Hey, it's Babe Ruth's birthday! February 6, 1895. Did you know that Fenway Park was, when he played there, an extreme pitchers' park and HRs were almost impossible to hit there? He did okay at Yankee Stadium though.
The good stuff:
1. I sort of like this NYT initiative to crowdsource obscure campaign finance reports. I'm more in favor of campaign finance disclosure than, I think, the evidence suggests it's worth...that is, I'm not really convinced that in real life disclosure actually does make that much difference, but I think in theory it's important to protect the potential of disclosure. So good for the Times.
2. We all know that the press has an interest in keeping the nomination battle going; Erica Fry on reporters actively rooting for it.
3. OK, I'm not going to stoop to giving Seth Masket a Catch of the Day for this one, but go ahead and click it.
4. Could have also given a CotD to Harold Pollack for this one on tax whiners.
5. And Sarah Kliff reports from inside Komen.
Showing posts with label taxes. Show all posts
Showing posts with label taxes. Show all posts
Worst Excuse Ever For Opposing Buffett Rule
Is the Buffett Rule -- that rich folks should pay at least as much in taxes as the middle class -- a good idea? I'm sure there are reasonable arguments pro and con. But you won't find any good ones in Douglas Holtz-Eakin's Bloomberg column today; it's an advanced class in hackery (via Wonkbook).
I'll start right off with a brilliant piece of misdirection Holtz-Eakin puts at the center of his case against the Buffett rule: that comprehensive tax reform is better. This is, even if you accept every benefit that he claims for tax reform, about the worst excuse I've ever heard for opposing a tax change. Here's the thing: comprehensive tax reform is really, really hard to get done. Impossible? No; after all, we do have one case of it happening, although that was 25 years ago and most of it unraveled rather quickly, which is why it's supposedly needed again. That's because comprehensive tax reform eliminates lots and lots...and lots and lots and lots of particular benefits in favor of general benefits. And that's something that a Madisonian political system doesn't do very well (nor, for that matter, do other democratic systems, but the US is perhaps especially prone to that one). So "comprehensive tax reform would be better" is a dodge. You don't get that choice.
And at any rate, the Buffett rule is hardly something that would make future tax reform more difficult. The essence of bipartisan-style tax reform is to eliminate deductions and lower rates. The Buffett rule doesn't exactly do that (and it's not revenue neutral), but it is, essentially, anti-deduction, isn't it?
So what else does Holtz-Eakin have? Well, he claims the problem "doesn't exist" because the millionaires are already paying, on average, a 30% rate. That, of course, hardly shows that the fundamental unfairness (as Barack Obama argues, at any rate) of some millionaires paying low rates doesn't exist; it just means that not all millionaires do so. So nothing there.
He also notes that the Buffett rule would be, in effect, a new Alternative Minimum Tax, and that the AMT we have has been a constant source of trouble because it's not indexed for inflation. True! Solution: index the Buffett rule for inflation. That wasn't tough! And again, he throws the "comprehensive tax reform would be better" attack at a permanent AMT fix. Now, it's true that an AMT fix would be heavy lifting and would be a waste of energy if comprehensive tax reform was on the menu, but the AMT fix is heavy lifting only because it's a revenue loser (at least the way CBO scores these things). The Buffett Rule, on the other hand, is a revenue raiser, so it doesn't have that problem at all.
Which brings us to yet another specious argument: that the Buffett Rule wouldn't balance the budget. Holtz-Eakin complains that it would only bring in $35B a year, which is, he points out, under 3% of recent deficits. Of course, the answer here is: so what? Again, he's trying to frame the question as either-or (that is, either the Buffett Rule or comprehensive tax reform), but there's just no good reason to believe that tax reform is going to happen anytime soon, or that passing the Buffett Rule this year would delay it in any way. Beyond that, saying that something wouldn't eliminate the deficit is hardly a reason to oppose it.
And then, finally, Holtz-Eakin argues that cutting entitlement spending for rich people would be better than the Buffett Rule. Perhaps so: but it's hard to see why the one would rule out the other. We should cut spending isn't an argument against the fairness claim that Buffett, and Barack Obama, are making.
Again, I'm not arguing here for or against the Buffett Rule. But if that's the best the opponents have, I'm guessing the case really boils down to Rich People Want Money, and that's not much of a case at all.
