President Barack Obama touts his tax plan as raising taxes on households making more than $250,000. As it turns out, that threshold is more like $300,000.
Obama has repeatedly said that families making more than $250,000 per year would face higher income tax rates under his deficit reduction plan, while families making less than $250,000 per year would not. The reality: That threshold is more like $305,000 per year, The New York Times’ Catherine Rampell and Binyamin Appelbaum report.
That’s because many affluent families deduct mortgage-interest payments and charity donations from their income taxes, which makes some of their income not taxable. As a result, Obama’s plan to let certain Bush tax cuts expire would raise taxes on only 32 percent of families making $250,000 to $300,000 per year, according to analysis by Citizens for Tax Justice cited by the NYT.
Mortgage interest deductions reportedly are at risk in the fiscal cliff negotiations, but neither party’s initial proposals would outright eliminate the popular tax break.
Some wealthy families will also be able to catch a break by taking advantage of tax cuts intended to help the middle class. Obama’s “middle-class” tax cut extensionwould cut taxes on the first $250,000 of taxable income for all families, including the rich, as New York Magazine noted in July.
The Obama administration has a lot at stake when it comes to raising taxes on the rich. Treasury Secretary Timothy Geithner has said the White House is “absolutely” prepared to go over the fiscal cliff if Republicans don’t agree to a budget deal that raises taxes on the highest earners.
It’s possible the country will go over the so-called fiscal cliff, or the set of spending hikes and tax cuts scheduled to take place on Jan. 1 if the government does not reach a deal. The Washington Post explains how much taxes would rise on families in various income groups if the country goes over the fiscal cliff here.