Can Someone Please Report this Correctly? Democratic Plan Extends Tax Cuts for People Making Over $250,000 a Year as Well

by Joshua Tucker on December 3, 2010 · 6 comments

in Media

I’m not sure this post is going to qualify as applying political science research to anything, but I just want to point out again that the current Democratic proposal for extending tax cuts is a tax cut for everyone who pays taxes. The cut off rate is for income over $250,000 (or $1,000,000, or whatever). But people who earn over $250,000 will still get a tax cut on their first $250,000 of income. Yet here is how Politico reports on the bill:

The objection means any tax-cut votes will be delayed until Saturday while Reid begins taking the procedural steps necessary to open debate on two separate measures: first, to limit the tax cuts to people who earn less than $250,000, and second, to people who earn less than $1 million. (emphasis added)

I don’t mean to pick on Politico. I heard the exact same thing on two different NPR programs this morning, the news of the hour and yesterday’s Marketplace. (To their credit, the hosts at NPR’s It’s All Politics podcast, Ron Elving and Ken Rudin, got it right.) But I think we should really be calling journalists on this, which is what I’m trying to do here.

Now to be fair, if you want to talk about the policy proposal in terms of what will happens to the amount of taxes people are paying right now, it is correct that people earning over $250,000 will pay more taxes come January 1 if the Democratic plan passes, but only on income beyond $250,000. So if you make $250,001 a year, your tax rate will only increase on that last $1. But again, if you want to talk about extending the Bush tax cuts, the Democratic proposal ensures that those tax cuts will be extended to everyone for their first $250,000 of earned income.

{ 6 comments }

Rob December 3, 2010 at 1:38 pm

If you’re going to criticize people for misstating the tax proposal, it behooves you to get it right yourself. The proposal is to allow tax rates to increase for the top two brackets–that’s individuals with taxable income over $200,000 and households with taxable income over $250,000. You refer only to the higher number, and you claim that’s the number for everyone. That’s incorrect–and you persist in being incorrect even though this was previously called to your attention.

john jansen December 3, 2010 at 2:53 pm

I would respectfully disagree with you. There is no tax cut on the first 250K of income. The rate will remain the same. Either the rate remains the same as it has been or it goes higher. I do not see how you arrive at tax cut.

Scott December 3, 2010 at 4:26 pm

And it’s not even the first $250k of income, right?

It’s adjusted gross.

Andy December 3, 2010 at 4:46 pm

Thanks for pointing this out. I believe the quality of reporting / the quality of Democratic rhetoric is even worse than you suggest because Obama’s plan is to revert to higher tax rates on “taxable income” of $250,000+. If my understanding of his plan is correct, this means that the $250,000 number is a vast underestimation of the amount of pre-tax income required to be in this class of taxpayers. This is because “taxable income” is income after taking into account all available deductions and exemptions. For people with income in that range, it is likely that they will have tens of thousands of dollars of deductions (state taxes and home mortgage interest being the likeliest sources), as well as thousands of dollars worth of personal exemptions.

Again, assuming my understanding of Obama’s proposal is correct, the actual cutoff for a married couple is probably much closer to $300,000 than $250,000.

Ian Callum December 3, 2010 at 7:12 pm

The common usage of the term tax cut would indicate that a person’s tax bill would be reduced. People over 250K would be paying more tax if the Democrat bill were passed. Paying more in taxes means your taxes are being increased. This isn’t just semantics. You actually wind up with less money.

MadDog2020 December 5, 2010 at 6:23 pm

Any politician in favor of tax cuts for the rich (>$500k or >$1000k) on either side of the aisle is ONLY interested in rewarding donors, not helping the economy.
I am a very successful small businessman. Within reason, higher taxes provide me an incentive to reinvest in HIRING and capital equipment, instead of pulling the money out as profit.

Why do the few honest Congressmen and Senators left, not explain this to the American people?

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