This week, I’ve asked readers to chime in on the Bush tax cuts. This guest post is courtesy of Belinda Roberts (for more on the topic, see the original post):
For a long time I’ve considered myself a Democrat. During law school, I competed with other liberal students for the title of most progressive. I attended protests in Washington, DC as a legal observer to protect peaceful assembly and the freedom to voice opposing views. After 9/11, fellow classmates accused me of being un-American when I questioned our military choices in Afghanistan and Iraq. More recently, I worked as a policy advisor for a city council comprised of very active Democrats. In 2008, without hesitation I voted for Barak Obama. So why do I suddenly feel like an American without a party?
I am almost embarrassed to say this but it’s coming down to taxes. Taxes?! I’ve always felt it my patriotic duty to pay my taxes without complaint not even looking that closely at the amount. But as I have become older and had a family, I’ve become acutely aware of my family’s tax bill. Some might say that I should just feel lucky that my husband and I are financially successful. I do feel lucky, but the suggestion of only extending the Bush Tax Cuts for only some families makes me frustrated.
The Obama administration has proposed maintaining the Bush Tax Cuts for some Americans and not others. Under proposed plan, single filers with incomes over $200,000 and married filing jointly filers with incomes greater than $250,000 will experience a 2 to 3.6 percentage point increase in their tax rate. All filers making less than these amounts will not have their tax rate increased. Along with rate adjustment, it’s being proposed that those under the tipping point limits will have new tax relief benefits yet those above it will have new deduction and exemption limitations. The rationale for this proposal is that the health of our country and our nation’s debt problem depend on the tax dollars from the top few. While I am humbled by the vote of confidence and the value of my tax dollar, I want to pass on this new found responsibility.
The most interesting part in all of this for me has been the media’s take on it. They vilify those in the $200k+ category often in the same sentence as oil companies and fund managers. No one seems to bat an eye at the use of the term “wealthy” for folks who lead pretty common lifestyles. Advocates of this plan use phrases like, “only the most wealthy” and “won’t affect the normal person.” I truly believe that a family with annual earnings in the $200s is not wealthy. I am not arguing that they don’t earn more than a lot of other families but they are hardly earning the kind of money of those we typically think when using the term wealthy. We think of Oprah Winfrey and Bill Gates. Yet the tax treatment is the same.
My family definitely falls into the top 5% of earners and, this year will probably be closer to the 2% mark. But I’d be uncomfortable calling us wealthy. We do what the experts in personal finance dictate. We prudently save and spend carefully. When unexpected bills come up (a mouth guard costs $500?!) we can absorb them without sacrificing other necessities but they do affect how much we eat out or how much we’ll spend on entertainment. We are not squirreling away huge stores of cash. In other words, we have a budget like most families and we have to adjust that budget when life happens. That is hardly rich, right? There is a big difference for families who earn enough to be comfortable (a term that I am completely comfortable with) and families that are wealthy. And don’t get me wrong, I am not uncomfortable with the idea of being wealthy. That is absolutely one of my goals, but don’t call me that before I am there. It sort of ruins the incentive.
I suppose I was naive in thinking that Obama’s election would lead to this. During his campaigns he did advocate for allowing the Bush Tax Cuts to expire. I must just not take campaign promises seriously. I mean, they are more puffery and grandstanding than actual promises, right? Apparently, they are for most of America but not for those who are “wealthy.”
In a two-party political system, it is easy to be without a party.
Concerning your taxes, my question would be over why you are in the top 5% of earners. How should it be attributed? Government funding? Parental choices? Your own choices?
Some things, like many medical needs, are beyond our control. Making money is never an accident (and lottery winners virtually never hold on to the money). For many people, health is the same way. I worry that this health care bill will remove another incentive from people to take care of themselves.
