A new study published by The Tax Foundation and authored by Nick Kasprak has concluded that low income Americans will suffer the most if President Bush’s 2002 tax law changes are allowed to expire on January 1, 2011:
The report states that on Jan. 1 the doubling of the child tax credit, increased standard deductions and income credits and the creation of the 10 percent tax bracket — all of which primarily aimed at non-wealthy taxpayers — will vanish if gridlock persists in Washington.
While wealthier taxpayers pay more in taxes and stand to lose more money if the tax cuts expire, the impact on low-income taxpayers will be far greater because they live on slimmer margins.
… “When comparing changes in after-tax income, low-income workers benefited substantially from the Bush-era tax cuts, and so they would pay much higher taxes if political gridlock allows the imminent expirations to occur on schedule,” Kasprak said.
Moreover, low-income taxpayers have benefited from many temporary stimulus measures enacted in 2009 that are also set to expire at the end of this year: a further expansion of the earned income credit for couples, greater refundability of the child tax credit and bigger credits for college education.
This study proves once more the scope of the lies told by Democrats for the last eight years, that the Bush tax cuts only benefited “the rich.” If the 10% tax bracket expires, it will be replaced by a 15% bracket, which is a whopping 50% tax rate increase. Working families would also see the return of the “marriage penalty,” as well as a smaller standard deduction, smaller child tax credits, and a huge increase in the tax rate on dividends, which would greatly impact retirees who depend on stock dividends for a significant portion of their income.
The rest of this story involves speculation over whether Democrats can be forced by Republicans to extend all of the provisions of the 2002 tax bill, or if they will simply let all of them expire in order to ensure a tax rate hike for the wealthy. In the middle of a lame duck session, it might be tempting for hardcore liberal Democrats to not see such a dastardly act as political suicide, but the devastating effect that it will have on working families can only harm Barack Obama in 2012. If your family is financially devastated by a huge federal tax increase, you’re not going to care how much tax the top 1% income bracket is paying.