I'll start right off with a brilliant piece of misdirection Holtz-Eakin puts at the center of his case against the Buffett rule: that comprehensive tax reform is better. This is, even if you accept every benefit that he claims for tax reform, about the worst excuse I've ever heard for opposing a tax change. Here's the thing: comprehensive tax reform is really, really hard to get done. Impossible? No; after all, we do have one case of it happening, although that was 25 years ago and most of it unraveled rather quickly, which is why it's supposedly needed again. That's because comprehensive tax reform eliminates lots and lots...and lots and lots and lots of particular benefits in favor of general benefits. And that's something that a Madisonian political system doesn't do very well (nor, for that matter, do other democratic systems, but the US is perhaps especially prone to that one). So "comprehensive tax reform would be better" is a dodge. You don't get that choice.
And at any rate, the Buffett rule is hardly something that would make future tax reform more difficult. The essence of bipartisan-style tax reform is to eliminate deductions and lower rates. The Buffett rule doesn't exactly do that (and it's not revenue neutral), but it is, essentially, anti-deduction, isn't it?
So what else does Holtz-Eakin have? Well, he claims the problem "doesn't exist" because the millionaires are already paying, on average, a 30% rate. That, of course, hardly shows that the fundamental unfairness (as Barack Obama argues, at any rate) of some millionaires paying low rates doesn't exist; it just means that not all millionaires do so. So nothing there.
He also notes that the Buffett rule would be, in effect, a new Alternative Minimum Tax, and that the AMT we have has been a constant source of trouble because it's not indexed for inflation. True! Solution: index the Buffett rule for inflation. That wasn't tough! And again, he throws the "comprehensive tax reform would be better" attack at a permanent AMT fix. Now, it's true that an AMT fix would be heavy lifting and would be a waste of energy if comprehensive tax reform was on the menu, but the AMT fix is heavy lifting only because it's a revenue loser (at least the way CBO scores these things). The Buffett Rule, on the other hand, is a revenue raiser, so it doesn't have that problem at all.
Which brings us to yet another specious argument: that the Buffett Rule wouldn't balance the budget. Holtz-Eakin complains that it would only bring in $35B a year, which is, he points out, under 3% of recent deficits. Of course, the answer here is: so what? Again, he's trying to frame the question as either-or (that is, either the Buffett Rule or comprehensive tax reform), but there's just no good reason to believe that tax reform is going to happen anytime soon, or that passing the Buffett Rule this year would delay it in any way. Beyond that, saying that something wouldn't eliminate the deficit is hardly a reason to oppose it.
And then, finally, Holtz-Eakin argues that cutting entitlement spending for rich people would be better than the Buffett Rule. Perhaps so: but it's hard to see why the one would rule out the other. We should cut spending isn't an argument against the fairness claim that Buffett, and Barack Obama, are making.
Again, I'm not arguing here for or against the Buffett Rule. But if that's the best the opponents have, I'm guessing the case really boils down to Rich People Want Money, and that's not much of a case at all.
Your Paycheck in 2012
How much money will you really take home from your paycheck in 2012?
To find out, we've created the tool below so you can run the numbers that matter the most for you! In addition to finding out how much money Uncle Sam will be taking straight out of your paycheck for income tax withholding and FICA (which we've broken down into your Social Security and Medicare tax components), our tool will also work in your 401(k) or 403(b) retirement plan contributions, as well as the effect of any flexible spending account arrangements you may have set up through your employer.
Better yet, our tool will also let you see how you take home pay might change if you earn a raise during the year!
Just enter the indicated data into our tool, and we'll run your numbers for 2012, or at least your numbers through February 2012, depending upon what happens with that temporary Social Security payroll tax cut. If and when that changes, we'll post a new version of the tool!
That's all well and good, but how does your paycheck compare to what it would have looked like in 2010, the last year before the Social Security payroll tax cut? And for that matter, when both Single and Married tax filers had lower federal income tax withholding rates in place as well? Did you really get the benefit of that full 2.0% reduction of your income more in your pocket? Our results table below shows how you take-home pay would have been....
| Compared to 2010 | ||
|---|---|---|
| Category | Calculated Results | Values |
| Major Changes | Payroll Tax Cut "Savings" per Paycheck (*) | |
| Change in Income Taxes Withheld per Paycheck | ||
| Net Gain (+) or Loss (-) to You per Paycheck | ||
| Your Personal "Stimulus" (Percentage of Income) | ||
(*) As part of the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010, the taxes collected from all Americans with wage or salary income to support Social Security was reduced by 2.0%, from 6.2% to 4.2%. This change only affects what individuals see on their paychecks, as the employers' portion of these taxes will remain at 6.2% of their employees' wage or salary incomes.
