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The Largest Tax Hike Email Debunked, Part 1 
13th-Sep-2010 12:49 pm
Intellektuels
The Viral "01/01/11 The Largest Tax Hikes In The History Of America Will Take Effect" Email Is Complete Fiction.
This is going to be a bit long, but it needs to be in order to accurately address and debunk the claims circulating in millions of email forwards. This is the newest attempt in the run up to the midterm elections in November to gin up fear and create hysteria at the polls. Nothing dispels ignorance like information, and nothing upends a lie like the truth. Pass this on by linking it to as many people as you like so that people can get accurate information and make informed decisions based on actuality instead of fear mongering. Thank you.


For starters, it doesn't really count as a the "largest tax hike in history" if it only affects a tiny fraction of the population, and restores rates to what they were previously (rather than actually raising them). The 'death tax' according to this misonformation would pass a tax bill to the loved ones/recipients of willed assets. That is NOT how the 'death tax' works. The tax is charged to the estate, not the heirs (much like the gift tax, which is essentially the same tax with a lower exemption, is paid by the giver, not the recipient). The executor of the estate is the person responsible for making sure that it gets paid from the assets of the estate. Often that person is a loved one, but that's not mandatory and it's not like the IRS is sending out a "death tax bill" to everyone who experiences a death in their family. If a close relative with a taxable estate dies, you don't suddenly personally owe the IRS money. In any case, the amount owed in tax is always going to be less than the value of the estate, so it's impossible to come out owing as "pass along a death tax bill" implies. Not that I expected anything referring to the "death tax" to be particularly honest. At least this didn't refer to it as the "Obama Tax Hike" like I've started to see, even though he was still in the Illinois legislature when the law causing it was passed.

The assertion that people will have to pay taxes on their employer provided health insurance is wrong unless in 2018 it is deemed to be a Cadillac plan. Employers will however have to include health insurance in W2s beginning 2011 but again employees will not pay taxes. Going from 35% to 39.6% is not a larger tax hike than when it went from 15% to 67% in 1917. Or from 25% to 63% in 1932. Or from 31% to 39.6% in 1993. Some conservative political movements such as the "Tea Party" have criticized federal spending as being out of control. While spending is up, taxes have fallen to exceptionally low levels. In fact, tax bills in 2009 are at the lowest level since 1950. As the non-partisan Tax Policy Center (TPC) noted Wednesday: "[N]ext year about 36 million taxpayers will report income" using the returns most small businesses use to report income, but "Only about 900,000, or 2.5 percent, would pay higher rates if the Bush tax cuts were allowed to expire for those in the top brackets."

The TPC went on to note that while that 2.5 percent did very well, earning "almost 44 percent of all the business income included in individual returns," the "average positive business income reported on 1040s is less than $40,000," a far cry from the $200,000 it would take for the business income to be taxed at higher rates under Obama's plan. Three percent, it should be noted, is much less than 50 percent, and does not qualify as "most." That's not to say that some people reporting business income wouldn't face higher taxes, it's just that those people are very wealthy, and are not necessarily engaged in the sorts of careers most of us think of as "small businesses".

Via Media Matters:

Viral Email: TAX HIKES COMING JAN. 1

August 30, 2010 4:52 pm ET

The following email has been widely forwarded.  Media Matters Action Network has written a response to the text below.  Please feel free to copy and paste it and send to your friends.

"TAX HIKES COMING JAN. 1"

[note - all mistakes below are original to the text]

RESPONSE

Hey,

Thanks for forwarding this email.  It would definitely be scary if Congress was planning on raising everybody's taxes at the end of the year, especially while the economy is struggling to recover.  But luckily, that's not going to happen.  Many of the claims in this email are misleading or outright lies.

You might remember that Sarah Palin recently said something similar about how Democrats wanted to have "the largest tax increase in U.S. history." Well, a website called PolitiFact.com that looks into claims from both Democrats and Republicans said that it's a blatant lie.  In fact, they rated Palin's statement "Pants on Fire" - the worst rating somebody can get.  You can read it here:http://www.politifact.com/truth-o-meter/article/2010/aug/04/distorting-democratic-plans-bush-tax-cuts/

The details of all of this are a little complicated, but it's important to understand how we got to the point where this is even a debate.  Basically, Republicans passed huge tax cuts early in the Bush administration to try to stimulate the economy.  At the time, the only way they could get enough votes in Congress to pass the tax cuts was to use a procedure called reconciliation (you might remember it from the health care debate) and write the law so that it would expire in 10 years.  Read more about that here: http://www.time.com/time/magazine/article/0,9171,128937-1,00.html

So now the 10 years is up and Congress has to figure out what to do.  I know it might seem obvious that they shouldn't let taxes go up at all, but here's the thing: the tax cuts cost A LOT of money (way more than Obama's stimulus) and they didn't lead to any significant economic growth.  I know we all worry about the size of the federal deficit, but most people don't realize that the Bush tax cuts are one of the biggest causes of the deficit problem.  Look: http://www.offthechartsblog.org/whose-deficit-is-it-anyway/

Still, most people can't afford to pay higher taxes right now and President Obama and Congress recognize that.  That's why they're planning to pass a bill continuing the tax cuts for almost everybody, but letting them expire for the richest Americans.  We're talking about households that make more than $250,000 per year, not middle class families.  And the changes will only affect 1.9% of small business owners:

http://www.politifact.com/truth-o-meter/statements/2010/jul/22/mike-pence/mike-pence-says-democrats-want-all-bush-tax-cuts-e/

http://www.cbpp.org/files/8-29-08tax.pdf

In fact, the only way the huge tax hikes in the email will occur is if Republicans do what they've been doing since Obama took office and try to block the bill when it comes up for a vote.  Because if Congress doesn't pass anything at all, then everyone's taxes will go up - but that's not what anyone has in mind. 

