A Taxation Primer

Taxation has been coming up quite a bit this election season, as is, quite frankly, the norm. Now, in light of Obama’s taxation pledges to raise it on $250K and up (maybe, depends which speech we are listening to,) I wonder how that will work out, and, quite frankly, tax policy fascinates me, and has ever since I read the book “Showdown at Gucci Gulch.”

Now, Barry had this to say to those very serious people at MTV, because he only wants to talk about serious issues (via Hot Air)

Obama: Well, right now, they are getting taxed at 36 percent. Under Bill Clinton in the 1990s, they were being taxed at 39.6 percent. You are talking about a 3.6 percent difference, and for the average person who is making half a million, a million dollars, now people like you Sway, that’s chump change, that’s nothing. But it could make a big difference for that young person who is trying to figure out whether they can go to college or not, if we could give them more of a break or more scholarships or grants to go to college.

First of all, the 2008 rate on those making $250K is 33%, as it will be in 2009. And the highest bracket is 35%. Let’s look at the individual rates for 2009, shall we?

  • 10% on income between $0 and $8,025
  • 15% on the income between $8,025 and $32,550; plus $802.50
  • 25% on the income between $32,550 and $78,850; plus $4,481.25
  • 28% on the income between $78,850 and $164,550; plus $16,056.25
  • 33% on the income between $164,550 and $357,700; plus $40,052.25
  • 35% on the income over $357,700; plus $103,791.75

What does this mean? Let’s say you make $50k. Now, if I ask the question “how much tax do you pay on that?”, most people answer $12,500. Nope. In fact, you would pay $8,843 (I am completely taking any deductions and exemptions out of this calculation), just 17%. In reality, if you go full bore, you would actually be paying $6,606 on that $50k with the standard deduction and personal exemption.

So, how does this affect those making $250k and up? Well, you can see that people making $250k to $357k will see an increase of 6.6% on their taxable income above $250, 33% to 39.6%. So, let’s take someone making $300k. Right now, they would pay $16,500 on that $50k of income made above $250k. Under Obama, make that $19,800. $3,200 more. Going to take quite a bit of people making over $250K to make up for all the spending Barry wants to do, eh?

Consider: he plans to give $500 and $1,000 checks to quite a few people, with an annual payout for these welfare checks of at least $35 billion. I have been doing quite a bit of searching, and still haven’t found any data on how much revenue is collected by the IRS for above $250k, but, can it equal $35 billion?

Now, I can see one or more of several possible actions early in 2009

  1. The tax code is changed to a straight roll up, ie, if you are in the 25% tax bracket, you pay 25% of your income. Period. No graduation. Not likely.
  2. The Democrat Congress passes a total repeal of the 2003 tax cuts. I very much expect this to happen by mid-February. If it hasn’t happened by mid-April, I will promise right now to write nothing negative about Obama for the remainder of 2009. This will make moot Barack’s promise to only raise taxes on those making $250 and up
  3. Obama asks for an increase of the capital gains tax to 29%. Likely.
  4. Tax credits and personal exemptions are decreased. 50-50 chance.
  5. National Internet taxes are implemented on all purchases, with mandatory federal reporting required.
  6. The Misery Index becomes part of the national dialogue by August

Anyhow, is everyone ready for the riots if McCain wins?

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