top marginal rate below 50% until his last few months in office.

Of course, the top rate was 91% during Truman, Eisenhower, and most of Kennedy's administrations. But, they don't exactly teach that in history class, do they?

Wake me up when Obama gets even halfway to Reagan's tax rates (1981-1986). Actually, better yet, let's re-instate those rates. Call it the "Ronald Wilson Reagan Memorial Tax Compromise" if it would help it get passed.

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camper 5 years, 7 months ago

Barry, with all due respect. Business has a great many deductions and bonus depreciation (for equipment investment) that can be taken....if you report schedule C.

My problem with the tax code is that it is way too long, and far too confusing, that not even the author (IRS) can make sense of it. I also think that if you have to pay Capital Gains tax, you should also be able to deduct Capital Losses immediately, rather than having to carry them forward. I think you would agree with me here?

At the end of the day, a graduated increase of 3.6% for those reporting over 250k is small potato's. Even though I think the US should consider a flat tax or sales tax.

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beatrice 5 years, 7 months ago

Snap: "Another tax cheater in the O'dude's regime"

Since I'm unclear who exactly this "O'dude" is you refer to, is the tax cheat under question here Sarah Palin? http://salon.glenrose.net/default.asp?view=plink&id=9924

Can you imagine a tax cheating VP? Thank goodness, neither could the majority of rational American voters.

Please quit pretending that tax cheats are only from one side of the aisle.

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