What Obama proposes is to allow President Bush's income tax cuts of 2003 to expire for married couples with adjusted gross incomes (AGI) above $250,000 and single people with AGI of $200,000.
That change would hit only the most affluent 2.3 percent of American taxpayers, figures Bob McIntyre, director of Citizens for Tax Justice, a liberal think tank in Washington. Obama would extend the Bush income tax cuts and enact several new tax cuts for the remaining 97.7 percent of taxpayers. So Joe the Plumber would get a tax break since he's not one of the 2.3 percent taxpayers.
Should Mr. Wurzelbacher reach his dream of becoming wealthy, his tax burden could become larger under Obama's plan.
After the Bush tax cuts, the top 1 percent of taxpayers ($978,000 or more income in 2004) paid 24.6 percent of their income in federal taxes and 8.2 percent in state and local taxes, for a total of 32.8 percent of income in all taxes. The Bush tax cuts saved this prosperous group 12 percent in taxes. For the remaining 99 percent, combined taxes averaged 29.4 percent of income, and they got a smaller percentage savings (3 to 8 percent). This tax table has not been updated since 2004. But Mr. McIntyre holds there would be little change in the percentages today.
His tax calculations include payroll taxes for Social Security and Medicare – a tax bill that is less significant for the well-to-do since the Social Security tax of 12.4 percent of income stops being deducted on income above $102,000. About three quarters of taxpayers pay more in payroll taxes than they do in federal income taxes. Famed investor Warren Buffet has occasionally noted that his secretary pays federal taxes at a higher rate than he does because of payroll taxes.