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Many people are familiar with the right wing rhetoric that suspending the tax cuts on the rich and taxing multi-national corporations is somehow “punishing hard work and success.” Glorifying trickle-down economics has been a favorite go-to argument of the Republican Party, but like many partisan arguments, it falls apart as soon as you begin to scrutinize the numbers.
Let’s take a look at the current tax brackets that exist now – many of you might not be aware of them. These are the brackets if you are married and filing jointly.
0 to $17,850 10%
$17,850 to $72,500 15%
$72,500 to $146,400 25%
$146,400 to $223,050 28%
$223,050 to $398,350 33%
$398,350 to $450,000 35%
$450,000 and above 39.6%
So what’s wrong with this picture?
Let’s start with the fact that the biggest jump in percentages happens at 72,000-146,400. Keep in mind that this is really the tax rate of two people in a household, the lower middle class. One look at that and it is no question that this is one of the main reasons that the United States has dropped to the bottom in terms of social mobility out of all developing nations. This is the bracket in which people could maybe own a home and send their kids to college if they are entirely frugal about their income and they suffer the largest increase in the bracket, 200% larger than the second largest bump. The chances that you could make enough to make up for the additional 10% you’ll lose in taxes are so negligible that you would wind up actually making less money if you made just a little more. So struggling to make a little more is actually discouraged.
Next, consider the fact that the tax brackets end at $450,000. To you and me that may sound like a lot but the average CEO makes $727,004 – just short of double the top bracket. Keep in mind this includes small corporations that couldn’t actually afford to pay their CEO’s anywhere near that and also that stock options are not factored in this sum. Ironically this is the class of people who actually have the power to give themselves massive bonuses and make giant financial leaps – people like AIG Exectuive Joseph Cassano AIG, who received $1.5 billion in bonuses and awards after the TARP bailout.
In conclusion, what we find is the biggest gap in our bracket system comes right at the point in which people could begin to save money, buy homes, and pay for their children’s college. However the gap between the well-off and the super-rich isn’t even represented. The people who cannot afford a big tax hike get one and the people who can afford multiple houses, super cars, Ivy league colleges for their children, etc., don’t get a tax increase at all. This doesn’t even factor in capital gains versus overtime taxes, something we’ll get into next time.
Joey, a former member of Occupy Orange County AND a former contributor to Bushala’s Friends For Fullerton’s Future blog, will be continuing this series over the upcoming days…