What Would Happen if the Bush Tax Cuts Just Disappeared in Some Scary Version of The Rapture?

Some background here: On February 1, Reuters posted a story about "backdoor" tax increases in the planning stages by the Obama administration. Essentially, the piece detailed what would happen in the Bush tax cuts actually expired in full at the end of this year (which is when they will go out of force absent any new legislative action).

Yesterday, Reuters pulled the story from its site, issuing not a correction but this:

ADVISORY: Backdoor taxes story

Tue Feb 2, 2010 1:35pm EST

The Feb 1 story headlined "Backdoor taxes to hit middle class" is wrong and has been withdrawn. The story said lower-income families will pay more under tax provisions scheduled to expire Dec 31. The Obama administration's budget calls for the extension of those tax provisions for households earning less than $250,000. There will be no substitute story.

The chatter on the interwebs and yak radio is that Reuters pulled the story directly in response to criticism from the Obama administration. I have no idea if that is true, but I do think it's worth looking at the original story, which does a good job of detailing exactly where the tax code was before those terrible Bush tax cuts (which somehow are responsible for massive, record-setting deficits as opposed to massive, record-setting spending bills; go figger).

It's good to know that Obama's budget keeps most of this stuff intact. It's one more thing for which to hold him accountable.

Here's the story, saved from the ashcan of cyberspace thanks to the inimitable Bruce Majors. To put it mildly, it makes sense to make sure these cuts stick around for as long as possible:

WIRE: Backdoor taxes to hit middle class...
« on: Today at 08:34:58 AM »
http://news.yahoo.com/s/nm/20100201/bs_nm/us_budget_backdoortaxes

By Terri Cullen Terri Cullen – Mon Feb 1, 4:09 pm ET

NEW YORK (Reuters.com) --The Obama administration's plan to cut more than $1 trillion from the deficit over the next decade relies heavily on so-called backdoor tax increases that will result in a bigger tax bill for middle-class families.

In the 2010 budget tabled by President Barack Obama on Monday, the White House wants to let billions of dollars in tax breaks expire by the end of the year -- effectively a tax hike by stealth.

While the administration is focusing its proposal on eliminating tax breaks for individuals who earn $250,000 a year or more, middle-class families will face a slew of these backdoor increases.

The targeted tax provisions were enacted under the Bush administration's Economic Growth and Tax Relief Reconciliation Act of 2001. Among other things, the law lowered individual tax rates, slashed taxes on capital gains and dividends, and steadily scaled back the estate tax to zero in 2010.

If the provisions are allowed to expire on December 31, the top-tier personal income tax rate will rise to 39.6 percent from 35 percent. But lower-income families will pay more as well: the 25 percent tax bracket will revert back to 28 percent; the 28 percent bracket will increase to 31 percent; and the 33 percent bracket will increase to 36 percent. The special 10 percent bracket is eliminated.

Investors will pay more on their earnings next year as well, with the tax on dividends jumping to 39.6 percent from 15 percent and the capital-gains tax increasing to 20 percent from 15 percent. The estate tax is eliminated this year, but it will return in 2011 -- though there has been talk about reinstating the death tax sooner.

Millions of middle-class households already may be facing higher taxes in 2010 because Congress has failed to extend tax breaks that expired on January 1, most notably a "patch" that limited the impact of the alternative minimum tax. The AMT, initially designed to prevent the very rich from avoiding income taxes, was never indexed for inflation. Now the tax is affecting millions of middle-income households, but lawmakers have been reluctant to repeal it because it has become a key source of revenue.

Without annual legislation to renew the patch this year, the AMT could affect an estimated 25 million taxpayers with incomes as low as $33,750 (or $45,000 for joint filers). Even if the patch is extended to last year's levels, the tax will hit American families that can hardly be considered wealthy -- the AMT exemption for 2009 was $46,700 for singles and $70,950 for married couples filing jointly.

