Above the Law figures just how much an Obama presidency will cost you (that is, if you are making over $164,000):
The effect is enormous. Betsy’s marginal tax rate goes up from an already ridiculous 42.5% to 51.4%—not including the new 6.2% marginal tax on your employer. Subject to how she structures her withholding, Betsy’s take home pay drops an average of $515 a paycheck—less in the early months of the year, but much more in the later months of the year. Add in the effects on her bonus, and Betsy loses nearly $20,000/year in take-home pay.
I added a third column: how big a pay cut would you have to take to receive the same take-home income? The answer is that Obama’s tax increases have a bigger effect on your income than a law firm cutting New York salaries by $34,000.
Now, I’m not anywhere close to making that kind of money right now. I still have another 2 years of medical school to pay for and then another at least 5 years of around $40,000 a year during residency. So the earliest that I’d start earning this income would be around 2015. However, I still feel that the best stimulus for the country is to reduce taxes and limit spending of the non-essential federal programs. Here’s a good article called Ten Myths About the Bush Tax Cuts that explains how the tax cuts stimulated the economy and promoted growth. The key balancing point for the correct tax rate is theorized by the Laffer curve: “This curve illustrates ‘taxable income elasticity’, which is the idea that government can maximize tax revenue by setting tax rates at an optimum point and that neither a 0% tax rate nor a 100% tax rate will generate government revenue. At one extreme, a 0% tax rate means the government’s revenue is, of course, zero. At the other extreme, where there is a 100% tax rate, the government collects zero revenue because (in a ‘rational’ economic model) taxpayers presumably change their behavior in response to the tax rate: either they have no incentive to work or they avoid paying taxes, so the government collects 100% of nothing. Somewhere between 0% and 100%, therefore, lies a tax rate percentage that will maximize revenue.”
Here’s something interesting. National defense spending (including the wars in Iraq and Afghanistan) as a percentage of the GDP is actually 1.5 percentage points below the 45-year historical average.