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April 21, 2014

Andrew Silow-Carroll: Passoverkill? Suggestions to make next year's seders even more culturally sensitive

Sara Israelsen Hartley: Seeking the Divine: An ancient connection in a new context

Christine M. Flowers: Priest's execution in Syria should be call to action

Courtnie Erickson: How to help kids accept the poor decisions of others

Lizette Borreli: A Glass Of Milk A Day Keeps Knee Arthritis At Bay

Lizette Borreli: 5 Health Conditions Your Breath Knows Before You Do

The Kosher Gourmet by Betty Rosbottom Coconut Walnut Bars' golden brown morsels are a beautifully balanced delectable delight

April 18, 2014

Rabbi Yonason Goldson: Clarifying one of the greatest philosophical conundrums in theology

Caroline B. Glick: The disappearance of US will

Megan Wallgren: 10 things I've learned from my teenagers

Lizette Borreli: Green Tea Boosts Brain Power, May Help Treat Dementia

John Ericson: Trying hard to be 'positive' but never succeeding? Blame Your Brain

The Kosher Gourmet by Julie Rothman Almondy, flourless torta del re (Italian king's cake), has royal roots, is simple to make, . . . but devour it because it's simply delicious

April 14, 2014

Rabbi Dr Naftali Brawer: Passover frees us from the tyranny of time

Greg Crosby: Passing Over Religion

Eric Schulzke: First degree: How America really recovered from a murder epidemic

Georgia Lee: When love is not enough: Teaching your kids about the realities of adult relationships

Cameron Huddleston: Freebies for Your Lawn and Garden

Gordon Pape: How you can tell if your financial adviser is setting you up for potential ruin

Dana Dovey: Up to 500,000 people die each year from hepatitis C-related liver disease. New Treatment Has Over 90% Success Rate

Justin Caba: Eating Watermelon Can Help Control High Blood Pressure

The Kosher Gourmet by Joshua E. London and Lou Marmon Don't dare pass over these Pesach picks for Manischewitz!

April 11, 2014

Rabbi Hillel Goldberg: Silence is much more than golden

Caroline B. Glick: Forgetting freedom at Passover

Susan Swann: How to value a child for who he is, not just what he does

Cameron Huddleston: 7 Financial Tasks You Should Tackle Right Now

Sandra Block and Lisa Gerstner: How to Profit From Your Passion

Susan Scutti: A Simple Blood Test Might Soon Diagnose Cancer

Chris Weller: Have A Slow Metabolism? Let Science Speed It Up For You

The Kosher Gourmet by Diane Rossen Worthington Whitefish Terrine: A French take on gefilte fish

April 9, 2014

Jonathan Tobin: Why Did Kerry Lie About Israeli Blame?

Samuel G. Freedman: A resolution 70 years later for a father's unsettling legacy of ashes from Dachau

Jessica Ivins: A resolution 70 years later for a father's unsettling legacy of ashes from Dachau

Kim Giles: Asking for help is not weakness

Kathy Kristof and Barbara Hoch Marcus: 7 Great Growth Israeli Stocks

Matthew Mientka: How Beans, Peas, And Chickpeas Cleanse Bad Cholesterol and Lowers Risk of Heart Disease

Sabrina Bachai: 5 At-Home Treatments For Headaches

The Kosher Gourmet by Daniel Neman Have yourself a matzo ball: The secrets bubby never told you and recipes she could have never imagined

April 8, 2014

Lori Nawyn: At Your Wit's End and Back: Finding Peace

Susan B. Garland and Rachel L. Sheedy: Strategies Married Couples Can Use to Boost Benefits

David Muhlbaum: Smart Tax Deductions Non-Itemizers Can Claim

Jill Weisenberger, M.S., R.D.N., C.D.E : Before You Lose Your Mental Edge

Dana Dovey: Coffee Drinkers Rejoice! Your Cup Of Joe Can Prevent Death From Liver Disease

Chris Weller: Electric 'Thinking Cap' Puts Your Brain Power Into High Gear

The Kosher Gourmet by Marlene Parrish A gift of hazelnuts keeps giving --- for a variety of nutty recipes: Entree, side, soup, dessert

April 4, 2014

Rabbi David Gutterman: The Word for Nothing Means Everything

Charles Krauthammer: Kerry's folly, Chapter 3

Amy Peterson: A life of love: How to build lasting relationships with your children

