An acquaintance of mine told me he's voting for Mitt Romney. His motivation, he happily and proudly admits, is selfish: "Obama will raise taxes on people who earn more than two hundred and fifty grand."
My friend does not earn that much now, but he is getting close. Edging toward age forty, he is an ambitious corporate executive and expects to exceed the $250,000 mark any year now. He does not want to pay a cent more in income taxes than he has to, and he sees the line of demarcation as arbitrary and unfair. Here's how he put it: "If I earn two fifty-one, why should I pay three percent more in taxes than someone who earns two forty-nine? I'd make only two thousand more, but I'd end up paying about ten thousand more than the other guy."
It's a very good point, and it does sound unfair. Except that it's not true.
My friend misunderstands the way tax brackets work, and what boggles the mind is that he is a savvy businessman who has, presumably, been paying income taxes for about half his life and has no doubt done everything possible to minimize what he forks over to the IRS. But he thinks that under Obama's plan everyone whose taxable income is above $250,000 a year will pay a higher rate on their entire income.
He was incredulous when I told him that is simply not true. Obama's plan (which would restore the Clinton-era rates), will raise the tax rate by three percent only on income above $250,000. Every cent earned up to that amount would be taxed at present rates.
The framing makes all the difference in the world. Using my friend's example, if his taxable income under Obama's plan is $251,000, he will pay three percent more on that last thousand dollars, as compared to what he would pay under the current system. That's thirty bucks. He spends more than that at Starbucks every week.
I'm not an accountant, and I'm not mathematically inclined, but it seems to me that if he were to earn $260,000 he would pay $300 more than he would now (three percent of $10,000). If he had an even better year and made, say, $300,000, the extra tax bite on the $50,000 that exceeds the magic $250,000 mark would be $1,500. Hardly enough to make an ambitious guy work less hard, or produce less, or achieve less.
My friend is a smart, tuned-in guy. Yet he was profoundly misguided about an issue that is central to the presidential campaign and to his own interests. One can only imagine how many others suffer the same delusion. In my friend's case, it hardly matters because he lives in a state that's a lock for Obama. But how many independent voters in Ohio, Florida, and Pennsylvania are mired in the same distorted thinking about tax brackets? As an Obama supporter, I can only hope that there are not too many of them in the swing states.
We all know that lies and distortions have run amok this election year, but in this case the damage to the Democrats -- if, indeed, there is any damage from this issue -- will be largely self-inflicted. It's not just the media that frames the tax policy discussion in misleading terms (I heard it just today, on National Public Radio -- that perpetual object of conservative scorn); the Obama campaign itself uses the same language. They've been saying all along that the president is calling for a small increase in tax rates for people earning over $250,000. Language matters, and to tax-hating people who earn, or aspire to earn, more than that amount, that language sounds ominous.
The Democrats have less than two weeks to switch to a more accurate, and less threatening, description of Obama's proposal. They need to say that he would raise the tax rate slightly, and only on taxable income over $250,000. If a business-challenged guy like me, whose checkbook has not been balanced for years, can understand that, it should not be too hard to explain to voters.
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