Whether ignorance or deliberate spin is to blame, we keep hearing that Pres. Obama wants to end the Bush tax cuts for those earning more than $250,000 annually. This is true. And false, false, false.
The president is proposing, as he has since he took office and knew Bush’s tax cuts would expire during his first term, to end the tax breaks on family incomes above $250,000.
That means everyone pays at the lower rate on the first $250,000 they earn. So if your family earns $220,000, you continue to pay at the Bush rate on your entire income. If you earn $280,000, then you continue to pay at the Bush rate on $250,000 and pay at the higher, Clinton-era rate on $30,000.
As Daily Finance’s Bruce Watson explains:
When discussing the tax code, most analysts and pundits — not to mention average citizens — focus on the highest rate that an individual pays. One rarely hears about the fact that everybody pays only 10% tax on their first $8,700, 15% on everything between $8,701 and $35,350, and so forth. In other words, a millionaire pays the exact same amount in taxes on that piece of their income as someone who makes $35,350 per year…or $85,000, or $150,000. (Before deductions, of course.)
It’s not hard to see why tax issues are drawn along wealth lines — after all, creating barriers between the rich and the middle class makes for good headlines and hot political battles. In truth, though, the line isn’t between cutting taxes for the rich and cutting them for the middle class; it’s between cutting taxes for the rich, and cutting taxes for the rich more.
Update: The misstatement bothers Robert Reich too.