As long as I have followed American politics, the differences between democrats and republicans on the issue of taxes gets the most coverage. Throughout his campaign, president Obama has talked about the need to raise taxes on the wealthy – the specific example of Warren Buffet paying taxes at a lower rate than his secretary was one that gained a lot of attention. On the other side, Gov. Romney and his aides have argued that Obama’s taxes have had a job-killing effect, that increasing taxes on the “job creators” would hinder economic growth, and that lower taxes (Romney is proposing a 20% tax cut across the board) are the way to go.
Normally this is the argument we would be hearing from a generic candidate of either party. However, the circumstances surrounding this election make their positions really important. First, the Bush tax cuts are set to expire at the end of this year and whoever controls the presidency will have a unique opportunity to direct tax policy. Second, it is widely recognized that the incoming president will have to guide and implement important policies that address our commitments to social security, medicare, the federal deficit, and debt. And government revenue, on which all these commitments rely, is largely dictated by what we do about taxes. Given this context, whose platform is more likely to be the most beneficial to us?
To determine this, I first asked what has Obama done on taxes? When he came into office, the Bush tax cuts were in place, and tax rates were at historic lows. Did Obama increase taxes? I compared tax rates from Obama’s term to Bush’s terms (some of them go farther back) to determine changes to tax rates. Here are some tables from the Tax Policy Center:
1. Individual Tax Rates: A comparison of lowest and highest tax brackets and tax rates.
2. Payroll Tax Rates: A comparison of social security and health insurance (medicare etc.) tax rates. Note: For 2011 and 2012, there was actually a small tax cut in the social security rate.
3. Capital Gains Tax Rates: This chart is not from the Tax policy center. I downloaded it from Wikipedia. But the numbers are reported in a number of sites including articles from the tax policy center. The long-term capital gains tax rate is 15% and hasn’t changed since the Bush years.
4. Corporate Tax Rates: Comparison of marginal tax rates on corporations.
As you can see, I find that under Obama, tax rates have not changed from the Bush era. If anything, there have been some cuts. Some of us might also remember that the Bush tax cuts were supposed to expire at the end of 2010 but Obama extended them for two more years. How do these tax rates correlate with the various indices that measure economic growth? This will be the subject of my next post and I feel that examining those numbers should give us a clearer idea of whose positions are worth endorsing.