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Home Publications Blogs Beat the Press NYT Does He Said/She Said on Bush Tax Cuts

NYT Does He Said/She Said on Bush Tax Cuts

Tuesday, 10 July 2012 03:35

The NYT must assume that its readers know all about the policy impact of allowing the Bush tax cuts on the richest 2 percent of the population. That is the only possible explanation for an article that reported what various political actors had to say about this idea without telling readers what is actually true.

For example, the piece told readers that:

"He [President Obama] said that 98 percent of households and 97 percent of small businesses would receive a tax cut under his plan. But Republicans said the president’s proposal would amount to a broad tax on small businesses because many business owners report their profits as personal income."

It would have been worth pointing out that President Obama's claim that 97 percent of small businesses would not see any tax increase under this proposal. Furthermore, even for the most businesses that did pay a higher tax the increase would be trivial.

This is because the tax is a marginal tax. A business owner who earned $300,000 a year, enough to be subject to a higher tax under the Obama plan, would see her taxes increase by approximately 0.5 percent of her income. 

The piece also refers to a proposal put forward by House Minority Leader Nancy Pelosi to have the cutoff for those subject to higher taxes be people with incomes above $1 million rather than the $250,000 cutoff set by President Obama. It would have been worth telling readers that would lose more than 40 percent of the revenue projected to be raised under Obama's tax proposal. It also would have been worth noting that the biggest gainers under the Pelosi plan would be the 0.1 percent of households with incomes over $1 million.

It also is worth noting that impact of the Obama tax increase on families $250,000-$500,000 would be substantially less than the impact of the change to the Social Security indexation formula advocated in the Bowles-Simpson plan and supported by many leaders in the Democratic Party. The proposed change in the inflation adjustment to a chain consumer price index, would reduce benefits by 0.3 percent a year compared to the current formula. After ten years this would reduce benefits by 3 percent, after 20 years by 6 percent. If an average beneficiary survives 20 years, their average cut in benefits would be approximately 3 percent.

Apparently many Democrats, who are unwilling to impose even a trivial tax increase  on people earning more than $500,000 a year are willing to cut Social Security for people getting by on monthly checks that average less than $1,200 a month.  

Comments (3)Add Comment
written by skeptonomist, July 10, 2012 9:04
Most of the discussion in the MSM - and in this post - is about income tax rates. Potentially as important is the changes to capital gains and dividend rates. Most of the information on this seems to appear in Fox News and the financial media, which are very hostile to increases (really, expiration of the drastic Bush cuts).
after this please rename them the Bush/Obama cuts...
written by pete, July 10, 2012 11:32
In December 2010, Obama said he would not extend them...then he did so we could have a commission to look at ways of fixing the tax code..blah blah blah...Now they will likely be extended again for all levels, since his bluff has already been called on this one. Worries of a fiscal cliff are of course overblown. Dean yesterday argued that debt or taxes did not matter....so a $4T reduction in U.S. borrowing over the next ten years were they too expire would wash out with the tax increases.

The defense spending cuts would free up resources for more efficient uses. More workers would be hired if we were building cars instead of tanks...some estimates are that government spending produces only 50 cents of GNP for every dollar spent.
written by Kat, July 10, 2012 11:37
after this please rename them the Bush/Obama cuts...


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About Beat the Press

Dean Baker is co-director of the Center for Economic and Policy Research in Washington, D.C. He is the author of several books, his latest being The End of Loser Liberalism: Making Markets Progressive. Read more about Dean.