Thursday, March 06, 2008

Comparing Income Taxes: Clinton vs. Bush

Despite all of the political rhetoric about "tax cuts for the rich" and the "middle class squeeze," a recent analysis by the Tax Foundation shows that federal income taxes have fallen for groups at all income levels as a result of the Bush tax cuts, compared to the 1999 tax rates under Clinton (see chart above). And in fact, the group in the chart above that experienced the largest percentage decrease in taxes were the married taxpayers with $50,000 of household income (clearly middle class by most definitions) - they paid 21% less in taxes under the Bush tax rates compared to the Clinton rates. By contrast, "rich" single taxpayers with income of $125,000 paid only 10% less in taxes. In other words, some middle-class taxpayers received twice the tax cut on a percentage basis as some of "the rich." .....So much for the claim that "the Bush Administration and Congressional policies are failing middle-class Americans."

Both Hillbamas want to extend the tax cuts for the middle-class but not for "the wealthy."

Here's my challenge to Hillbama: Both of them are clearly part of "the wealthy," and pay federal income taxes at the highest current marginal income tax rate of 35%. Obama's income in 2007 was about $1 million, and just one or two speeches by Bill Clinton at $200,000 puts the Clinton household income into the top tax bracket (in 2006, Clinton earned $10 million in speaking fees).

If they want to end the tax cuts for "the wealthy," they don't have to wait for the Bush tax cuts to expire at the end of 2010, they can voluntarily pay taxes right now at the old 1999 rates under Clinton. In other words, if the highest marginal rate of 35% is too low for the wealthy Hillbamas, they could make a strong, personal statement right now by voluntarily paying their 2007 taxes at the old highest marginal rate of 39.6%. In fact, Hillbama, Warren Buffet and anybody else opposed to the Bush tax cuts, can voluntarily pay taxes this year under the 1999 Clinton tax rates, instead of the current tax rates (see chart below, click to enlarge). If higher taxes on the wealthy in the future are good, shouldn't they also be good right now?

Here's an idea: Why doesn't TurboTax introduce tax preparation software based on previous years' higher marginal tax rates, to easily allow people like Hillbama, Warren Buffet and other anti-Bush tax cut advocates to pay at their preferred higher rates, instead of the new lower rates. Alternatively, The Tax Foundation has historical income tax rates back to 1913 here. If 39.6% from 1999 is too low, Buffet et al. could file under the 1960s highest marginal tax rate of 91%, the 1970 tax rate of 70%, or the 1980s tax rate of 50%.

(HT: Juandos)


At 3/06/2008 11:37 AM, Blogger Cobb said...

I would have a tremendous amount of respect for Clinton or Obama if they put their money where their mouths are. It would show that they're not just rhetoric.

I still wouldn't vote for them, but it would make me feel a little better about the prospects of a Clinton or Obama presidency.

But we all know that they won't do this. They speak the populist language because it helps them get elected which helps them fulfill their need for power.

At 3/06/2008 12:32 PM, Anonymous Anonymous said...

I'm not sure I would suddenly gain respect for them if they voluntarily paid the higher tax rate, but it would be nice for each of them to live out one less lie... it is a start in the right direction.

At 3/06/2008 2:27 PM, Blogger Unknown said...

And give Bush another edge, with the dollar down 50% against the Euro, those tax payments are way cheaper.

The Bush coalition: Patriots until they're asked to pay for it.

I'll sacrifice for this country, those who won't can leave.

At 3/06/2008 5:13 PM, Blogger Unknown said...

Does anyone have data to show earning percentiles in America?

Seems the married making less than $65k made out better than anyone -- what percentage of the population does this represent?

At 3/06/2008 6:54 PM, Anonymous Anonymous said...

In other words, some middle-class taxpayers received twice the tax cut on a percentage basis as some of "the rich."

Sure, but in actual money the middle class ($50K taxpayers...third quintile) paid between $656 and $1073 less income taxes whereas the upper middle class ($125K taxpayers...fourth quintile) paid between $2906 and $3964 less income taxes.

Now why don't you show the income tax money saved by the upper quintile.

At 3/06/2008 7:17 PM, Anonymous Anonymous said...

Does anyone have data to show earning percentiles in America?

The Congressional Budget Office has detailed Excel Tables here.

At 3/09/2008 3:22 PM, Anonymous Anonymous said...

That's a misleading chart. If you consider inflation (at a very conservative rate of 4%) from 1999 to 2008 someone making 30k in 1999 should be making about 42k in 2008. Under Clinton in 1999 that's about 11.5k in taxes under Bush in 2008 that's about 10.5k in taxes a saving of 1k. No wonder we no longer have a surplus, a war costing trillions, gas at 3.14 a gallon, foreclosures and a great economy (per Bush)!!!

At 6/06/2008 4:39 PM, Anonymous Anonymous said...

Wow. How do you compare pure numbers to determine tax burden? What happened to percentage of income or inflation, etc? Does the author(s) really think a pure numbers comparison will truly answer the question? Is the author really that stupid?

At 9/07/2008 10:55 AM, Anonymous Anonymous said...

My family's life has gotten worse under Bush polices. Inflation is much worse than the CPI,go ahead and add in energy and food cost. The bully attitude that if your not with him and the neocon's then you support terrorist. Let take care of the white collar terrorist here at home. Head of JP Morgan losses 3 billion in a quarter and they let him retire instead of firing him so he can collect 160 million parachute. Goverment and spending have gone up the last 8 years and it's being put on the national debt. Tax cuts are nice if you adjust the spending to pay for them.

At 12/29/2008 8:29 PM, Anonymous Anonymous said...

I wonder if I can pay those taxes in Euros or dead soldiers lives.. ..hmmm.. .probably not the dead soldiers, they seem to be cheap and easily disposed of.

At 6/24/2009 12:48 PM, Anonymous Leishtek said...

As usual, democrats don't win the race for lowest taxes. But....who was really better under the Clinton economy vs. the Bush II one? And what do a few thousand $$$ mean if there are other hidden "gotchas" such as more difficult business climate, AMT, tariffs, trade barriers, etc.?

At 4/07/2010 4:39 PM, Blogger Unknown said...

This is a fairly juvenile argument. No one likes to pay taxes. The reason we pay taxes is because we want Medicare and highways and airports and an army and all the other services that everyone demands but no one wants to pay for. So if Obama were to pay a few extra bucks it would do nothing. But if every household making over $376k pays more, then we'll get a little closer to matching revenues and liabilities.
It's not as if people who support higher taxes are going to dodge them once they pass; there's no hypocrisy here. Consider the other side of the argument: When Bush lowered taxes he did save himself, and his family, and his friends a lot of money. And yet he kept on increasing government expenditures. How is that more responsible than the Democrats approach?


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