Yours has been a most thoughtful post to read. The tax code is being used for class warfare and micromanagement of the economy. The tax system should be a very simple means to raise money for the legitamate needs of a limited government. Why are people being discouraged from earning additional income. Let’s face it. That’s what’s being done. Most jobs are created now by small business people. These folks don’t know which way to turn. All they are faced with are financial disincentives to grow their business, even as they take risks in a very shakey economy. The most productive people have to be freed to make more money and create jobs. Yes, that’s right create not save jobs).
I’m sorry, but you are delusional if you think you are not “wealthy.” Yes, it probably feels like there are a lot of people that make more money than you, but then again, the grass is always greener. Look at the numbers–you make more than 95-98% of Americans. Who, exactly, should be paying more in taxes?
I’m not completely unsympathetic to your perspective–my family makes roughly the same income, but we live in a relatively expensive urban area, and it often seems like there isn’t much extra. But the luxury of not worrying where the $500 for the mouthguard is going to come from–and that you can even contemplate spending so much on something that isn’t strictly necessary–that is a luxury that most Americans don’t have. Yes, it hurts to have almost 50% of your earned income taken in taxes, but that is the price of success.
I can’t tell, is this post satire? Or is she really complaining about making above $250,000 while 9.6% of the labor force is unemployed, 18.6% was underemployed, and the median household salary for 2010 was $50,000? It must be hard only eating out 4 nights a week instead of 6. I’m going with satire.
My mother taught me this: there will always be people who have more than you, but there will also be those who have less. I think each person can look at their circumstances and say they are not “wealthy.” The real test is disposable income. That is, would a 2% tax increase prevent you from taking vacation or would a 2% tax increase prevent you from buying food, health insurance or paying the rent? Our tax system is supposed to be progressive.
As an avid reader of the Taxgirl blog, I sensed there would be a point where logic and personal experience would prevail over good (yet economically inefficient) intentions. I say this because I remember how I used to see the world fiftee…n years ago, when my circumstances dictated that I pay far less into the welfare state than I currently do.
You have done a fine job pointing out the error of selective expiration of the the Bush tax cuts, but the real problem is with any movement toward more steeply progressive brackets (which the current Obama plan is encouraging).
The Obama tax increase (a better way to think of it than as an expiration of the “Bush tax cuts’–especially when selectively applied) targets the same folks who have the power to hire workers in the private sector, provide seed capital to new businesses, and spend on durable goods for business of personal use. These are the LAST people one should be taxing in a sluggish economy.
Oops! My bad. I didn’t realize I was responding to a guest post, so perhaps Taxgirl has yet to join the ranks of the converted. ; )
I would like to chime in on this one… Congatulations on your success. But… don’t forget this little fact. The top 90% (+) of the wealth in this country is held by less than 5% of the people. Think on that for a second and realize that our founding fathers went to war to prevent that very thing happening. A middle class (of which I believe you are one if you fall in the 100K-300K range) is where a healthy economy is determined. To eliminate it would be to shoot ourselves in the foot. It is on the backs (the work load) of 90% of the people in the country that the top 5% have what they have. I believe it comes down to this. Yes, you can afford a $500 hit to the budget for a retainer, to some that might as well be a million, and so, they just don’t get it. Ten years down the line the person without the retainer doesn’t have the confidence that they could have and probably won’t be as successful. The cycle continues.
The mortgage melt down was planned. A way for the wealthy to get wealthier. It hurt all of us and our very freedom was being held hostage by the top 5%. What ever happened to a government that is of; for; and by the people? Where it’s very exsistance was aid for the common welfare of all. Our defense budget was supposed to be to defend ourselves and belongings. If I have nothing, what do I have that needs defending? If I have a strong business and a home and family I actually have something to defend.
Our school budget was supposed to be for the education of our children and thus the future of our country. Where is it all going? I don’t just mean States and local budgets I mean the U.S. government as well.
We all need to stand up and be counted, and stop listening the the news that the wealthy media owners want us to hear and petition for real information. You mark my words… “they” will find a way to sensor, restrict, and edit anything dealing with the internet by way of some horrible problem that arrises.”
