We currently have a Federal Income Tax that has marginal tax rates of 10, 15, 25, 28, 33 and 35 percent, with each percent apply to a different chunk of your income – the 10% applying to the first chunk, earnings above the level the 10% ends at are taxed at 15% – for everyone including billionaires – up to the income level where 25% kicks in, and so on until the earnings above a given level is tax at 35%, for all such earnings above that cut off.
The above is true except if you are a rich person – or earned your income as a hedge fund manager – because the rich get 90% of their income from investments and hedge fund salaries are deemed a return on investment and investment income has its own, much lower rate of taxation – 15% in most cases.
So Obama wants to add a new Alternative minimum tax for those with income above $ 1 million a year. What is in that tax concept will be revealed on Monday but it is likely to include the idea of taxing investment income at the same rate as wage income is taxed.
The White House is calling the new tax the Buffett tax but Buffett also called for the end of the wage cap ($106,800) on income subject to the Social Security payroll tax – and that does not seem to be in this proposal. And the GOP of course Claim a zero tax for millionairs is appropiate when the get invesment income because the rich folks only get that income after their companies have paid a burdenson corporate tax, as the rich pretend that a dollar in commerce is taxed only once, ignoring the sales taxes, excise taxes, state and local tax that everyones dollar, commerce or personell income, must pass through before they deposit it in their bank.
But White House is making clear that Obama will leave the details of how the new law is written, how such a rate would be calculated, to the GOP as he invites yet again the GOP to write a law that prevents the Clinton tax rates from ever returning.
And Obama, in his plan, makes clear the GOP can toss in $300 billion in 10-year savings from Medicare and Medicaid but not have any changes in Social Security. And our Super Committee member Representative Chris Van Hollen of Maryland, one of six Democrats on the 12-member joint committee, says Obama must make it clear that those reductions from entitlement programs “are tied to his proposals to raise revenues by cutting special-interest tax breaks and asking the folks at the top to pay more.”
Of course since tax increases stand little chance of being passed by a divided Congress, they will be rejected by the Super Committee, and we’ll have the replay of the now standard “reluctant Obama signs GOP bill for the good of the country” song and dance.
Meanwhile we will have a new election year progressive issue that proves there is a reason to vote for Obama. You really didn’t expect a return to the Clinton Tax rates – something the GOP can’t prevent without Obama’s help, as the reason to vote for Obama, did you?