Middle-class families also will find fewer tax breaks available to them in 2010 if other popular tax provisions are allowed to expire. Among them:

* Taxpayers who itemize will lose the option to deduct state sales-tax payments instead of state and local income taxes;

* The $250 teacher tax credit for classroom supplies;

* The tax deduction for up to $4,000 of college tuition and expenses;

* Individuals who don't itemize will no longer be able to increase their standard deduction by up to $1,000 for property taxes paid;

* The first $2,400 of unemployment benefits are taxable, in 2009 that amount was tax-free.

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  • brotherben||

    El Rushbeau hit this real hard yesterday. I understand that the gubmint seems to want everyone depending on them for everything but I am curious where the fuck they think the money will come from. If I ever meet any of you regulars or editors in person, I ask that you just punch me in the fucking head for voting for this goddamned idiot.

  • fists of capitalism||

    no problemo

  • Fist of Etiquette||

    And I will also politely do so.

  • ||

    Wear a name tag, or better yet get a tattoo on your forehead of the Obama "O" logo and the text "Punch Here"

  • Naga Sadow ||

    Being magnanimous in being proven right, I shall merely crackwise bout your intellect. No physical violence shall be necessary.

  • John Tagliaferro||

    I get his punch.

  • ||

    I will only make you smell the glove.

  • Jersey Patriot||

    If it's any consolation, he would have been elected regardless of what you did on E-Day.

  • Tim Geithner||

    I am curious where the fuck they think the money will come from.

    China, God willing.

  • Ebeneezer Scrooge||

    China's economy increasingly looks to be in worse shape than ours. But I'm sure they'll give us more loans just from the very goodness of their hearts. For they too must know Obama Is Great.

  • robc||

    the tax on dividends jumping to 39.6 percent from 15 percent

    Ummm...doesnt the dividend tax rate go from 15% back to "whatever your regular income tax rate is" not to "39.6%"? Why the assumption that dividend earners are in the highest bracket? Really sloppy work by Terri Cullen.

    (I earn taxable dividends, Im nowhere near the 35/39.6 bracket. I never paid those kind of rates on my dividends pre-tax cut either).

  • Ska||

    That's a good point - but many people will be paying at 25% or 31%. It is a big jump.

  • robc||

    Oh yeah, will be a big jump for me too, just not to 39.6%.

  • Dan||

    How was the story wrong again?

  • robc||

    See my post 1 minute before yours. Not wrong in the way the Obama administration claims, but still wrong.

  • ||

    THe story was fundamentally incorrect. As Alan Viard at American Enterprise Institute put it (they're on our side, btw) it contained "appalling inaccuracies." Pretty much every fact in the Reuters story was factually inaccurate in that it asserted the Obama budget didn't seek renewal of things such as the Bush tax cuts for most Americans, a patch for the Alternative Minimum Tax, and a bunch of smaller tax breaks, such as a the deduction for state and local taxes. Reuters didn't correct it because the very premise of the story was wrong. They RETRACTED it, which is far worse than a correction. They fucked up. Rush was stupid to make a big deal of this.

  • ||

    What's the point of having a bully pulpit if you can't bully everybody who won't tow your thin blue lion?

  • ||

    Tow the thin blue lion
    lived by the Mall
    And frolicked in the autumn smog
    in land called Washington, DC

  • Fist of Etiquette||

    I actually printed the original story to pdf when I saw it, thinking how odd it was to see a Reuters story being so unequivocal in its piece on tax hikes. I assumed heavy revisions would be coming, which I wanted to be able to compare with the original, but I see just yanking it altogether was the approach.

  • ||

    The conspiracists were out in full force yesterday, claiming the retracted story was PRUF that the government controlled the media. The truth is sadder though, that the media willingly fluffs the government.

  • ||

    "The chatter on the interwebs and yak radio is that Reuters pulled the story directly in response to criticism from the Obama administration."