To make up any resulting shortfall in the Social Security tax collections used to pay benefits to today's Social Security recipients, the U.S. Treasury will increase its borrowing to cover the cost of providing those benefits at their current level. The Social Security payroll tax cut was extended for most wage and salary earners through February 2012 by the Temporary Payroll Tax Cut Continuation Act of 2011.
As for why President Obama's promise of a 2.0% payroll tax cut really doesn't add up to 2.0% of your salary or wage income, see the charts here (if you file as Single) and here (if you file as Married), for the explanation of those tax withholding dynamics....
And remember, one of the consequences of not putting that extra 2.0% of your paycheck into Social Security is that the program will run more deeply in the red, which will force the government to have to borrow more money just to pay benefits to today's Social Security recipients.
Our advice: if you'd like to put Social Security on a more sound footing, and keep your take-home pay from being reduced by 2.0% when the temporary Social Security payroll tax cut is set to expire in February 2012, have your U.S. Representative or Senators reduce all the other income tax rates (and withholding tax rates) by 2.0% (or more). As far as President Obama is concerned, it will make no difference to how much money the federal government will borrow on his watch.
Previously on Political Calculations
We've been in the business of calculating people's paychecks (not including state income tax withholding) since 2005!
- Your 2005 Paycheck
- Your 2006 Paycheck
- Your 2007 Paycheck
- Your 2008 Paycheck
- Your 2009 Paycheck
- Your Paycheck in 2010
- Your Paycheck in 2011
But before we forget, your employer pays a lot more to keep you on the payroll than just your paycheck! The tool below shows how much it costs to employ you in 2011-12!
Meet the Married Rich of 2012!
We're following up our look at the payroll and income tax withholding plight of Single tax filers today with a look at the plight of those who have their income taxes withheld at the IRS' initial 2012 married tax rates:
Once again, we're comparing the initial tax withholding rates for 2012 against those that applied in 2010, the last year before the employee's portion of the Social Security FICA payroll taxes of 6.2% of the employee's income was "temporarily" reduced to 4.2%.
What we find is that the benefits of extending the Social Security payroll tax cut into 2012 is limited to roughly 51% of those who might choose the Married filing status for their federal tax withholding, namely those whose incomes might fall between $7,900 and $78,800.
For all practical purposes, no individual who has their taxes withheld under the Married filing status whose income equals or exceeds $78,800 can expect to see any meaningful increase in their take-home pay with respect to what they might have done under the tax withholding rules of 2010. The increase in the income tax withholding rates will offset the reduction in they might otherwise see from the payroll tax cut.
In the chart above, we've used two different shading levels to indicate the range of incomes for which the 2.0% income surtax incorporated into the December 2011 temporary payroll tax cut extension might apply.
The lighter gray zone indicates the incomes where a married individual's income may be affected by the surtax while the darker gray zone indicates the incomes where a married couple will definitely be exposed to the surtax (since married filers combine the incomes of two people, it's possible for their combined income to be above the $110,100 level, yet still not be individually subject to the new 2.0% surtax.)
All in all, we're not sure it's worth forcing Social Security to run more deeply in the red for the sake putting a smidgen more take-home money into just 51-53% of American income earners' paychecks. It would benefit way more people, and put way more disposable income into the economy, if the federal government would let the temporary Social Security payroll tax cut expire and cut regular income and withholding tax rates across the board by 2-3% instead.
But if nothing else, at least we now know that President Obama's definition of who is "rich" really starts at $37,500 for single tax filers and $78,800 for married tax filers.
References
Internal Revenue Service. Payroll Tax Cut Temporarily Extended into 2012. IRS-2011-124. 23 December 2011.
Internal Revenue Service. Early Release Copies of the 2010 Percentage Method Tables for Income Withholding. Notice 1036. Released December 2011.
Internal Revenue Service. Early Release Copies of the 2010 Percentage Method Withholding and Advance Earned Income Credit Payment Tables. Notice 1036. Released November 2009.
