Explaining Tax Rates and Tax Cuts to Low-Information Voters


We have tax rates, whatever they are. I only know mine; I don’t care about yours. Uh, no! Whoa, whoa, whoa! I take that back. Oh, no, no. I care so much about your tax rate that I’m gonna learn what they are. Ahem. The point is that whatever your tax rate is, if there is no agreement your taxes are going up, because the current rates expire on December 31st. By law, they expire.

And by law, because of the way the tax rates were achieved through reconciliation back in 2003 — by law — the tax rates have been temporary, essentially, for all these years. So they return to what they were before George W. Bush and the Congress cut them in 2003. So they go back up. The top rate will go back up to 39.6%. And that’s what the Obama people are trying to tell you in the middle class means that you will not get a tax cut if we go over the cliff.

But if we come to a deal, you will get a tax cut. The way they’re saying this is, taxes are going to go up. They’re not there yet. Your rate is what it is. But if there is a deal, then your rate won’t go up, and that’s a tax cut, even though it stays the same. There’s no tax cut here! One of two things is gonna happen. Your tax rate’s gonna stay the same or it’s gonna go up. In neither case is there a tax cut. I’m sorry, but there are no tax cuts.

This is the way baseline budgeting works. I’ll give you an example how this works. Let’s say you’re gonna buy a new car, and you have allocated $50,000. That’s what you’re gonna spend on a car. You’re going to spend $50,000 more than what you are spending now, and you’re gonna spend that on a car. So you go shopping, and you find a car that you really like that costs $40,000, and you tell yourself that you just saved ten, when what you did was spend $40,000.



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