This is already getting pretty long, so I'm not going to get into every little detail in the email.  I think the fact that the main point was so dishonest should tell you all you need to know.  If there's a specific claim that's bothering you, I encourage you to do a little research of your own - this infographic summarizing President Obama's proposals for the expiring tax cuts is a good place to start:http://graphics8.nytimes.com/images/2010/07/25/us/politics/25tax-graphic/25tax-graphic-popup.jpg

Please, be careful about forwarding emails like this in the future without getting all the facts.  Otherwise, people might get all worked up for no reason.   

Hope to talk to you soon!



Via TPMDC:

GOPers Revise History: Say Dems Have Tax Hike Ticking Time 'Bomb'



Somewhere between approving a massive tax cut plan with an expiration date and President Obama's election, Republicans seem to have decided that it's Obama's fault the tax cuts aren't permanent.

Karl Rove's Crossroads GPS this week detailed the "seven public policy initiatives" that will be most important for Congress next year. The group runs ads against Democrats across the country.

On the list at No. 1: "Stop the Obama tax hike time bomb scheduled to detonate on January 1, 2011."

That's not a typo. Rove's group is claiming that Obama set the timer on that so-called "bomb."

And in this slick video produced by the House GOP for the summer recess, Rep. Kevin Brady (R-TX) uses the "bomb" term as well. He says there is a "ticking tax bomb that can explode on our economy and families at the end of this year."

Watch:



There's a debate about whether it's fair to say that an expiring tax cut amounts to a tax increase. TheWashington Post is out with this nifty calculator to help you see if your taxes would go up next year under Obama's plan, which extends the cuts for families earning $250,000 or less. A work packet for House Republicans obtained by TPM actually spells out the situation almost accurately: "Washington Democrats are poised to allow the largest tax increase in American history to take effect next year."

The word "allow" is key -- the whole point is that they were written this way.

It's true that Obama has repeatedly insisted he'll let them expire and rebuffed suggestions from tax-cut-friendly Democrats such as Sen. Max Baucus to extend them during this tough economic time. But is it really fair to call it a time bomb set by the president? Hardly.

Let's roll tape.

It's May 26, 2001, and the Senate, with just 12 Democrats on board, passes the Bush tax cuts. The House approves the tax cuts too, and 28 Democrats vote "yes." They cost $1.35 trillion and were set to expire to comply with Congressional rules, triggered by the GOP's use of reconciliation, that required they either expire within 10 years or not increase the deficit. So, the "tax increase" was written that way -- by Republicans.

June 7, 2001. President Bush signs the tax cuts, seemingly unaware of the ticking time bomb within. He declared:

A year ago tax relief was said to be a political impossibility. Six months ago it was supposed to be a political liability. Today it becomes reality. It becomes reality because of the bipartisan leadership of the Members of the United States Congress, Members like Bill Thomas of California, Ralph Hall of Texas, Charles Grassley of Iowa, Max Baucus of Montana, Zell Miller of Georgia, John Breaux of Louisiana, Trent Lott of Mississippi and the entire leadership team in the Senate, and Denny Hastert of Illinois and the leadership team in the House of Representatives--some Democrats, many Republicans--who worked tirelessly and effectively to produce this important result.

In 2003, the Republican-controlled Congress approved another tax cut measure, which accelerated some of the benefits they'd put in place the year before. That also was set to expire.

Fast forward to Bush's 2008 State of the Union address, when he urged Democrats controlling Congress to make his tax cuts permanent:

Unless Congress acts, most of the tax relief we've delivered over the past seven years will be taken away. Some in Washington argue that letting tax relief expire is not a tax increase. Try explaining that to 116 million American taxpayers who would see their taxes rise by an average of $1,800.

This is going to be a major topic of debate this fall before the midterm elections. Of the 12 Democratic senators who backed the tax cuts nine years ago, 7 are still serving. Baucus already has made his preference known. The others? Sens. Blanche Lincoln (AR), Ben Nelson (NE), Dianne Feinstein (CA), Tim Johnson (SD), Herb Kohl (WI) and Mary Landrieu (LA). (Sen. Arlen Specter, then a Republican, also voted for the tax cuts.)



Bill Clinton managed to pass "the largest tax hike in history" (as it was characterized at the time) around 1993. How did the economy do after that? It boomed. George Bush passed a bunch of tax cuts after being elected. How did the economy do after that? The boom ended and there was just so-so growth. Eventually, it collapsed. The idea that tax policy affects the economy seems to have no actual real-world proof. Other factors are far more important (e.g., the collapse of the banks had little to do with tax policy).

Slate.com recently juxtaposed current footage of Republicans claiming that tax cuts don't have to be paid for with budget cuts, because they "pay for themselves," against GHW Bush's "voodoo economics" accusation against Reagan early in the 1980 campaign. They posted a graph that shows how the budget deficit has varied under Democratic and Republican presidents since 1970 (guess who's deficits are a LOT bigger?). For those of you who plan to vote in November, and you absolutely should, I would strongly urge you to consider this data when choosing candidates to support. It's pretty compelling.

- Click HERE for part 2 of this post -
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