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January 03, 2013 10:09 AM Real Tax Impact

By Ed Kilgore

While we’re at the task of unraveling real-life consequences from symbolism, via Wonkbook’s Suzy Khimm the Tax Policy Center has weighed the “distributional effects” of the new tax bill and determined that those on every step on the income ladder will experience a net tax increase, but with those with income between $200k and $500k experiencing the least pain:

Taxpayers with income between $200,000 and $500,000 and those with income between $10,000 and $20,000, both of whom will see their tax rate increase by 1 percentage point—a smaller hike than any other income group. Even those earning less than $10,000 will see a bigger 1.3 percentage point rate hike.

It’s that 200-500k group, of course, that might have had the highest percentage increases under the proposals long championed by the president, which also had strong public opinion support. But since this category of taxpayers didn’t see an income tax increase, and is less vulnerable to the payroll tax increase that hit all wage or salary earners (since the Social Security portion of the payroll tax only affects the first $113,000 in earned income), they did well, as Khimm tartly notes:

In fact, most of those in the $200,000-$500,000 range dodged a major bullet when legislators agreed upon on a $450,000 threshold rather than the lower $250,000 level that President Obama was pushing for. By comparison, those with income between $500,000 and $1 million will see their taxes go up 2.2 percentage points and those above $1 million will see a 5.2 percentage point hike. So those upper-income Americans whom Congress has deemed to be “middle class” arguably got the best deal under the entire bill.

That’s not entirely due to Republican leverage or Obama’s “weakness,” by the way. This is precisely the category of taxpayers that some Democrats—particularly those from high-income, high-cost-of-living states like New York, plus rural areas where some farmers who insist on paying taxes at individual rates fall into this bracket—were worried about. But genuine middle-class folks, and the working poor, didn’t get treated as well.

Ed Kilgore is a contributing writer to the Washington Monthly. He is managing editor for The Democratic Strategist and a senior fellow at the Progressive Policy Institute. Find him on Twitter: @ed_kilgore.

Comments

  • bigtuna on January 03, 2013 10:17 AM:

    Are these reported percentages a total tax rate increase, or the marginal rate increase?

    AND - - why isn't a rather large piece of the story - Boner boy's refusal to allow a vote on Storm repair in the NE, being factored in, and discussed, more widely? In following up on Ezra Klen's blog, the 112th not only did little, when they did nothing, it was often at the cost of some large group of citizens.

  • c u n d gulag on January 03, 2013 10:27 AM:

    bigtuna,
    When the 112th Congress did nothing, it was doing the country a huge favor - 'cause when they did something, the last thing they were concerned about, was the "public good."

    Stupid + Evil, does not = Good.

  • c u n d gulag on January 03, 2013 10:44 AM:

    I don't care whether you live in Bangor, Maine, Chicago, IL, NY City, SF, or Yucca Flats, or Sisterdiddle, when you're in the top 2%, you ain't middle class!
    You're still part of the top 2%.

    I lived in NYC back in the 80's on far less than $25,000, and could barely afford to live there.
    But I somehow scrimped and saved to go the plays, the ballet, the opera, or music clubs, and the once every few month visit to a good restaurant - sometimes dining on nothing but Rice-s-ronie for dinner for days at a time, to be able to do so - so don't cry to me about the high cost of living there.

    Boo-feckin'-hoo.

    If staying where you are, earning more, and enjoying your lives, instead of moving to a poorer area and earning less (making you more truly middle class), is what you want to do, then stay there, quit yer feckin' whinin' about your family of 4 in NYC or SF, and having to cut back on restaurants and Lexus purchases, and the "horror" of maybe even having Junior and Juniorette having to go to public schools.

    You got lucky.
    THIS time!

    So, STFU, lest your whining draw attention to you, from riff-raff like me. If it was up to me, anyone making 6 figures a year, should be taxed at a far, far higher rate. Ok, make that $113,000, since that's when you stop kicking into the SS and Medicare funds that I don't think I'll be able to live long enough to get.

  • Josef K on January 03, 2013 10:44 AM:

    But genuine middle-class folks, and the working poor, didnít get treated as well.

    Same as it ever was. Lucky we Americans aren't the sort inclined to violent overreaction to injustices to our persons (whether real or perceived).

    Oh wait...

  • troglodyte on January 03, 2013 11:12 AM:

    The $113K limit on SS payroll tax is less relevant as a windfall if the income of these $200K-$500K upper-upper-middle-class households is two-earner. If both spouses contribute income, each pays SS taxes up to the threshold.

    Small adjustment, but it probably applies to a lot of those households.

  • Mimikatz on January 03, 2013 11:21 AM:

    If we are going to have so-called entitlement reform, raising the wage cap slowly over 10-15 years to $250,000 would seem to be an obvious step. Much better than, say, raising the Medicare age, because it hits only people who could actually afford it.

  • mb on January 03, 2013 12:23 PM:

    All this talk about how taxes are going up on low income wage earners because of the expiration of the payroll tax holiday, is at least one reason why it never should have happened in the first place. The PTH was not a tax cut and its expiration is not a tax increase -- but it sure feels like that and lends itself to being referred to as such. They should have found other ways to stimulate the economy rather than cutting SS withholding -- maybe rebate the same amount the PTH represented through direct transfer payments. But here we are and now we will hear in 2014 about all these Ds in the House that raised taxes on the working poor.

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