Newsmax is one of the many conservative news sites that routinely distort reality. Here’s a perfect example, David Patten’s analysis of the American Taxpayer Relief Act of 2012 (ATRA), aka the fiscal cliff deal struck last week. The distortions come fast and furious.
Reflecting the progressive nature of the new tax structure, the Tax Policy Center estimates that workers earning between $50,000 and $75,000 will pay an about $822 more in taxes this year. Compare that to a taxpayer with an income of $1 million, who is expected to shell out an additional $170,000.
No, that is not what the Tax Policy Center says. He refers to this chart, which does not say that those who make a million dollars a year will pay $172,000 more each year in federal taxes, it says those who make more than a million dollars a year will pay that much on average. That includes lots of people who make tens, even hundreds of millions of dollars. This isn’t particularly complicated math. The marginal tax rates on those making more than $400,000 a year only go up by 4.6%, from 35% to 39.6%. That’s a far cry from 17.2%, even if you add in some of the other smaller tax increases in the bill.
Perhaps the biggest surprise for taxpayers: Despite both parties’ promises during the campaign that taxes would not go up for middle-income wage earners, The Tax Policy Center reports taxes will rise for more than 77 percent of American households. Most of this stems from the expiration of the so-called payroll tax holiday.
Obama was clear on what he wanted from the start, which was an increase in marginal tax rates for those making over $250,000; it ended up being those making over $400,000 due to political compromise. The payroll tax rates were not included in that and everyone knew it. For the last two years, everyone has gotten a 2% break on payroll taxes and that is now expiring. And by the way, this is something every conservative should support. That temporary reduction in payroll taxes contributes to shortfalls in Social Security and Medicare revenue. It was a bad idea from the start. But the expiration of those temporary cuts was inevitable and has nothing to do with Obama’s promise not to raise marginal tax rates.
About $160 billion of revenue this year due to the expiration of the payroll tax “holiday,” which increases the payroll tax that helps pay for Social Security from 4.2 percent to 6.2 percent. According to the Tax Policy Center, this increase will hit lower- and middle-income taxpayers harder, in percentage terms.
Of course it will. You know why? Because payroll taxes are capped, they’re only taken out on the first $100,000 or so in income. That means the wealthy pay a far lower percentage than everyone else and makes that tax highly regressive. Would Patten support lifting the cap on payroll taxes? Of course not. But I sure as hell would. It would make federal taxes less regressive and help fix the revenue problem with Social Security and Medicare.