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Obama Raises Tax on 163 Million Middle-Class Americans

January 12th, 2013
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01.12.2013

2013 Tax Increases from "Fiscal Cliff."  (Graphic credit: Wall Street Journal)

2013 Tax Increases from “Fiscal Cliff.” (Graphic credit: Wall Street Journal)

Obama Raises Tax on 163 Million Middle-Class Americans

original article written by Net Advisor

WASHINGTON DC. Some have claimed that President Obama is the champion for the Middle-Class, by lowering tax rates. Millions of people have fallen into this trap door argument. This article examines how not only the Middle-Class (and everyone else) will see their taxes go up, we also show how we all get hit with indirect taxes that will increase healthcare costs for everyone.

[1] History Check
The Obama talk was that only the so called “rich” would be subject to new taxes. Many of the people being targeted here are also small business owners who actually employ people, pay taxes and contribute to the economy. In the course of a year we go from targeting only the super wealthy to now taxing those with modest income. Examples:

2011: “(Obama’s) proposed new tax would affect Americans who earn more than $1M (one million) a year” (Source: BBC).

2012: (Obama): “…Millionaires and billionaires should pay their “fair share” to help reduce the federal debt and pay for necessary government investments like education” (Source: USA Today PDF).

 2012: “Tax the Rich.” Rich means you earn $250,000 or more (Source: Citizens for Tax Justice PDF).

How did Obama go from taxing just “millionaires and billionaires” all the way down to $250,000 a year?

For a short time there was a small tax break for Middle-Class workers. PolitiFact’s “Truth Meter” was temporarily correct that Obama and Congress lowered the payroll tax from 6.2% to 4.2%  in 2011.

“Social Security is funded by a 12.4 per cent tax on wages up to $110,100, rising to $113,700 in 2013. Half is paid by employers and the other half is paid by workers.

For 2011 and 2012, Congress and Obama cut the share paid by workers from 6.2 per cent to 4.2 per cent. A worker making $50,000 saved $1,000 a year…a worker making $100,000 saved $2,000 a year.”

— Source: Daily Mail.UK (PDF)

[2] Obama: No New Taxes on the Middle-Class?
In July 2012, Obama claims to have “pushed” for a Middle-Class “tax-cut” extension during his weekly address (Source: ABC News PDF). The reality is there were no new tax cuts to begin with in 2012. This “push” was not to lower taxes, but rather to continue the same “Bush Tax Rates” and hit high-income earners with new taxes. But was this the case?

Video: Obama’s “Read My Lips” speech?

Obama pledges not to raise taxes on the Middle-Class (video: text of speech):

“I can make a firm pledge. Under my plan no family making less than $250,000 a year will see any form of taxes; not your income tax, not your payroll tax, not your capital gains taxes, not any of your taxes.”

— Barack Obama Speech on “Middle Class Tax Relief”

[3] Obama “Pushes” Middle-Class Americans Over the Fiscal Cliff
Now that Obama won re-election in 2012, his supporters might have been under the illusion that the President would continue pushing for ‘Middle-Class tax reductions.’ We’ll, unfortunately this was NOT the case.

As of January 1, 2013, 163 Million “Middle-Class” Americans got a tax increase [Sources: Business Week (PDF) and Fox News (PDF)]. Those with incomes of say $50,000 a year will now pay an extra $1,000 per year taken out of their payroll checks or $3,100 a year total [Math: $50,000 times the new payroll tax of 6.2% = $3,100].

Those with incomes at $113,700 will now pay $7,049.40 per year [Math: $113,700 times the new payroll tax of 6.2% = $7,049.40]. This is a tax increase of $2,274 per year from the 2011 law (4.2% payroll tax).

[Math: $113,700 times the old payroll tax (4.2%) = $4,775.40 per year – the new payroll tax (6.2%) = $7,049.40. Then subtract the difference between the old payroll tax ($4,775.40) (4.2% rate) from the new payroll tax (6.2% rate) ($7,049.40) =  $2,274 additional payroll tax increase for those with $113,700 of income.

If your income is $20,000 a year that’s $1,240 per year tax under the new law. Note that it does not matter what your income is, you are subject to the tax if you receive a regular paycheck.

