Bush Tax Cuts

If you think the Bush tax cuts benefit the rich, you either can’t add or you don’t understand the Jobs and Growth Tax Relief Reconciliation Act.

Let’s say Joe is married with 2 kids and an income of $50,000:

  • Joe’s standard deduction increased from $7,950 to $9,500.
  • Joe’s taxable income decreased from $29,850 to $28,300.
  • Joe’s child credit increased from $1,200 to $2,000.
  • Joe’s post-credit tax decreased from $2,678 to $1,545.

Now, let’s say Bob is married with 2 kids and an income of $300,000. Heck, let’s say Bob is also a highly successful investor with $10,000 in dividend income… and since Bob wants to milk the government for all it’s worth, he has managed to find $50,000 of deductions:

  • Bob’s itemized deductions remain the same — $45,185.
  • Bob’s personal exemptions remain the same — $3,172.
  • Bob’s taxable income remains the same — $251,643.
  • Bob’s child credit remains the same — a big fat goose egg.
  • Bob’s post-credit tax decreased from $69,607 to $62,687.

So Joe gets a tax cut of $1,133 (42.3%) and Bob gets a tax cut of $6,920 (9.94%). And after Bob gets his 10% windfall, he’s still contributing 40 times more in taxes than Joe is — even though Bob only make 6 times more. Plus, that’s what would have happened in 2003. Some of Bob’s tax cuts have already expired… like lower capital gains and dividends rates.

If that’s not enough, exactly what do you think Bob is going to do with that extra $6,920? I think he’s going to take his family out to dine in Joe’s restaurant… or hire Joe to do some project he’s been putting off. Bob might just spend that money in a way that keeps Joe employed.

If Joe thinks Bob should only get $1,133 because that’s all he got, Bob thinks it’s pretty obvious why Joe isn’t the one making $300,000.


What the Bush Tax Cut Means for You