Tax Cut Myths: Fact Checking The Showdow - AP/HuffPo

[WillyT]

Tax Cut Myths: Fact Checking The Showdown
BERNARD CONDON | AP/HuffPo
12/ 3/10 03:51 PM

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Here are a few myths, half-truths and short-hand distortions that have marred the debate:

_ Under the Obama plan, taxes will increase for families making more than $250,000.

Wrong. Actually, a family could make a lot more and still not face higher taxes. Obama wants to raise the top two brackets from 33 percent to 36 percent and from 35 percent to 39.6 percent. The first of the two – 36 percent – is widely assumed to kick in at $250,000. Obama says that himself.

But that's not right. The higher rate would apply to families with $232,000 or more of taxable income, or what's left after personal exemptions and deductions have been subtracted from income. Deductions can be sizable, especially for wealthy people. Think state and local taxes, mortgage interest and charitable contributions. The result is that a family making $300,000 or even more could have taxable income of less than $232,000.

"A lot of people making more than $250,000 won't be paying higher taxes," says Clint Stretch, a managing principal of Deloitte Tax.

So where does the $250,000 come from? That's a number for "adjusted gross income," which is total income minus a few things like 401(k) contributions and alimony payments.

A family that had adjusted gross income of $250,000 and took two personal exemptions, plus a standard deduction instead of itemizing, would have taxable income of $232,000.

So $250,000 is distorting. It refers to adjusted gross income, not total income. And most people in that income range itemize their deductions.

The key number for families is taxable income of $232,000; for individuals, it's taxable income of $191,000. Only 2 percent of U.S. households would face the 36 percent tax rate, according to the nonpartisan Tax Policy Center, a Washington think tank.

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More: http://www.huffingtonpost.com/2010/12/04/in-tax-showdown-myths-spr_n_792024.html

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[WillyT]

1. And It Truly Is About The Rich... Check This One Out !!!

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_ The tax debate is all about income tax rates.

Wrong. For all the attention given to higher taxes on earned income if current rates expire, the big hit to some families will come from taxes on capital gains and dividends. The government now takes 15 percent of both. If the Bush cuts aren't renewed, the tax on long-term gains would rise to 20 percent.

And the rate on dividends would shift to your income tax rate, or a maximum 39.6 percent. Under Obama's plan, the tax on dividends would rise to 20 percent for everyone.

If Congress doesn't act to stop taxes from reverting to their pre-2001 levels, new limits would be placed on deductions and exemptions, too. And a $1,000 child credit would be halved.

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Link: Same as OP.

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