The sky is falling. President Obama is reversing the Bush tax cuts. The economy will collapse. Those who make over $250,000 per year will suffer greatly.
Really? Let’s do some simple math. We all hate math, but sometimes we just have to run the numbers.
Present tax rate: 35 percent.
Reversion to pre-Bush tax rate: 39.6 percent.
Tax rate increase: 4.6percent.
Afamily making over $250,000 per year will pay an additional $46 per $1,000 of taxable income. Put yourself in these taxpayers’ shoes. Yes, you will be paying more and it will be debated as to whether this is fair or is “soaking the rich.” What is not debatable is whether this will cause irreparable damage and drive the economy into depression. The economy did quite well at these rates in the 1990s.
A family earning $250,000 with $30,000 in deductions and a net taxable income of $220,000 will no longer take home $143,000 and will have to scrape by on $132,880 per year, or $11,073 per month, or $2,555 per week. This is a problem most people in Maine would be happy to deal with. The sale of $100,000 of assets subject to capital gains will net $80,000. Think of these numbers when you hear pundits, lobbyists and politicians predicting disaster for those who are fortunate enough to earn $250,000 per year, have capital gains and are being asked to contribute to the reduction of the national deficit after eight years of enjoying the Bush tax cuts.