Warren Buffett, self-proclaimed financial genius, knows what he is talking about. I have said repeatedly that if the Bush Tax Cuts are allowed to expire and the Senate approves the Obama Tax Plan that Philadelphia would be a better place. A study that fiscally backs up my original statement was released October 7 2010 from an independent and non-partisan organization, the Tax Foundation-and it is also backed by Mr. Buffett.
Cold, Hard Facts
The report states that the Bush Tax cuts, if allowed to expire, would in fact hit the poorest Philadelphians, Pennsylvanians, and Americans everywhere the hardest. Yes, that statement completely contradicts the previous one. However, the same study also states that the Obama Tax plan, should it pass, helps everyone who needs it the most-the poorest Philadelphians. In fact, a family of four making $40,000 per year would see an increase in after tax take home pay of 9.8 percent per year.
Should the Bush Tax Cuts be allowed to continue, the wealthy-for this example let us say a person makes $1 million per year. That person would see an increase of 6.7 percent in after tax income for a total take home pay of $748,308. However, if the Obama budget is adopted, the same wage earners would see a -1.3 percent in income, putting their total after tax income at $692,257. I don’t know about anyone else, but I think that anyone who earns a million a year can afford those taxes and if they cannot, then they do not deserve to make that much. As Mr. Buffett stated, “time to cut taxes on those outside the top tax brackets,” and, about how to raise money for the government and decrease the deficit, “Why not get it from me instead of the guys who will serve us lunch?”
By the end of this year, I will be lucky if I can surpass $20,000 in earnings, meaning I would fall into the second lowest tax bracket. If the Bush Tax Cuts are allowed to expire for this tax bracket, then I would see an increase in my “take home earnings” of 4.4 percent. However, if the Obama Budget were adopted, I would see an increase of 9.7 percent, according to the study. While it is true that people who make less than $10,000 will see tax cuts of up to $53, those making between $10,000 and $20,000, my tax bracket, would see a tax cut of $387. This figure is the $53 plus $334, which is the cut amount of the second tax bracket, the $10,000 to $20,000. No matter which way the tax plan goes, if the Bush Tax Cuts are extended, expire, or if the Obama plan is adopted, I would not see too much of a difference.
Why Do I Care?
The problem with this is that every person who ever has or ever will pay taxes sees the “step ladder economics” calculations. What many people do not realize is that when taxes are cut, the credits, and discounts are applied and added up, it creates a very large tax cut on those who make a lot of money. For example, the ladder continues until the highest tax bracket so that those in that bracket receive tax cuts equaling each bracket added together so the $1 million wage earner would see 11 tax cut amounts all together. Essentially, that earner would receive one tax cut and another and another until that earner pays less taxes than those in the lower brackets do. I cannot justify that, can you? I know I cannot afford to pay more in taxes than “Mr. $1 Million” wage earner does.
Ask Mr. Buffett to Run Philadelphia
Mr. Buffett knows what he is talking about; he is the “goto” billionaire that other company heads and CEOs seek out when they are in need of financial advice. Mr. Buffett did not get where he is today by making stupid decisions or mistakes. He proposes raising taxes on the wealthy such as himself because he knows the lower income people cannot afford it. Considering Philadelphia consists mostly of people who make less than $40,000 a year, we should take a listen to what Mr. Buffett has to say-especially considering his current financial status. If Philadelphia were to take his advice and the Senate were to pass the Obama Budget, Philadelphia might finally get out of the debt hole Mr. Bush dug for us. Do you still think the Obama plan is a bad idea?
Tax Cut Graph Comparison of Democrat VS Republican Tax Cuts: Washington Post
Nick Kasprak, “The Potential Impact of Expiring Tax Cuts on Low-Income Taxpayers,” (Table 3 and table 4) Tax Foundation
“Fiscal Fact: The Potential Impact of Expiring Tax Cuts on Low-Income Taxpayers (PDF),” Tax Foundation
Colin Barr, “Buffett Says Cut taxes for all but the Rich,” (With Video of Buffett Interview) CNN Money