How GOP and Obama Approaches to Bush Tax Cuts Would Affect Wisconsinites
Federal tax cuts enacted in 2001 and 2003 are scheduled to expire at the end of 2012, and lawmakers must decide how much of that tax cutting the nation can afford to continue, and how the extended tax cuts will be distributed.
Competing plans have been offered by President Obama and Congressional Republicans, and both proposals would extend most of the so-called “Bush tax cuts.” Although wealthy taxpayers are the primary beneficiaries of either plan, a new analysis released today by the Institute on Taxation and Economic Policy (ITEP) and Citizens for Tax Justice (CTJ) finds that the GOP plan would give high-income Wisconsinites a much larger share of tax cuts than the President’s proposal, and would add $1 trillion more to the national debt over the next ten years.
The analysis reveals that middle-income and low-income Wisconsinites would pay slightly less in taxes under President Obama’s approach than under the GOP plan, while high-income Wisconsinites would pay far less under the Republican approach. Under President Obama’s plan, the poorest 20 percent of Wisconsin residents would receive an average tax cut of $280 in 2013, while the richest one percent would get an average tax cut of $18,410. Under the Congressional Republicans’ approach, the poorest 20 percent of Wisconsinites would receive an average tax cut of $150 next year, while the richest one percent would receive an average cut of $56,790.
The study also finds that in 2013 the poorest 20 percent of Wisconsin residents would get 2 percent of the reduced taxes under the Republican plan, and the middle 20 percent of Wisconsinites would get 8 percent of the benefit, while 28 percent of the tax reduction would go to the richest one percent. Under President Obama’s approach, three percent would go to the poorest 20 percent, ten percent would go to the middle 20 percent, and 11 percent would go to the richest 1 percent.
Put another way, with the Obama plan, the top 5 percent of Wisconsin earners will get 29 percent of the tax benefit, as shown in the chart below. With the GOP plan, that share swells to 43 percent.
The Bush tax cuts extension outlined by the President would cost one trillion dollars less over 10 years than would making all the Bush tax cuts permanent.
The Republicans in Congress have indicated that they would extend all of the tax cuts first enacted in 2001 and 2003, but not the 2009 expansions for lower income families. President Obama wants to extend the 2001 and 2003 tax cuts only for the first $250,000 a married couple makes annually, or the first $200,000 a single person makes. Obama also wants to extend expansions to tax cuts that benefit low income and working families.