    Initially, I thought he was stealing pages from my playbook, but now I have to admit, I could learn from this guy!

    Subtlety, huh? I haven't really considered that before, but if you get the same results? ...nah, what's the point of being President if you can't have your own talk show?

    But the auto industry stuff--that I like! Take over the domestic companies with union support and give the foreign competition hell...in the name of safety! And if anyone protests, you just say something like, "But if you were to listen to the debate, and, frankly, how some of you went after this [takeover of the auto industry], you'd think that this thing was a...some Bolshevik plot!"

    http://www.youtube.com/watch?v=b5w2xf-EeqA

    I couldn't have said it better myself.

  • BakedPenguin||

    Let me be clear: Obama is a lying piece of shit.

  • kinnath||

    I saw this coming the day after the election.

  • ||

    I saw this coming the day I created the first monkey.

  • ||

    i saw this coming when obama was nominated

  • Xeones||

    If I ever meet any of you regulars or editors in person, I ask that you just punch me in the fucking head for voting for this goddamned idiot.

    I can't speak for the rest of the dudes (and occasional ladies) here, but i'm saving my fists up for unrepentant morons. Anyway, we all make decisions that, in hindsight, look pretty stupid. Like Epi and his six tribal armband tattoos, or all those hookers Pro L killed. Or the time Warty opened that cryogenic capsule, despite the signs clearly warning that Steve Smith was contained therein.

  • Warty||

    Dude, that was before I realized that Encino Man was a fucking lie.

  • Johnny Longtorso||

    October 29, 2008: Never Forget.

  • Ska||

    I think it was Fist of Etiquette who had been posting that link in his name for a long time, and I'd go back and read it every now and then and think "what the fuck are you guys thinking?" Props to the handful that didn't get on board with the "punish republicans by voting for Obama!"

  • Fist of Etiquette||

    YOU LIE!

  • ||

    It's the scrotal piercing that I regret most. The tattoos were just henna, for that LARPing session you and I did last month. The one where you played a female cleric.

  • ||

    Are you saying that Bush cut taxes for the poor? LIAR! Everyone KNOWS that the fat cats live off the poor and tax them mercilessly, that's why they are poor!

  • Alan Vanneman||

    "I do think it's worth looking at the original story, which does a good job of detailing exactly where the tax code was before those terrible Bush tax cuts."

    Well, as I remember, Nick, we had a HUGE FUCKING SURPLUS! DO YOU REMEMBER THAT, NICK, DO YOU?

    OK, I'll calm down. This is what happens when I haven't had my morning Qualudes.

  • Warty||

    Jesus Christ, shut the fuck up, Vanneman.

  • ||

    I guess you missed this: "(which somehow are responsible for massive, record-setting deficits as opposed to massive, record-setting spending bills; go figger)".

  • brotherben||

    LEMMON
    ________

    714

  • BakedPenguin||

    I remember seeing some bootlegs in the mid 80's that had "Lennon / 714" on them.

  • BakedPenguin||

    Yes! So let's make it WAY FUCKING WORSE! Yay!

    Here's an analogy for you, Vanneman: imagine a typical boring Jim Jarmusch film. Now, add in 78 more minutes of people walking around and not talking. Does this make it better?

  • ||

    STOP IT JUST STOP IT

  • T||

    I will be dead and in my grave by the time my wife stops complaining about me taking her to see Ghost Dog when we were dating.

  • Ska||

    Netflix and show her Dead Man; I'd like to hear the reaction.

  • ||

    Peace dividend, and speculative economy. Counting on that continuing was just stupid.

    Dems took over the purse strings in 2006 and that's when the train went off the tracks completely, before that, it was just on he wrong track.

  • ||

    It will be interesting to see how much money gets donated to the Oblowme '12 campaign.

    For some reason, I suspect it might be significantly less than last time.

  • Ska||

    Proof that the corporations hate Democrats, and are buying the elections for Republicans!11!!! Or the Russians!!!

