Today is an appropriate day to stir up some class envy and jealousy. Let's look at how a "rich" taxpayer benefited from George W. Bush's 2001 tax cut. Tommy Taxpayer is a filthy capitalist pig! Let's learn about him.
Tommy is a successful manager at a large company. In 2000, his salary was $102,000, making him rich. He is so rich that his wife Tiffany can betray the sisterhood and eschew a career in order to stay home with their child, Tab. They bought their $500,000 home early in 2001 with a small down payment and a mortgage that averages just over 6%. The Taxpayer family is generous, they tithe nearly 10% of their income and Tiffany volunteers at a social justice charity two days a week while Tab is in a decaying public school. They live in Minnesota, so they are happy to pay income tax at a nearly 8% rate.
Tommy's employer, Productco, Inc. is in a slow-growth industry, due in part to the state's high business tax rate. Business is so slow that for the last seven years Productco has only been able to increase its expense for Tommy's compensation by an annual rate of 1.1%.
So the magic question is: How much did the Taxpayer family benefit from Federal Tax policies between 2001 and 2008? Make sure to account for the tax cuts "for the rich" that Bush passed in 2001.
Here are your choices:
A) The bourgeois pigs paid $40,000 less in taxes to the Federal government than they would have if the 2000 rates had stayed in effect through 2008 (over $5,000 savings a year).
B) The greedy monsters paid $25,000 less in taxes to the Federal government than they would have if the 2000 rates had stayed in effect through 2008 (over $3,000 savings a year).
C) These winners of lifes lottery paid $8,000 less in taxes to the Federal government than they would have if the 2000 rates had stayed in effect through 2008 (over $1,000 savings a year).
And the winning answer is D) None of the above. What happened to the Taxpayer family pocketbook between 2001 and 2008? They actually lost over $14,000 due to federal tax policy during that time period.
Confused? Did you think Bush cut taxes for these rich people? Allow me to explain. The Taxpayer family didn't get any benefit at all from the Bush tax cuts. You see, their high levels of home mortgage interest, state taxes and charitable deductions forced them to file their federal taxes under the Alternate Minimum Tax (AMT)
rules. Bush's tax cut didn't impact the AMT, so their Federal income tax rate didn't change.
Further, in 2000, the FICA portion of social security taxed income levels up to a maximum of $76,200. The FICA tax is 6.2% of income up to the maximum level for workers
. By 2008, the feds have raised the maximum contribution limit to $102,000. Therefore Tommy had an additional $7,086 withheld from his paycheck. To add insult to injury, Productco's payroll taxes also rose by $7,086. Productco could only afford to increase its labor cost by the same amount, so the tax increase crowded out Tommy's raise. In total the Taxpayer family ended up $14,073 worse off.
And I thought Bush cut taxes for the rich.