This is a far cry from taxing the ‘millionaires, billionaires, and corporate jet owners‘ discussed during the 2012 campaign. It is a also a far cry from taxing just the “Wealthiest Americans” as Team Obama repeatedly chanted.

Neither Obama nor enough members of Congress seemed to show any interest in keeping taxes down for the Middle-Class. Remember the old adage, it’s not what they say, but what they do. Many politicians will tell Americans all day that they are for lower taxes, only to tax you at 4:00 AM while you are sleeping – as they did with the ‘Fiscal Cliff’ Bill.

[4] House Minority Speaker Pelosi Misspeaks?
Nancy Pelosi (D-CA) said the Fiscal Cliff legislation included “permanent tax relief for the middle class” [Source: CBS, PDF (highlight added)]. Just to let everyone understand that there is not one single provision for “permanent tax relief for the middle class.”

The only thing that happened regarding taxes for everyone earning under $400K a year is that their tax rates will remain the same as they have for the last 11+ years. This was a tax extension, not a new tax cut which occurred under the Economic Growth and Tax Relief Reconciliation Act of 2001 also dubbed as the “Bush Tax Cuts.

[5] Why the Payroll Tax Hike? Have You Heard About ObamaCare?
The Cato Institute published a 2009 report that discussed how taxes were likely to go higher under ObamaCare and how the Middle-Class would end up flipping most of the bill. The following chart from the Heritage Foundation drew data from the Joint Committee on Taxation. The chart shows how despite any current legislation, taxes will continue to increase under ObamaCare.

"Obamacare imposes numerous tax hikes which total more than $500 billion over 10 years. Obamacare's higher tax rates on income and investment will slow economic growth, leaving hardworking American families and businesses worse off. A particularly harmful new payroll tax on investment income goes into effect in January 2013" (Source: Heritage Foundation).

“Obamacare imposes numerous tax hikes which total more than $500 billion over 10 years. Obamacare’s higher tax rates on income and investment will slow economic growth, leaving hardworking American families and businesses worse off. A particularly harmful new payroll tax on investment income goes into effect in January 2013” (Caption and Chart Credit: Heritage Foundation. Data Source: Joint Committee on Taxation).

[6] ObamaCare Raises Taxes on EVERYONE
What Mr. Obama and Ms. Pelosi won’t tell you is the payroll taxes are just a tiny part of the actual amount of taxes all Americans – regardless of income will begin to pay under ObamaCare.

“Buried in Nancy Pelosi’s health-care bill is a provision that will partially repeal tax indexing for inflation, meaning that as their earnings rise over a lifetime these youngsters can look forward to paying higher rates even if their income gains aren’t real…”

“…This is a sneaky way for politicians to pry more money out of workers every year without having to legislate tax increases.”

— Source: Wall Street Journal (PDF), 11-6-2009

CBO Costs of ObamaCare Revising Higher before it starts (Source: The Weekly Standard).

CBO Costs of ObamaCare Revising Higher before it starts (Source: The Weekly Standard).

[7] More Taxes Hit Seniors, Middle-Class, Those with Higher Out-of-Pocket Medical Costs
Fox News reported additional NEW costs and 20 new taxes that will hit Americans from 2010 to 2018. Aside from the payroll tax, here is a list of taxes to impact for 2012 (Source: Fox News PDF).

To say that Obama is ‘for the Middle-Class’ is a nice gesture. So “let me be (perfectly) clear:” In reality Middle-Class taxes are going up under Obama’s leadership in terms of payroll taxes, income taxes and yes higher healthcare costs.

Consumers will see their health premiums rise if they haven’t already. ObamaCare hits healthcare companies with $8 Billion in taxes just in 2014 (PDF – highlight added). If anyone thinks that their healthcare provider(s) are going to just absorb these costs and lose money, guess again.

Businesses pass on their higher taxes and expenses to their end customers – that means us. This is nothing but an indirect tax on consumers. We can thank ObamaCare supporters for higher taxes and higher health insurance costs. We can also thank the Obama Administration for higher taxes on the Middle-Class and everyone else for that matter. Remember this at the ballot box.

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