New Analysis Confirms High-Income Taxpayers Benefit from “Middle Class” Tax Cuts

July 13, 2012 at 4:51 pm

The debate over President Bush’s income tax cuts has again revealed a common misunderstanding about how the income tax works.  As Kevin Drum of Mother Jones and Dan Amira of New York note, policymakers and pundits repeatedly characterize President Obama’s proposal as extending the Bush tax cuts for people with income under $250,000.  It certainly does this.  But, despite widespread assertions to the contrary, people with incomes of more than $250,000 would benefit from the proposal as well.

That’s because Obama’s proposal would extend the tax cut on all income up to $250,000.  As a result, Americans who would make more than that amount still would get benefits from the tax cuts on their income up to that level.  We explained this point in detail during the 2010 debate.

New Tax Policy Center numbers reinforce the point by showing the full effect of Obama’s proposal across the income spectrum.  Those making between $200,000 and $1 million a year would receive an average of more than $10,000 in tax cuts compared to current law.  People with incomes above $1 million would receive somewhat less on average, but they, too, would benefit from the proposal.

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More About Chuck Marr

Chuck Marr

Chuck Marr is the Director of Federal Tax Policy at the Center on Budget and Policy Priorities.

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2 Comments Add Yours ↓

Comments are listed in reverse chronological order.

  1. 1

    CBPP does an amazing job helping advocates understand the potential and actual impacts of federal policy. I can’t thank you all enough. I use your resources daily.

    That said, we need to find a way to educate the general public better about tax policy. Your materials on tax expenditures and tax cuts are so clear. We need to get them into more people’s hands.

    People need to understand that well over half of the “Middle Class Tax Cuts” actually benefit households making over $200,000 per year.

    Serious mislabeling by politicians, don’t you think?

    • ohiodale #

      Everyone I know already knows we have a progressive tax code. What was the difference when the democrats, at the time the Bush tax cuts were enacted, preached the tax cuts ONLY benefited the rich? Now all of the sudden the democrats are saying they want to keep the Bush tax cuts for the middleclass. 8 years ago not a single liberal would have admitted the Bush tax cuts saved the middleclass thousands in taxes per year. Even though the upper middleclass (couples making more than $250/yr) would benefit from the Obama proposed tax cut extensions they would still have their taxes increase 3% on all taxable income above $250K. Obama increased the baseline spending by a trillion dollars, which is the real cause of our deficits. Look at the deficits from 2000-2007. As soon as the economy turns around we will not have a revenue problem. I would think we should keep the tax cuts for those creating the jobs. It has worked everytime in the past. The liberals hate successful people and only want to increase taxes on successful people for spite. The bottom 50% of tax payers only pay an average of 2.5% in federal income taxes. Liberals keep talking about fair but is this fair? Maybe if liberals would stop enabling the poor the poor would work harder to get out of poverty. Their are families that have been on welfare for 5 generations so the liberal plan is not working. I am not for one second saying Bush did a good job either but Obama is the current president.

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