Tags: Barack Obama | tax increases | middle class | liberal think tanks

Liberal Think Tanks: Obama Tax Proposals Won't Help Middle Class

By    |   Thursday, 29 Jan 2015 12:08 PM

According to a new analysis by two liberal think tanks, President Barack Obama's tax proposals will do little to benefit middle-class households and could actually end up increasing taxes on many of them, The Wall Street Journal reported.

Data compiled by the Tax Policy Center – a joint venture of the Brookings Institution and the Urban Institute – "tends to undercut recent administration claims that its plan is aimed at helping middle-class families get ahead and stimulate the economy," according to the Journal.

The center's analysis shows there will be "winners" and "losers" in the middle quintile under the Obama tax proposals. Those making between $49,000 and $84,000 a year would see their taxes increase by an average of $7. Approximately one-quarter of this group would get a tax cut of about $550 on average, while roughly 50 percent would get a tax increase averaging about $290.

The largest income boost would go to the lowest quintile (incomes up to approximately $25,000), who would see their incomes rise by about $174, or roughly 1.2 percent.

Those in the "top 1 percent" would see their income drop by about $29,000 (2 percent).

One reason why the results look so bleak for a wide variety of economic groups is because analysts attempted to estimate the impact on all U.S. workers of President Obama's proposed tax on "highly leveraged financial institutions."

While this bank tax is not a direct tax hike on these workers, economists believe they will pay for these increases in some fashion – for example, through lower fringe benefits and compensation.

The picture is slightly better for the Obama plan if the bank tax is removed from the calculations. When that is done, only about 6 percent of households in the middle quintile would receive a tax increase, down from 50 percent with the bank tax factored in.

But the overall impact of Obama's plan on this group "remains negligible" with "essentially, no change in after-tax incomes and an average $12 tax cut," the Journal reported.

The Tax Policy Center's analysis could also undermine the administration's claims that its capital-gains proposal would do little damage to middle class taxpayers.

In its State of the Union fact sheet, the White House said that 99 percent of those increases would fall on the top 1 percent of earners. But according to the policy center, approximately 62 percent of the overall tax increase would hit the top 1 percent, while the remaining 38 percent would fall on Americans with lower incomes.

These increases, the Journal reported, "would be felt far down the income spectrum, mostly because of Mr. Obama's proposal to start imposing capital-gains tax on many inheritances."

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According to a new analysis by two liberal think tanks, President Barack Obama's tax proposals will do little to benefit middle-class households and could actually end up increasing taxes on many of them.
tax increases, middle class, liberal think tanks
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2015-08-29
Thursday, 29 Jan 2015 12:08 PM
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