How about making the people who “represent us” chime in with who they actually work for and where their money comes from, because I firmly believe that most americans don’t even know their representatives name, let alone where their money comes from. Why is a corporation consisdered a person? Why is there a such thing as a lobbiest and why would the american people continue to allow it to happen time and time and time again? You want reform? How about a one hour block of time to “pitch” to your congressman and no more. Each block would be priced the same for all. Each would only have ONE time spot. No more gifts, vacations, donations, or anythig else for that matter.
As for president Obama, I think he was handed most of the problems that he is facing in office from previous adminastrations. FROM BOTH PARTIES!
Yes, that’s right. Look at the Clintons and tell me just what it was that they were able to do in their “jobs” to be able to increase their wealth as much as they did while Bill was in office? Both senior and junior Bush did the same thing. The raging fact that we see evidence of every day is that our government is for sale and only the top 5% will be able to pay them off to keep their share of the wealth. The rest of us will just have to scrape by until we get angry enough to take back OUR country.
A family income of $250,000 is well above the average family income. Your family is far better off than most. I don’t begrudge you that, but you are not just getting by, like my family is. I am a public school administrator who makes $62,2000. My husband is self employed and his business has taken a tank along with the economy. When an unexpected $500 expense comes up in our lives, we no longer have the disposable income to cover it, it goes on a charge card with added interest.
You may not see that you are well off, but , believe me, you are.
Earnings in the $200k is wealthy from my perspective in rural Nebraska.
$200k can be a lot or relatively little depending on where you live. If you live in NYC, $200k barely covers living expenses and childcare let alone savings. What Obama should do is add another tax bracket. Leave the $200k – 250k’ers alone but target the truly wealthy. I think a tax bracket for those over $1 million seems perfectly reasonable and not sure who would argue against it. It would be pretty hard for any politician to come out against a tax increase for the $1 million and up crowd and look sincere.
I’m with Barbara. Funny that those who are in that top 5% to top 1% don’t think of themselves as wealthy. Wonder what that makes those of us who are down in the middle of the pack? Dwellers in the squalor of a shanty town I’d guess.
Seems your values were only good as long as you weren’t one of those who was in that income range and once you got there they crumbled away as the $ signs began to light your way.
I remember all the moaning and gnashing of teeth when Bill Clinton took office, because of all these tax hikes he was supposedly going to enact. And true enough, he did raise the top marginal tax rates by a few percent. But did people in the top brackets suddenly stop working (or doing business) because of the additional few percent lopped off the top of their income stream? I don’t know about anyone else, but my income tripled during the Clinton administration. I am not saying he was responsible for it (my own feeling is that a Democrat in the White House and the GOP controlling Congress is the best combination), but the automatic whining we got when Clinton took office was misplaced.
Having said that, certain of the wealthy really do change their behavior because of tax hikes, even though they’ve got money to burn. My first client was a guy with several Ferraris in the garage, and who had several big powerboats. When a 10% “luxury tax” on boats went into effect, he an his friends did actually stop buying boats — not because they couldn’t afford the tax, but just because they were big shots who were sick of liberals confiscating their hard-earned wealth. Stuff like that does happen. But the economy did not grind to a halt when Clinton upped the top income-tax bracket to 39%, and I doubt it will this time around, either. As with everything else, where you stand depends on where you sit — I’d like to see Congress get rid of the estate tax for good, because my Dad is 90 and bedridden, and his net worth is right around the area where, if he expired next year, his estate might owe some tax (I’m not sure, because home care is so expensive that he might be under the threshold by now). In any case, if Belinda thinks she’s one of the have-nots, I’d like to trade places with her!
Congratulations on hitting your earnings years and being statistically rich. Remember starting out and being statistically poor?
