Wednesday, January 02, 2013

Tax the poor

American households that earn more than $450,000 per year — will see their income taxes rise modestly, from 35% to 39.6%.

Dividend taxes for households making more than $450,000 per year will rise from 15% to 20% (plus an additional 3.8% surcharge for Obamacare, to a total of 23.8%). But they won't rise all the way to 39.6%, which they were scheduled to rise to without a Fiscal Cliff deal. Those earning less than $450,000 a year will remain at 15% (18.8% with the surcharge, for those with income between $250,000 and $450,000).

47% of all dividend income is earned by the 3.8% of American households that make more than $200,000 per year. Households that make more than $200,000 collect a total of $70 billion of qualified dividends per year (2009). This tax change will save these households about $14 billion a year vs. the pre-deal tax rates. The top 400 highest earning taxpayers collect about $10 billion a year in dividends, or $25 million apiece. This tax change will save these about $2 billion in total, or an average of about $5 million apiece.

For the less well-off, all those on incomes up to $110,000 will now face a rise of 2% in the payroll tax, from 4.2% to 6.2%.

In other words, the tax deal that Congress just agreed to will raise $125 billion from increased payroll taxes from all working Americans, while saving the richest Americans at least $20 billion in dividend taxes.

Happy New Year rich Americans from Obama.

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