Tax Cut Extension: Multi-Millionaires Do the Math, You Should Too

The ruckus over Obama's proposal to extend only part of Bush's tax breaks -- not the part to ultra-ultra-ultra wealthy individuals -- is maybe playing second fiddle to the mosque ruckus. Maybe this should be obvious, since one involves a little math and reasoning, while the other can be argued from straight from the gut, therefore more people can chatter about Muslim community centers.

News Aimed to the Lowest Common Denominator

But it's a shame more people aren't talking about the tax cuts, because the GOP driven (w/ some Democrats on board) arguments against tax-breaks make no more sense than the ones against the Muslim Community Center, so they should be gossiped about. Plus, the tax-cuts arguably have more impact on the average American than the presence of a community center in downtown New York City.

The Tax Policy Center made a great chart showing who, exactly, would be touched by the Obama tax-cut extension plan. Not until you made $196,549/year would you your tax break be impacted even one cent by Obama's plan.

Once you made $196,540, the Obama plan would take an average of $2 off your $5,508 tax cut - two dollars. The most you would "lose" under Obama -- if you happened to make over $8,367,274 -- that is you were in the top 99.9 percentile in income, making $8.4 million dollars or more, would be $61,500.

That is, if you made about $8.4 million dollars, you'd still get $248,640 of the original $310,140 tax cut. You wouldn't get that extra $61,500 tax cut, so you'd miss out on, I don't know, that bottle of Bordeaux (not any Bordeaux, mind you, a bottle of 1945 Chateau Mouton-Rothschild). Put that in your pipe and smoke it T-partiers.

The Tax Policy Center notes that the Obama plan will actually only cut a very small part of the overall deficit - 7%. Obama would only change a very small, small number of peoples' incomes (not "small businesses" that would feel the pinch). The TPC says:

"How much will the President's proposal save? Unfortunately, not nearly enough to close the cumulative budget deficit. The administration's proposal shaves off about $680 billion from the 10-year deficit--a modest $68 billion per year"

But the cost of extending all the cuts is worse news. The Tax Policy Center writes: "From a budgetary perspective, the price of extending all of the cuts is steep; full extension would contribute $3.7 trillion to the deficit over the next ten years..."

The Battle Between Math & Rhetoric (hint: math is losing)

Paul Krugman also points out that the insistence on extending the tax cuts as opposed to going with Obama's plan makes no sense. He brings our attention to the craziness of what the GOP is quibbling over, rather than the insignificance of the cuts to the overall budget.

He writes:

"According to the nonpartisan Tax Policy Center, making all of the Bush tax cuts permanent, as opposed to following the Obama proposal, would cost the federal government $680 billion in revenue over the next 10 years. For the sake of comparison, it took months of hard negotiations to get Congressional approval for a mere $26 billion in desperately needed aid to state and local governments."

Even Alan Greenspan, forever shocked that the markets let him down, recommends suspending all the 2001 and 2003 tax cuts. Aside from FOX News, where John Stossel is "tired of Greenspan", and finds it "ironic" that Greenspan once wrote for Ayn Rand, and (not ironic the way I do), what's up with the rest of the people?

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