Reminder of Obama's Campaign Promise: A Net Spending Cut:

Obama, in the third debate, on the video below within the first minute: "what I've done throughout this campaign is to propose a net spending cut.... What I want to emphasize ... is that I have been a strong proponent of pay-as-you-go. Every dollar that I've proposed, I've proposed an additional cut so that it matches."

Also, I wonder how Obama's high-income supporters in high-tax, high-cost areas like NYC, California, and DC are feeling right now? According to an article I read today, the top 7% of taxpaying families make over 250K a year, while the top 1% make over 380K. So the vast majority of those affected by Obama's tax plans are in the 250-380K range.

If you live in DC, on your marginal dollar of you'll be paying 39.6% in federal taxes, 10% in DC income taxes (with no deduction thanks to the AMT), ... oh, and that 800K mortgage you took out in 2004, on which you pay 50K a year in interest? Instead of a 20K deduction, it will be 14K. And that's not counting the inevitable push to add 6% or so in social security taxes (really, 12%, half payed by the employer). Your other deductions with face similar limits. For a couple with adjusted gross income about 250K, I'm estimating a marginal tax rate without additional social security taxes of around 52%, 64%, including the employer share, if new social security taxes added.

Tax the rich?

My friends in this income bracket tend to have have high mortgages, work 60-80 hours a week, pay 40-50K or more a year for child care (a nanny is necessary when you often work into the late evening--and even day care for two kids in the DC area costs close to 40K a year), and have six figures worth of student loans, primarily from professional school, that they are still paying off. In other words, approximately 100K of their pretax income is taken up by their student loans and child care costs, which are the equivalent of "startup costs". Their mortgage costs may seem excessive, but you don't easily make six figures in low-housing cost cities like Des Moines, and living in outer suburbs is very difficult when you work 12 hour days.

If a hypothetical couple's initial income is a total of $300K, and they work an average of 70 hours each, and assuming two weeks vacation, they are in effect getting a grand total of $28.57 an hour for their labors, and a fair percent of that is going to pay interest on the mortgage. I'm sure they are glad to know that they are rich enough to be taxed at over 50% of their marginal dollar.

UPDATE: Of course, the situation described above only applies to some fraction of the relevant taxpayers, but in my experience, young professional couples in large urban areas were among the most enthusiastic Obama supporters. Yet they also find themselves lumped by his administration into the category of "the rich," when, because of scenarios like the one described above, they certainly don't think of themselves as such, and indeed, in practice are not, despite their high gross income.

For that matter, my friends and acquaintances in such situations who supported Obama tend to be somewhat fiscally conservative, but voted for Obama for other reasons. In part, I think his calming rhetoric on economic policy (see video above) persuaded them that he wasn't going to govern as a "tax and spend liberal," so they could vote on, e.g., the Iraq War, abortion, et.

Related Posts (on one page):

  1. More on the "Rich":
  2. Reminder of Obama's Campaign Promise: A Net Spending Cut: