Taxmeggedon

I've been looking at the consequences of letting the Bush tax cuts expire.  I found this link that explains all the things that will go up.  One thing stuck out to me.  There isn't just a bracket of 10% going up to 15%.  They are basically eliminating the 10% bracket.  Now everything under $35,500 for single, $70,700 for married filing joint, and $47,350 for head of household just became 15%.  They didn't raise it, they just made it the bottom rung.

My husband has a friend who thinks this won't affect him, and he's going to vote for Obama, so I did some figuring.  He lives with a woman, not married, so he files single.  He makes $14 an hour. 

Figuring it the old way, using 2012 projected tax brackets found here, this is what I came up with:

The first $8,700 would have been taxed at 10%, which equals $870.
 The rest of his $29,120 falls into the second bracket, which was taxed at 15%, which equals $3,063.
This is a total of $3933, assuming no deductions.  I don't know what his deductions would be. This makes an effective tax rate of about 13.5% total, since you use 2 rungs of this progressive ladder.

Now, figuring the new way is actually easier.  The whole thing falls under the 15% bracket, which is $4,368. That's $435 more a year in taxes. That's 1.5% more.  So the lower middle class will get a 1.5% tax increase across the board.

This new system is going to do one of two things: 1) make it more beneficial to stay on welfare, since everything up to the previously stated limits will be taxed at 15% or 2) hurt the working poor the most.  I think given the option, if I was going to see my taxes go up that much, I'd consider doing something to get fired so I could go on welfare.  You don't have to work now to get welfare, so the government will pay you to sit at home. You know people were counting hours to make sure they didn't go over the limit ($8,700 single, $17,400 married, or $12,400 head of household).  I've heard people turn down overtime because it would put them over.

I played with the numbers one more way.  I figured a dual income, both being union workers.  Let's say one of them makes $30 an hour, and the spouse makes $20 an hour, for a combined $50 an hour. This comes to a married filing joint return of $104,000.

Old way: First $17,400 is taxed at 10%, which equals $1,740.
The next $53,300 is taxed at 15%, which equals $7,995
The last $33,300 is taxed at 25%, which equals $8,325 for a total of $18,060, again before deductions.

The new way: The first $70,700 is taxed at 15%, which equals $10,605.
The last $33,300 is taxed at 28% which equals $9,324 for a total of $19,929. That's $1,869 more a year.

I know one person who, together with his spouse, makes about $170,000 and I can't wait to tell them they will see about a $3849 increase over a year of taxes.  They are extremely liberal, let's see if they like sending almost $4,000 more to the government.  That would mean less toys for him.

Another thing, according to this chart, it erases the advantage of filing married filing joint when the income reaches $217,450.  At this point, it would be cheaper to separate and file single, because it would cut each of your wages by individuals, so if you made the same, the lowest would be $108,825, which would put you in the 31% bracket (the old 28%) instead of the 33%, which becomes the 36%. That's a difference of 5%, half of what I tithe to my church.  Are they hoping people will realize this and cut their tithe in half?

And that's just on income.  The tax credit for children is being cut in half, from $1,000 per child to only $500 per child.  What you wanna bet those people who "loan" their children to relatives who don't have any will suddenly take them back?

One thing that will affect me, if your medical expenses are over 7.5% of your adjusted gross income, you can file the higher actual amount.  They're raising that to 10%, making it harder to reach before you can claim it.

We all know this is a political ploy.  Barack Obama is trying to scare his base.  Remember, these are the BUSH tax cuts.  President Bush is the one who made a lower tax rate so the poor wouldn't be affected so much.  So, if you make up to $17.07 an hour single, or a combined $33.99 (which could be two people making about $17 an hour), or file head of household and make $22.76 an hour with no other income, your taxes ARE going up. So what happened to the poor won't pay more taxes? Remember, this is the current President threatening to let them expire.  All he has to do is sign the bill and they'll stay in effect.

This is why we need a flat tax.  You saw how difficult it was to figure your taxes.  With progressive brackets, it just makes it confusing.  If we had a flat say, 12% tax rate across the board, people making $12,000 a year would pay $1200, and people making  $388350 would pay $46602.  You can't tell me that's not paying their fair share.  Of course, 10% would be even easier to figure.  We should get rid of the earned income tax credit, or make it where it only erases what you owe, doesn't give back more than you put it.  As it's written now, it's just another way to redistribute wealth.  I'm not against setting a low range for people to pay no taxes or get all they paid back.  I'm against people getting back twice what they put in. And I have children, I'm not against getting a deduction for having a child. I think if you can prove that you take care of an adult, say your parents move in and you're providing for them, minus what they get for Social Security, you should be able to deduct their expenses.  I mean, the government didn't have to pay for them to be in a home, did they?  Of course, that leaves open for abuse, but people will find a way to scam no matter what the rules are.

So, who exploits the poor?