John Ericson: Older Women: Save Your Heart, Prevent Stroke Don't Drink Diet

John Ericson: Why 50 million Americans will still have spring allergies after taking meds

Cameron Huddleston: Best and Worst Buys of April 2014

Stacy Rapacon: Great Mutual Funds for Young Investors

Sarah Boesveld: Teacher keeps promise to mail thousands of former students letters written by their past selves

The Kosher Gourmet by Sharon Thompson Anyone can make a salad, you say. But can they make a great salad? (SECRETS, TESTED TECHNIQUES + 4 RECIPES, INCLUDING DRESSINGS)

April 2, 2014

Paul Greenberg: Death and joy in the spring

Dan Barry: Should South Carolina Jews be forced to maintain this chimney built by Germans serving the Nazis?

Mayra Bitsko: Save me! An alien took over my child's personality

Frank Clayton: Get happy: 20 scientifically proven happiness activities

Susan Scutti: It's Genetic! Obesity and the 'Carb Breakdown' Gene

Lecia Bushak: Why Hand Sanitizer May Actually Harm Your Health

Stacy Rapacon: Great Funds You Can Own for $500 or Less

Cameron Huddleston: 7 Ways to Save on Home Decor

The Kosher Gourmet by Steve Petusevsky Exploring ingredients as edible-stuffed containers (TWO RECIPES + TIPS & TECHINQUES)

Jewish World Review May 24, 2011 20 Iyar, 5771

A rare Geppetto for Paul Ryan's assertion on Obama's hidden top marginal tax rate

By Glenn Kessler




http://www.JewishWorldReview.com | “I say that, at a time when the tax burden on the wealthy is at its lowest level in half a century, the most fortunate among us can afford to pay a little more.”

— President Obama, April 13, 2011

“The president says he wants to eliminate deductions, but he also wants to raise rates. That includes raising the top rate to 44.8 percent.” 

— Rep. Paul Ryan (R-Wis.), May 16, 2011

Ryan’s speech to the Economic Club of Chicago on Monday caught our attention with its figure of a top marginal tax rate of almost 45 percent. Generally, the media’s coverage of the president’s 2012 budget has focused on Obama’s desire to return the top tax rate to 39.6 percent, the same as it was before the Bush-era tax cuts.

The top rate is currently 35 percent. So when President Obama said in his speech on fiscal policy last month that the wealthy (those making above $390,050 a year) would “pay a little more,” we thought he meant an extra 4.6 percent. But Ryan is suggesting the increase is much more than that.

Who’s right?

The Facts

The president framed his statement by claiming the tax burden on the wealthy is “at its lowest level in half a century.” It’s certainly among the lowest periods, but not the lowest, according to a 2010 Congressional Budget Office study that examined average tax rates over the past three decades.

The most recent data is from 2007, which shows the average tax rate for the top 1 percent is at 29.5 percent. That’s lower than any period since 1990, when the average rate was 28.8 percent. The lowest rate was 25.5 percent in 1986 for the top 1 percent. So Obama is stretching it to claim this is “the lowest” in a half century.

Meanwhile, how does Ryan get the top tax rate to reach nearly 45 percent?  His staff provided the following explanation:

New top rate with expiration of Bush tax cuts : 39.6 percent

Plus “PEP/Pease provisions” reinstated : 41.6 percent

Plus net 2.3 percent Medicare tax on wages/salary : 43.9 percent

Plus 0.9 percent Medicare tax from health care law (2013) : 44.8 percent

These are somewhat complicated concepts. We will try to explain without boring you.

The first category refers to tax provisions that Bush eliminated but which would be reinstated under Obama’s budget plan. Currently, taxpayers reduce the income subject to tax with personal exemptions and itemized deductions, but PEP and Pease impose limits on those benefits as income rises.

“PEP” refers to Personal Exemption Phase-out. “Pease” refers to the late Rep. Don Pease (D-Ohio), who pushed through the legislation limiting itemized deductions.

Ryan calculates that reinstating “PEP and Pease” would add about 2 percentage points to a wealthy person’s tax rate. The precise calculation can vary, but Ryan’s estimate appears to be in the ballpark.

Ryan then adds Medicare payroll taxes to his total rate. Unlike Social Security, there is no wage cap on Medicare taxes. Currently, employees and employers split the cost of the 2.9 percent Medicare tax, though many economists say it makes sense to assume some of the employer’s tax payments result in lost wages for the employee. Ryan does that to come up with a “net” tax rate of 2.3 percent. (However, we should note, this is an existing tax; it is not new under Obama.)