  • football socks||

    He has got a lot of work to do. Some of it will be good and some of it horrible thats the nature of politics

  • healthscarequotes||

    uh, anonymity bot, you forgot to put on your hyperlink shirt when you left the house this morning

    oh wait, is this cathy young?

  • ||

    Taxpayers who itemize will lose the option to deduct state sales-tax payments instead of state and local income taxes

    This fucking sucks for states like Washington with no state income tax & ridiculously high sales tax.

    The ability to take the IRS table amount (instead of keeping receipts- ugh) of state sales tax is something that saves a lot of people money. Especially if they don't qualify for the standard deduction.

  • T||

    Yeah. The sales tax thing has been a winner for me since we got no state income tax. If that goes away, I'm fucked.

  • ||

    something that saves a lot of people money.

    And, for that very reason, must be eliminated.

  • John Tagliaferro||

    It's one more thing for which to hold him accountable.

    That woke me up with a laugh.

  • everyone||

    You've been awake & posting as "Suki" for like 4 hours, you fucking weirdo. Go away please.

  • John Tagliaferro||

    WTF? I have been posting as me for months and Suki has been posting as her for months.

    Guess what? Reason has more than one contributor too, with several different people who post stories on this blog. Let us know where you got lost there, or not.

  • Mr. FIFY||

    I thought Obama cared about poor people, and yet here he is directing His Minions to tax unemployment benefits...

  • Kroneborge||

    I like tax cuts as much as the next guy, but if you don't match them with spending cuts they don't do any good.

    So yes, IMO I think the Bush cuts were a mistake. Why should our kids have to pay for our consumption?

  • T||

    Why should I have to pay for some geezer's retirement? Great thinking, K. You've just eviscerated all entitlement programs with that logic. Get on up to DC and spread the good word. Write if it works.

    I'm not optimistic.

  • Curtis||

    When congress enacts "temporary tax cuts", they eventually expire. Duh.
    Congress played a game by getting credit for cutting taxes without taking the blame for creating a mountain of debt. If they do expire, the "temporary" tax cut charade will not be repeated.

    The fact that no action will be unpopular gives slight hope to possibility of a deficit reducing compromise.

  • Tman||

    The tax-cut discussion always reminds me of this interview with Milton Friedman-

    http://www.hoover.org/publications/digest/3459146.html

    ROBINSON: Now…[here’s another] option for handling the surplus: tax cuts. You favor that above all?

    FRIEDMAN: I favor it on economic grounds because it enables the ultimate consumer—the ultimate individual, you and me—to decide how the money should be used. You know, it makes no sense for me to send my money to Washington to have somebody in Washington decide how to use it. I’d rather decide how to use it myself—whether for charity or for welfare or for other purposes. So that’s the first and most important argument. But the political argument for it is that it’s the only way to keep Congress from spending it.

    ROBINSON: Only if Congress doesn’t have the money can it be prevented from spending it?

    FRIEDMAN: Right. That’s why for a long time now I have been in favor of any tax cut, under any circumstances, in any way, in any form whatsoever.

    ROBINSON: On any pretext.

    FRIEDMAN: On any pretext because that’s the only way to keep down government spending.

    The fact is that even though Bush outspent any of his predecessors in terms of expanding the government, it's still not even peanuts next to what Obama has already achieved in one year. If the choice is between tax cuts + additional spending vs. no tax cuts + Ridiculous additional spending, I'll take the tax cuts thanks.

    One of the ironies of letting these tax cuts expire is that the overall revenue the government is going to bring in will go down, and Obama will still outspend Bush exponentially.

  • ||

    Yes O man address the the income tax brackets for the poor but in the last few pages of his budget he call for the taxation of Life Insurance proceeds. This will either kill his budget so the tax brackets go back to screwing the poor or his budget does get passed & the country gets screwed when citizens estates are calculated

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