The Pres. prejudices the issue by calling it “extending the Bush tax cuts”. Although it is nice to give Bush credit for the cuts, taxes were cut, period. The 2011 sunset on the cuts came about as a good faith compromise when congress could not agree on technical aspects of the law. Those details were to be settled long before 2011 but some in congress (you can guess who) have been kicking the can down the road ever since. Now they want to “compromise” on how much of the “cuts” to retain.
This is a new day and allowing anything to expire is a new tax. BO is acting benevolent by saying his is only nailing those damn “rich” people.
Hi,
Do you have a twitter account in order for me to follow your blog?
Here is mine: http://twitter.com/leviweisz ,I have a blog on International Taxation.
Thank you very much,
Levi.
@Levi, her twitter account is listed at the top right of the page with a big green box with a big blue bird that says “Twitter” on it. Yes, I was being sarcastic in a friendly manner, no offense.
@D Scheider, I strongly agree with much of what you wrote. We are at a crossroads in our countries history and I’m pretty afraid for our countries future right now. Back in my college days I read books like “Capitalism” and studied “The California Constitution” (which is a great read btw) and countless other historical writings, all of which stuck with me to this day.
I guess what I’m getting at here is history. It’s safe to say the majority of Americans have forgotten their history, the very reasons how and why this country was created in the first place. We are so hypnotized by television commercials, Tiger Woods scandals and mainstream media garbage that we’ve forgotten our history. I’m in the middle of reading our Constitution and it’s mind blowing to say the least. It’s so relevant to what’s happening today I hope just one person here gives it another read.
@TaxAuditAttorney,
I would be interested to hear you speak more specifically about the reasons this country was created in the first place, as well as what makes the Constitution more relavant to what’s happening today than it would be to any other time period in American history.
As for the scandals, commericials, and the media, while it’s true that there is a lot of entertainment news parading as importance out there, you shouldn’t paint anyone who disagrees with you about taxes with that broad brush. It’s flawed to look at the other side of a debate and merely declare “they’re the mindless ignorant ones, and that is why I am right.”
If you make more than 95% of the people in our country then you are rich. No question about it. And if you live somewhere expensive, you’re still rich. It’s a choice you made and you just have to cut back on expenses elsewhere. Families of four live off minimum wage and they probably complain less than the rich.
I make close to $100K and I feel fortunate and thankful for what I have. Maybe I’m rich; maybe I’m not, but I’m definitely above middle class. I see no problem in helping pay down our country’s debt, (a necessity for our long term prosperity) by paying a few extra percentage points of taxes. We can’t keep padding the bank accounts of the rich in the short term while the rest of our country suffers in the long term.
I don’t know anybody who has said they are not motivated to make more money because the next higher tax bracket percentage has gone up. I am also sick and tired of people being ungrateful for their prosperity. The rich have the means to help get our country out of this economic mess and since they benefited the most, they should pull their weight. Just look at corporations hoarding cash, laying employees off, squeezing the remaining employees to do more (or else). It is despicable and it’s bad business. When they claim they can’t hire because of possible tax increases, it smacks of political revenge. If it makes sense for a company to hire to increase sales and competitiveness when the tax rate is 35%, it most likely makes sense at 37%. Just cut the executives’ salaries to make up the difference and the company benefits in the long term. I know I’m oversimplifying but the principles are sound.
To UH2L-
This is not a steady state analysis. Don’t buy into the class warfare crap.
At different times of our lives we are statistically poor and, hopefully, statistically rich as measured by INCOME. It’s usually tough to get by when you are young and starting out and statistically poor. Although the tax burden is lighter, it is a bite. Then when you hit the peak earning years (statistically rich and hopefully in the top 5%), the government really sticks it to you by confiscating your potential retirement savings. To get to this privileged position you have worked hard for it, not because you took advantage of someone else. You retire on beer money from social security and you are again statistically poor.
Then you die and the government again wants to confiscate what you have left after a life time of taxes, screwing your heirs.
The term “rich” is simply used as a slur to justify income redistribution. Most “rich” people EARNED what they have and should have it stolen by the govt..