How Much More A Year Will People Pay If The Tax Cuts For The Rich Are Left To Expire?......

[global1]

The threshold is $250,000 for couples and $200,000 for individuals. If the federal income tax rates in 2011 go back to their 2001 levels for income above those cutoffs - and lets just take those two numbers - $250,000 for couples and $200,000 for individuals - how much more a year will people at these pay levels have to pay in income tax? Is it that much more than they are currently paying?

[dkf]

1. The question isn't how much they will pay but if they curb their spending.

And if they curb their spending how many jobs will be lost.

[Warren Stupidity]

4. what?

The upper middle class and the rich are not going to spend their money because the tax rate on their earned income over 250,000 went from 35% to 39.6%? really? They are going to just sit there and not eat at fancy restaurants, buy designer clothes, travel first class, scoop up the latest techno-gadget, etc.

Are they also going to shed their McMansions? not buy new cars every year or two? Not go on vacation? I gotta see this.

Do you have any actual data that demonstrates that a modest tax hike, similar to the one passed in the Clinton administration, has any such affect?

[dkf]

8. They already had a negative savings rate as they ramped up consumption

And kept the economy afloat while the middle class amazingly started saving.

Now who will spend us out of this recession?

[Warren Stupidity]

13. The rich and the upper middle class have a negative savings rate?

Really? Please provide some documentation for that assertion. As far as I can tell, the top 10% have maintained a more or less constant debt to income level while the middle 80% has buried itself in debt.

Here is some analysis that might help:


A little data might help here. Unfortunately, there really IS no good data on PCE (personal consumption expenditure) and savings stratified by income percentile. There are a couple of surveys, the triennial “Survey of Consumer Finances” by the Federal Reserve and the “Consumer Expenditure Survey” by the Bureau of Labor Statistics, but the self-reported data is laughable. For 2007, the Consumer Expenditure Survey showed a personal savings rate of 18.4%. In the same year, the Bureau of Economic Analysis, which calculates the savings rate as a residual from actual income and expenditure data, showed a savings rate of 1.7%. Either the Consumer Expenditure Survey does a poor job of sampling, or people who fill out surveys are really big liars.
Fortunately, there IS some pretty good data on income stratification in the United States, and a few assumptions can help shed some light. Economists Thomas Piketty and Emmanuel Saez have made careers of studying US income inequality using IRS data, which goes back to 1913. The most recent data available (for 2007) showed that the top 14,988 households (0.01% of the population) received 6.04% of income, the highest figure for any year since the data became available. The top 1% of households received 23.5% of income (the second highest on record, after 1928), while the top 10% received 49.7% of income (the highest on record).
The fortunate 14,988 had an average income in 2007 of $35,042,705. They had an average federal tax burden, according to Piketty and Saez, of 34.7%, leaving them after tax income of $22.9 million. If you assume a 50% savings rate among this group, you get total savings of $171.5 billion. This is nearly ONE HALF of the total savings for the entire country implied by a savings rate of 4.2% ($365 bn) reported in this month’s Bureau of Economic Analysis data.


http://economistsview.typepad.com/economistsview/2009/08/the-savings-rate-has-recoveredif-you-ignore-the-bottom-99.html

These are the people you think are going to stop spending if their marginal tax rate goes from 35 to 39.6? Really?

SERIOUSLY?

[dkf]

15. Here ya go.

http://blogs.wsj.com/wealth/2010/08/05/us-economy-is-increasingly-tied-to-the-rich/

The data may be a further sign that the U.S. is becoming a Plutonomy–an economy dependent on the spending and investing of the wealthy. And Plutonomies are far less stable than economies built on more evenly distributed income and mass consumption. “I don’t think it’s healthy for the economy to be so dependent on the top 2% of the income distribution,” Mr. Zandi said. He added that, “In the near term it highlights the fragility of the recovery.”

In fact, the recent spending of the wealthy may be unsustainable. Their savings rate has gone from more than 26% in 2008 to a negative 7% in the first quarter of 2010, according to the Moody’s Analytics data. They still have lots of savings. But the massive draw on that in the past two years is unlikely to continue at the same pace.

[Warren Stupidity]

18. It cites one quarter in 2010.

Please try a little harder than quoting a blog in the WSJ that quotes unverifiable data for one quarter of 2010. The article itself admits that the general trend is a savings rate of 26%.

15,000 families continue to have average incomes over 35M/yr for which they pay taxes at top marginal rate of 35%. And you are defending that insanity because of one blog in their official plutocracy propaganda outlet that declares their lifestyle in peril?

[dkf]

24. When did we start to look like we were really in recovery?

It doesn't give all the numbers but cites a trend. I wish I had more info on this as I can't find more data than this article. It does cite even longer term trends from the 80s showing the percent of spending the wealthy were responsible for.

My point though is that jobs dependent on consumer spending may be adversely affected. But hey I was the one screaming that we need to concentrate on jobs before we can move to healthcare. I was right then and I think I am right now.

I'll be looking to protect my meager assets in case we double dip or worse. Good luck to the rest of you.

[bluerum]

16. I say they will spend as freely as ever. In fact I say that they will invest

In tax free or sheltered investments to protect their pile'o cash.

[dkf]

26. I think you are right about investing in munis. So long consumer spending.

[provis99]

5. why would it affect their spending at all?

People making over $250,000 are socking away extra money, not spending it all. They will continue to spend at the same levels they usually do.

And if we're so worried whether spending will be hurt, how about if we take all the money we making reinstating the tax levels on the rich, and distributing the money to the poor in the form of tax credits? The poor will definitely spend the money, and the economy will grow stronger because of the increase in demand.

[dkf]

7. No the top earners had been spending more than they make and the top 5% had

Been doing 37% of consumer consumption. We will see how sensitive they are to tax increases if consumption starts slowing at this news.

