In an address yesterday, President Obama laid out his position on taxes. He asked Congress to keep current tax rates for most people and end the Bush-era tax cuts on income over $250,000, letting those tax rates revert to the levels they were in the 1990s.
That means the very wealthiest—who have seen a stronger recovery than the rest of us—would wind up paying a little bit more, while nearly everyone else would see their tax rates hold steady. It’d be a good step towards a fairer tax system.
The immediate conversation among the comfortable, well-paid pundits of Washington—who mostly talk with other comfortable, well-paid people—is that this is a “risky” move. Back in the real world, yet another poll shows Obama’s tax proposals are the ones Americans strongly prefer, adding to a long list of polls pointing to widespread public support for restoring 1990s-era rates on the highest-end income. The responses you’re likely to see: language meant to mislead taxpayers on who will actually be affected—or the insistence that the very wealthiest people contribute the most to the economy.
Indeed, even people who make over $250,000 a year would see the continuation of current tax rates on much of their income—it’s only income earned over $250,000 that would be taxed at the 1990s rates. For most taxpayers, there’s no difference at all, as this chart indicates:
Former Secretary of Labor Robert Reich has a great post pointing out the misleading rhetoric you’re likely to hear on this tax proposal—and debunking it.
The question, of course, is what Congress will do. They could pass President Obama’s proposal to extend rates on most income, and then fight separately about what to do about rates on income over $250,000. Or Congressional Republicans could do what they did in the Senate in 2010: refuse to extend any of the current tax rates unless the Bush tax cuts for very high income got extended as well.