Jim Cramer is very worried about the impact of the tax changes to his bottom line:
As someone who can expect a real shock when I get an Obama-shredded paycheck the moment his plus-$250,000 tax levy kicks in, I can’t be thrilled. Only the brain-dead like to take a pay cut for doing the same job. I probably won’t get paid for my work until July, with my current salary going to fund an immense expansion of the federal budget ordered by the man I voted for.
Booh F-in Who pal. I wish I had your income. And by the way, thanks for all the great tips over the last year:
Hmmm….So there was another President who presided over a 3000 point loss on the stock market? I thought the drop in my 401K was all Obama’s fault-in only 5 weeks. Silly me.
Life is tough when are making over a million a year . Especially when mean old Socialists are seeking to deprive you of 3 extra cents on each of those dollars. Good God man! There is a war on rich people! Success is being penalized! Pretty soon “there will not be enough wealthy people left to bleed.” Oh my God! Jim might have to drink American beer! God save us!
Dan Gross over at Slate has done a pretty good job of fisking how absurd these claims really are. Cramer and all the rest also ignore what I call the “plateau effect”, namely that after a certain point ones living expenses tend to level out-especially when you look at “must haves” vs “nice to haves”.. But I’ll let Mr. Gross explain it:
[The Obama Tax plan] consists largely (but not exclusively) of returning marginal tax rates to their levels of 2001, before Gerson and the epically incompetent Bush administration of which he was a part got their hands on the reins of power. Obama wants to let marginal rates for families with taxable income (not total income, but taxable income) of more than $250,000 revert from 33 percent to 36 percent, and to let the top rate—currently 35 percent on family income above $357,000—revert to 39 percent. (Here are the current tax tables.) There’s also talk of capping—not eliminating, but capping—deductions on charitable giving and mortgage interest.
As the video above notes, and Gross explains further, the damage that has been done to the economy did not start on January 20th 2009. Maybe we would not have needed a stimulus plan if we’d raised the money to pay for our expenses to begin with:
This return to 2001’s tax rates was actually part of the Bush tax plan. The Republicans who controlled the White House and the Republicans who controlled the Congress earlier this decade decreed that all the tax cuts they passed would sunset in 2010. They put in this sunset provision to hide the long-term fiscal costs of the cuts. The Bush team and congressional supporters had seven years to manage fiscal affairs in such a way that they would be able to extend the tax cuts in 2010. But they screwed it up. Instead of controlling spending and aligning tax revenues with outlays, the Bush administration and its congressional allies ramped up spending massively—on two wars, on a prescription drug benefit for Medicare, on earmarks, etc. Oh, and along the way, they so miserably mismanaged oversight of Wall Street and the financial sector that it required the passage of a hugely expensive bailout. Even before the passage of the TARP, the prospect of extending all the Bush tax cuts was a nonstarter. Once Bush signed the $700 billion bailout measure into law, extending tax cuts was really a nonstarter. The national debt nearly doubled during the Bush years. So if you want to blame someone for raising taxes back to where they were in 2001, don’t blame Obama. Blame Bush, his feckless Office of Management and Budget directors, his economic advisers, and congressional appropriators like Trent Lott and Tom DeLay.
Finally, there has been a near total absence of discussion of what higher rates will mean in the real world. That’s the point that Gross makes at the end of his article-when you do the math, and look at the actual tax impact of what has been proposed- it just does not compute. Even the rhetoric about how small businesses and entrepreneurs will be hurt does not actually work out, when you break out the calculator and the stubby pencil:
Say you’re a CNBC anchor, or a Washington Post columnist with a seat at the Council on Foreign Relations, or a dentist, and you managed to cobble together $350,000 a year in income. You’re doing quite well. If you subtract deductions for state and property taxes, mortgage interest and charitable deductions, and other deductions, the amount on which tax rates are calculated might total $300,000. What would happen if the marginal rate on the portion of your income above $250,000 were to rise from 33 percent to 36 percent? Under the old regime, you’d pay $16,500 in federal taxes on that amount. Under the new one, you’d pay $18,000. The difference is $1,500 per year, or $4.10 per day. Obviously, the numbers rise as you make more. But is $4.10 a day bleeding the rich, a war on the wealthy, a killer of innovation and enterprise? That dentist eager to slash her income from $320,000 to $250,000 would avoid the pain of paying an extra $2,100 in federal taxes. But she’d also deprive herself of an additional $70,000 in income!
Can she, or we, really be that stupid?
I don’t have such worries-as I am already the victim of forcible income redistribution. But just for giggles I worked up some hypothetical scenarios on my computer to check the validity of Gross’ assumptions and they check out. I also looked up some ideas about the other kind of taxes and the way they work out:
Let’s imagine two frugal traveling salesmen. They each have to buy a new car every four years to (say) keep up appearances, and they need reliable transportation.
(One guy makes 20K, the other 300K)
Run the numbers on a the RATE of total income each pays on on 5% sales tax.
Poor Boy buys a $20,000 car pays $1000 or 5.0% of his income.
Rich Boy buys a $60,000 car pays $3000 or 1.0% of his income.
Poor Boy has 5 times the tax bite, or rate of tax on a car. Rich Boy hardly feels sales taxes.
Then run the numbers on a $30 pair of Levis, and the tax rate discrepancy triples.
Facts are stubborn things-John Adams.
All the same-I’d be happy to trade portfolios with Cramer-even at the higher tax rate.
1. W presided over a 3,000 point loss due to 9/11, not because the markets were reacting to his overt tendency towards income redistribution.
2. I agree that rich people are whining about the marginal increase in taxes. Unfortunately they (and all of the other folks who actually make the engine of our economy run) are doing more than whine and cry– thus the huge fall in the markets of late.
3. I know you’ve read Atlas Shrugged. See any parallels between that fiction and the reality we now face?
4. I saw it put this way today:
a. raise taxes=bad, lower spending=good Clinton
b. lower taxes=good, raise spending=bad Bush II
c. raise taxes=bad, raise spending=bad Obama
He’s basically doing the opposite of “Best practices”.
Sluf
Then that means W presided over two 3000 point losses. Which is really not true, because the DOW only dropped 2000 points in the six months after 9-11 and then rebounded quite well. However, In October of 2007 the Dow stood at 13,000+ and on the day Bush left office it was below 9000.
Furthermore-everyone agrees a stimulus was necessary. I happen to think this one has too many tax cuts and not enough spending on the right things. That is because we have to get consensus from assholes like Boehner-who reneged anyway. He deserves to be kicked in the balls.
So to do bankers who took the stimulus money and then did not start lending again-but used the money to improve their capital balance sheets. Kick them twice. Then shoot big Wall Street investors.