Interestingly, when some conservatives complain that half of all Americans do not pay income taxes, they are not counting payroll taxes, which is the main tax paid by lower-income Americans. We have not seen Ryan make this claim; it certainly would be inconsistent for him to count payroll taxes here and not in other circumstances.

Meanwhile, starting in 2013, the new health care law adds a surtax on high earners — an additional 0.9 percent tax on incomes over $200,000 for individuals and $250,000 for couples filing joint returns.

For someone making $390,050, thus triggering the 39.6 percent tax rate, that means at least an extra $1,260 in Medicare taxes just from the health care law. (The health care law also imposes additional taxes on investment income, but we won’t get into that now.)

Adding up all of these figures, you get to an effective marginal rate of nearly 45 percent. One can quibble with some of the assumptions, but tax experts we checked with found Ryan’s calculations to be reasonable.

Why are marginal rates important? In theory, if the rate gets too high, it reduces the incentive to earn another dollar. The top marginal rates have been as high as 90 percent in U.S. history, but it has also been as low at 28 percent (under Ronald Reagan). At 45 percent, that means nearly half of each additional dollar a high earner makes would go to taxes.

Put another way, Ryan shows that Obama’s budget would effectively boost the marginal rate for high earners by a hidden 7.5 percentage points, or an increase of 20 percent. For every $100,000 of additional income, about $45,000 would go to federal taxes. (State and local taxes would eat up more; there are no additional Social Security taxes at this income.)

Only a small number of taxpayers would be affected by this, of course. Most Americans would see little change in their taxes, as they would keep paying the Bush tax rates. Obama also proposed a permanent fix for the alternative minimum tax, which often hikes taxes for upper-middle-income taxpayers.

 But, for the very wealthy, the new taxes could be significant. The Tax Policy Center calculates that the top 1 percent (with income above $643,000) would pay an average of $76,000 in additional taxes. The top 0.1 percent (above $3 million) would pay an average of $414,000 in additional taxes.

The Pinocchio Test

Paul Ryan’s attention-getting figure adds up and appears credible, so Ryan earns the rare Geppetto Checkmark.

Geppetto Checkmark








Meanwhile, we are going award one Pinocchio to President Obama for claiming that the wealthy would pay “a little more.” That phrase is relative, but the hidden 7.5 percentage points identified by Ryan strikes us as more than pocket change.

 

One Pinocchio


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An award-winning journalism career spanning nearly three decades, Glenn Kessler has covered foreign policy, economic policy, the White House, Congress, politics, airline safety and Wall Street. He was The Washington Post's chief State Department reporter for nine years, traveling around the world with three different Secretaries of State. Before that, he covered tax and budget policy for The Washington Post and also served as the newspaper's national business editor. Kessler has long specialized in digging beyond the conventional wisdom, such as when he earned a "laurel" from the Columbia Journalism Review



Previously:

05/16/11:Obama administration boasting about border security

05/11/11: Kathleen Sebelius's outrageous claim that cancer patients would 'die sooner' under the GOP Medicare plan

05/09/11: A gusher of oil rhetoric

05/04/11: The Obama administration's odd claims on export growth

04/28/11: How effective are sanctions in ‘changing behavior’?

04/14/11: ‘Biggest cuts in U.S. history’? Well, no.

04/08/11: Nancy Pelosi's absurd math on senior citizens losing their meals

04/06/11: Hillary Clinton's uncredible statement on Syria

03/25/11: Libya, Obama and the tragedy in Darfur

03/22/11: Gifts of bogus statistics for the health-care law's birthday

03/21/11: Mitch McConnell's not-so-happy birthday greetings for the health care law

03/10/11: A job-loss statistic produced out of thin air

03/10/17: A budget analogy that earns a Geppetto checkmark

03/10/11: Four pinocchios for the American public on the budget

03/09/11: Obama and the White House's ‘halfway’ fixation with the budget

03/08/11: Foreign policy braggadocio on Libya and AIDS

03/07/11: Democrats keep misleading on claimed budget ‘cuts’

03/01/11: Mike Huckabee is on to something here, but jumped the gun

02/25/11: Harry Reid's illusory $41 billion in budget cuts


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