Your Taxes: Up or Down

I received an email from James Kvaal of the Obama campaign asking me to look at their tax calculator which said that Mitt Romney’s tax plan would raise taxes on middle class families by an average of more than $2,000 while the reduce taxes for millionaires. I used it and it said our taxes would likely rise by $431 in 2013 while the tax savings under Obama would be $2,991. Interesting but I was skeptical.

I then went to PolitiFact.com which dealt with the same claim. It’s conclusion was that the claim was mostly true.

They write about the general parameters of Romney’s plan:

Romney has suggested general parameters:

• The rate cuts would be paid for without adding to the deficit.
• People at the high end "will still pay the same share of the tax burden they’re paying now."
• Everyone would see tax rate reductions.

He has outlined specific tax cuts on his campaign website. They include: cutting marginal rates by 20 percent on a permanent, across-the-board basis; eliminating interest, dividend and capital gains taxes for taxpayers earning less than $200,000; eliminating the estate tax; and repealing the Alternative Minimum Tax.
  
Romney would also cut the corporate rate to 25 percent.

To offset those cuts, Romney has hinted that he would eliminate some common tax write-offs and deductions for people with high incomes. 

PolitiFact says that Obama’s claims are based upon a study by the Tax Policy Center. They agree that middle-class payers would see lower taxes as the wealthy but the loss of exemptions and deductions would hit them harder so folk making less that $200,00 per year would see their taxes rise about $2,000. In other words they say Romney’s plan is untenable; he cannot cut tax rates as much as he wants and not add to the deficit. Thus they conclude the Obama claim is most true.

Another thing we have been hearing is that the Olympic athletes will owe up to $9,000 to the IRS after claiming the $25,000 reward for winning Olympics gold medal, $15,000 for a silver and $10,000 for a bronze. At a 35% tax rate the gold works out to just under $9,000 and so on down the line. However, that is not what they are likely to pay, again according the PolitiFact.

The 35% rate (marginal rate) is the rate you pay once you pass income of $385,000. Also athletes can deduct  expenses involved in their training: travel, training, equipment, etc. which can run from about $15,000 to $50,000 (20% of athletes spend that later figure.)

So big money athletes such as Michael Phelps might pay that rate, most won’t. Their winnings are taxable but few will be making enough money to pay the $9,000 tax.

Another claim that is mostly false.