NCPA - National Center for Policy Analysis

Obama Budget Proposals Raises Taxes on Middle Class

April 30, 2013

Higher taxes on the richest Americans are supposed to support middle- and lower-income Americans. Ironically, Obama's new budget proposal for 2014 will target middle-class taxpayers more than any of his previous proposals, says Politico.

  • The new proposal calls for a cap on deductions, changes the way some tax benefits are calculated and includes a big increase in cigarette taxes.
  • These proposals would fall disproportionately on middle- and lower-class Americans.
  • For the first time in his presidency, Obama is proposing to raise taxes on people below the $250,000 threshold.

Some state and local Democratic leaders are afraid that the new taxes will affect their constituents who earn decent money but do not consider themselves rich. Capping the mortgage tax deduction will increase the tax liabilities of many middle-income Americans at a time when the housing market is finally beginning to gain momentum.

  • Obama's budget proposal seeks to change the way inflation is calculated, which would reduce the annual growth rate of federal programs like Social Security and subsidies like the Earned Income Tax Credit.
  • The proposal also seeks to cap deductions, which would affect people with taxable income as low as $183,000.

Along with his new proposals that target the middle class, Obama's proposal continues to push for higher taxes on the wealthy.

  • The proposal seeks to install the Buffett rule, which is a minimum 30 percent tax on income exceeding $1 million and also seeks to limit the amount of tax-advantaged contributions that can be funneled into Individual Retirement Accounts.
  • Taxpayers earning more than $1 million would see their tax liabilities soar by an average of $82,604 in 2015.

Under the budget proposal, those earning between $75,000 and $100,000 will pay an additional $74 in taxes and those earning between $100,000 and $200,000 will pay an additional $149 in taxes, on average.

  • The budget also seeks to raise the federal cigarette tax from $1.01 per pack to $1.95 per pack to fund education.
  • Twenty-nine percent of adults who live at or below the poverty line smoke while only 18 percent of the overall population smokes, meaning the new tax would be incredibly regressive.

Source: Steven Sloan, "Taxes: President Obama's Budget Would Hit Middle Class," Politico, April 23, 2013.


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