The Senate approved a last-minute deal early this morning on a vote that will supposedly avoid the so-called fiscal cliff. The vote wasn’t even a close one, 89-8. That’s about as bipartisan as you can get.
Under the Senate plan, taxes will rise for people making over $400,000 a year, $450,000 if they are heterosexually married and filing jointly. Spending cuts that were supposed to go into effect today will get a two-month extension. Unemployment benefits will continue for the long-term, habitually unemployed.
The Senate plan will now have to go to the House where they are scheduled to vote on it later today. It should be interesting to see what happens in the House. It’s clear at this point that House Speaker John Boehner has little, if any, control over congressmen in his own party.
Getting House Republicans to do anything is like herding cats, only not as fun.
We currently have only six tax brackets, the highest at 35%. Contrary to what most people believe, that rate is paid only on income above $388,350. For example, if someone makes $500,000 in taxable income a year, their taxes would break down like this:
- The first $8,700 in taxable income they would pay a 10% tax.
- On income from $8,700 to $35,350 they would pay a 15% tax.
- On income from $35,350 to $85,650 they would pay a 25% tax.
- On income from 85,650 to 178,650 they would pay a 28% tax.
- On income from $178,650 to $388,350 they would pay a 33% tax.
- On all income above $388,350 they would pay a 35% tax.
The person making $500,000 in taxable income would pay the top tax bracket on only $111,650. The rest of their income would be taxed at the lower rates like everyone else.
Under the Senate plan, the top tax rate would return to what it was under Bill Clinton, from 35% to 39.4%. That would only apply to income above $400,000.
We don’t just need higher taxes, we need more than six tax brackets. Does anything really think people making $178,650 to $388,350 in taxable income are in the same economic class? That’s a huge difference in income, yet they both pay the same top tax rate.
I think taxes in this country are ridiculous. We enjoy spending lots and lots of money, yet we don’t want to pay for any of it. I’m a firm believer in paying for the things you want. If we want to have the world’s largest military, larger than the next 14 countries combined, then we should be paying for it now. If the American people really want flying killer robots patrolling the skies of countries we aren’t technically at war with, then we will come up with a way to pay the higher taxes such expenditures require.
The alternative is that we don’t really want any of these things. If that’s the case, then we should spend accordingly. If we never have to pay for what we spend, than we will really never know.