Internal Revenue Service - Statistics of Income Division. 2009 Individual Complete Report (Publication 1304), Table 1.2 - All Returns: Adjusted Gross Income, Exemptions, Deductions, and Tax Items: Size of Adjusted Gross Income and Marital Status. [Excel Spreadsheet]. Accessed 2 January 2012.
Meet the Rich of 2012
Two days before Christmas 2011, the U.S. Congress acted to pass a temporary extension of the Social Security payroll tax cut that had originally been passed a year earlier, and which had been set to expire at the end of 2011. To celebrate the occasion, the White House issued the following statement describing who would benefit from extending the Social Security payroll tax cut:
President Obama today signed into law a two month extension of the payroll tax cut, which means that 160 million American workers will not see their paychecks shrink starting Jan 1, 2012. The President thanked Congress for ending the stalemate and urged them to keep working to reach an agreement that extends this tax cut as well as unemployment insurance through all of 2012, saying it is the right thing to do for American families and for the economy, and called it "a boost that we very much need right now."
While technically true, we find that the White House's statement is misleading.
The part that's true is that had the Social Security payroll tax cut that had originally passed into law as part of the Job Creation Act of 2010, as many as 160 million individuals would indeed have seen their paychecks shrink as the Social Security payroll tax would have risen back to the level it was in 2010.
The only problem is that just over half of those wage and salary earning individuals ever saw any benefit from the Social Security payroll tax cut on their paychecks in the first place!
We'll illustrate why that was the case with the following chart, which presents the withholding income tax rates for individuals having money withheld at the "Single" tax filing status rates throughout the year for both 2010 and 2012.
The 2012 withholding tax rates shown in the chart above are nearly identical to those for 2011 - the only difference is that the incomes at which the withholding tax rates apply for 2012 have been adjusted upward slightly from 2011's levels to account for the effect of inflation over the past year.
What we find is that for all practical purposes, the only individuals who really benefitted from the payroll tax cut of 2010 were individuals with incomes between $6,050 and $37,500.
Assuming that the income distribution given by the IRS' adjusted gross income data for single tax filers from 2009 is representative of today's single tax filers, we estimate that roughly 53% of the wage and salary earners who have their taxes withheld at the Single filing status will see any significant benefit on their paychecks from the extension of the Social Security payroll tax cut. At least, as compared to what their paychecks would have looked like for earning the identical incomes in 2010, before the temporary Social Security payroll tax cut was enacted.
Much of the same math applied for 2011, which is a major reason why there was so little economic "stimulus" from the payroll tax cut - instead of having more money to take home, a very large percentage of individuals took home less money after all tax withholding from their paychecks than they would have in 2010.
And for all practical purposes in 2012, almost all individuals with incomes above $37,500 will see the federal government's withholding and payroll taxes claim a larger share of their paychecks than they would have seen in 2010. With almost exactly the same economic benefit from the "stimulative" effect desired by President Obama.
But at least now the pain of higher federal taxes taking more money out of every paycheck is being spread among all those single tax filers with incomes above $37,500.
Meet the rich of 2012!
References
Internal Revenue Service. Payroll Tax Cut Temporarily Extended into 2012. IRS-2011-124. 23 December 2011.
Internal Revenue Service - Statistics of Income Division. 2009 Individual Complete Report (Publication 1304), Table 1.2 - All Returns: Adjusted Gross Income, Exemptions, Deductions, and Tax Items: Size of Adjusted Gross Income and Marital Status. [Excel Spreadsheet]. Accessed 2 January 2012.
White House. President Obama: Extending Payroll Tax Cut Is a "Boost We Need Right Now". 23 December 2011.
Median Adjusted Gross Incomes by Tax Filling Status
Sometimes, as we work on our various projects, we stumble across data that's kind of interesting in and of itself.
To that end, today's example of that would appear to provide more evidence that social factors have more to do with the perceived rise in income inequality in the United States over time than do economic factors:
In the chart above, we've presented the median adjusted gross incomes we've estimated for 2009's income tax filers according to their tax filing status. The number in parentheses below each column in the chart indicates the number of tax returns filed in 2009 for each group.
It would seem that just marital status has a lot to do with the observed differences between the various kinds of income tax filers.
Data Source
U.S. Internal Revenue Service Statistics of Income Division. 2009 Individual Complete Report (Publication 1304), Table 1.2. [Excel Spreadsheet]. Accessed 2 January 2012.
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