[rufus dog]

10. oh for FUCKS SAKE

Have you ever made 300k per year?

Let me put it bluntly for you, if you have an AGI of 400k you will have 3k more in taxes. I fucking guarantee you that 3k of taxes is not going to impact any decision that might increase revenue. And if then a new hire gets the person to 500k thus another 3k in taxes he or she will be more than happy to bank the difference.

[dkf]

12. Well then you don't think there will be an impact.

However I suggest you read this piece...

http://blogs.wsj.com/wealth/2010/08/05/us-economy-is-increasingly-tied-to-the-rich/

[rufus dog]

31. Oh for FUCKS SAKE part Deux

A WSJ blog complaining that the rich will be impacted. Excuse me but that is Rich!

Yes the rich spend more on consumer goods because the rich have more money to spend. You want to know a secret, when you make over 300k you save more too! Because you have more money to save. You also do things like take vacations to Foreign countries, invest for long term, etc.

Conversely those at lower income levels spend every cent they have. So if you want the money going directly into the U.S. market you target getting money at the lower levels.

[sendero]

14. Boy..

... you've fallen for the wingnut bullshit in a big way.

[dkf]

22. Actually I believe in data.

[Warren Stupidity]

23. You didn't actually provide any.

Instead you appear to believe in an unfounded theory that one quarter in 2010, based on one data source, constitutes a long term trend totally at odds with the long established trend of a 26% savings rate at the top of the pyramid. So it seems instead that you reach for anything resembling data that agrees with your odd belief that we should protect the plutocracy from the terrors of a progressive income tax.

[sendero]

32. Thanks...

.... for doing my light work.

[lonestarnot]

17. fuck them! They should not be given either option of saving or spending OUR FUCKING TAX DOLLARS!

[dkf]

19. Our economy depends on consumer spending. If they stop spending who will start?

[Warren Stupidity]

21. oh the poor rich, we must protect them

[lonestarnot]

27. Why should they take one nickle from me to spend as they wish. Again, fuck them!

[DireStrike]

30. The spending will become government spending.

[Warren Stupidity]

33. no according to the neo-liberal canon it disappears.

And if they are willing to grudgingly admit that it actually doesn't disappear they then fall back to the next barrier: gummint spending on e.g. teacher salaries is less efficient than Paris Hilton deciding which new pair of shoes she needs to buy. (No offense intended Paris, you're a swell kid.)

[MrSlayer]

2. 4.5% more.

So, for every million dollars a person makes, they'd pay $45,000 more. They'd still walk away with more than $600k of that million.

[Statistical]

6. Actually they walk away with a more than that.

Remember are tax code is progressive.

Someone making $1 million say they have $100K in deductions & exemptions. So it is $900K taxable.

Taxes paid on $900K taxable is $292,644 for an effective tax rate of 29.2%.

If the 33% bracket goes to 36% and the 35% bracket goes to 39.6% that would change to 320,892 an effective tax rate of 32.1%. Nominal taxes will rise by $28,248 or 2.8% of income.

[Statistical]

3. $0.00

If the threshold is $200,000 then someone making exactly $200,000 wouldn't pay anything in extra taxes because tax brackets work based on the income in that bracket (i.e. above the threshold). In nothing happens then the 33% bracket will return to 36% (3% rise on income ABOVE the threshold). The 35% returns to 39.6%. Someone making $200K wouldn't have any income above $200K. :)

Beyond that .... say $200,001 then it would be an extra 3% on the amount > $200,000 which in this case is a single $1. So 3% * $1 = $0.03 in extra taxes (yes 3 cents). Someone making $201,000 in taxable income would pay $30 in extra taxes ($1000 * 3%).

It gets a little more complicated than that because $200K/$250K have absolutely no meaning in current tax code.
33%/36% bracket starts at income > $171,850 taxable
35%/39.6% bracket starts at income >$373,650 taxable.

My guess is that "greater than $200K single or $250K married" is code for 33% bracket -> 36%. Extra who that affects will depend on how much income is tax deductible.

[gophates]

9. whatever it is, it isn't enough. nt

[Turbineguy]

11. The price will be in

misery, sickness, homelessness and early death. But these are things that do not bother repubs.

[EC]

20. At the 250 range their taxes won't go up

to 39 that's for the top range ...their is only 1% to 2% more...

[customerserviceguy]

25. I made a post a couple of days ago about those at the lower end

You can read it here:

http://www.democraticunderground.com/discuss/duboard.php?az=show_mesg&forum=389&topic_id=9084220&mesg_id=9084326

I used to be enrolled to practice before the IRS back in the 80's, admittedly haven't kept up with training, since I don't work in that field anymore, but I still can read tax law, and do simple math.

I'll admit, I haven't done any research on what the expiration of the tax cuts would mean for people making just under the $200/250K level, but if they're still making that kind of money, then other than their investments, they probably haven't suffered the most under the current recession/depression, and can afford to get off the gravy train that the Bush tax cuts have provided.

[WinkyDink]

28. Am I supposed to care?

[SmileyRose]

29. Yes

You are supposed to care enough to take a 30% pay cut and loss of all benefits and express sympathy when the business owner bitches about taking home 3 million a year instead of 5 million. (poor little thing)

[JustAnotherGen]

34. I'm one of the singles

I'm going to pay about $8K more a year. I don't understand what the big 'deal' is. If I'm not paying my fair share - I'm not paying it. And the reality is - it's patriotic to step up to the plate and help out because I sure as hell don't expect a family of 4 in NJ getting by on 60K a year to foot the bill. It's not fair to them to even think about asking them to do that.

There's a deep ugly selfishness coursing through the veins of those who "have" lately. Makes me sick.