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Research desk compares: Who gets hit hardest if the Bush tax cuts expire?

By Dylan Matthews

michaelh81 asks:

If we let the Bush tax cuts expire for those making more than $250,000, what will be the distribution of those increased taxes? How much of that increase will millionaire's pay? How much is the share of the increase paid by people making less than say $400,000, who are only paying an increase on the top end of their income? How much of it will be paid by small business owners? Thanks.

I answered the last part of this question, about the effect on small-business owners, a few days back. As for the rest, this chart from the Wall Street Journal demonstrates that not only do low-, middle- and even upper-middle-class people not suffer under President Obama's proposed tax changes, they actually benefit relative to if the Bush tax cuts were extended in full:


Unfortunately, this does not include the effect of letting the Bush tax cuts expire in their entirety, which CBO projections show would deal with much of the deficit problem in the medium to long term. Luckily, the Tax Foundation has crunched those numbers as well. Here's the WSJ graph modified to include the effect of letting the tax cuts expire as planned. S = single, M = married, *E indicates the number of earners in the household, and *C indicates the number of children:


The pattern here is fairly simple.Letting all the tax cuts expire produces the highest tax burden of the three for every group except the very rich, who pay the most under
Obama's plan. Below the $300,000-a-year group, the lowest burden comes from the Obama tax proposals, while above that group it comes from extending the Bush tax cuts. Extending the cuts in their entirety, then, would primarily benefit high earners, while the Obama plan both raises rates on very high earners, relative to the status quo, and reduces the burden of low- and middle-income taxpayers.

To see how these different scenarios would affect you, or another hypothetical household, check out the Tax Foundation's tax calculator at, which will produce a rough guess of how much you'll owe under the status quo, full extension of the Bush tax cuts, and Obama's proposals.

By By Dylan Matthews  |  July 30, 2010; 1:57 PM ET
Categories:  Taxes  
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I had to laugh. based on's calculations I would owe the same under Obama's plan as under an extension of the Bush tax cuts. The message I got thoug was:

If Congress fails to act to extend the
Bush tax cuts, your income tax burden
will be $5,547 higher in 2011.

Posted by: sash64 | July 30, 2010 2:58 PM | Report abuse

Hey there. I just wanted to highlight that Citizens for Tax Justice (a progressive rather than conservative organization)also has a great distributional analysis on this as well.

Posted by: theonionfisher | July 30, 2010 3:18 PM | Report abuse

Great, according to calculations, if Bush's Tax cuts are not extended my taxes will go up $2900.00 in 2011. Come on Congress extend the Bush Tax cuts. Help someone who don't work for the government.

Posted by: senglish887 | July 30, 2010 4:46 PM | Report abuse

Thanks for picking my question, Dylan! You provided some useful raw data but didn't quite get to the heart of my question. I'm only asking about the increased taxes for income above $250,000, and how those increases spread out. As your data shows, even a family making $500,000 will only see a $6500 increase. However, a family making 2x as much ($1 million) will pay a 9x greater increase (~$53,000), and of course this effect increases as the income scale goes up.

My point is that if you look at where the tax increases from those making more than $250k will come from, only a tiny percentage is from those earning below $500k. I'd like it if you can tell me what that percentage is. And then I'd like Democrats to use your number and start pointing out that when they talk about raising taxes on earners >$250k, 97% of that (or whatever the real number is) will be coming families making more than a million a year. So rather than Obama asking audience members to raise their hands if they make more than $250k and saying he will raise taxes on only the top 3 or 5 %, he should really be saying that 97% of his tax increases are not on the top 1% but the top 1% OF THE TOP 1%!

Please solidify my political strategy with some hard data.

Posted by: michaelh81 | July 30, 2010 4:53 PM | Report abuse Was already taken?

Posted by: slag | July 30, 2010 7:29 PM | Report abuse

It's a damn shame that there aren't any major tax plans out there that are targeted towards helping the very poorest taxpayers. It costs only a tiny amount to significantly lessen the tax burden of the bottom quartiles and in addition to helping the quality of life of societies neediest members, it's a heck of a lot more 'pro-growth' then the tax cuts that the chamber of commerce is constantly demanding.

Posted by: theamazingjex | July 31, 2010 12:51 AM | Report abuse

Let the tax cuts expire, and po folk will be hit harder than anyone else. HOW?? Because it will slow the economy even more, causing the po' folk who work for the rich folk, to lose jobs.

Are you better off now than 4 years ago when demos were running for control of congress, promising "CHANGE?"

Posted by: homefried1 | July 31, 2010 9:30 AM | Report abuse

As their proportion of tax obligations increase, the wealthiest taxpayers will gain in their ownership of government. In turn, the bottom 50% of wage-earners who pay no income tax own no part of government.

Posted by: prospector | July 31, 2010 11:58 AM | Report abuse

This ignores the impact of the alternative minimum tax and implies passage of Obama's plan is a given. The only assurance we have today, is that there will be massive tax increases in five months, and Obama s trying to start a class war by demonizing those with the greatest tax burden.

Posted by: hdc77494 | July 31, 2010 9:48 PM | Report abuse

If the tax cuts expired, we all (at least anyone with half a brain) realize that congress would just spend the extra revenue.
What difference would it make?

Posted by: invention13 | August 1, 2010 10:12 PM | Report abuse

Any extra revenue is already spent if you've been paying attention. It's the deficit which will be smaller.

Posted by: Falmouth1 | August 2, 2010 6:58 AM | Report abuse

Yes, wreck the economy! The American people need to pay dearly for giving dictatorial power to Democrats.

Posted by: josephpturner | August 2, 2010 12:14 PM | Report abuse

All we heard when the Bush tax cuts were proposed was "Tax Cuts for the Rich" I am pretty surprised to find out how much everyone saved as a result of the Bush tax cuts.

If the Bush Tax Cuts really were for the Rich, let them all expire. If not, there are major apologies owed and explaining to do for everyone who said they were for the Rich so loudly and often against Bush.

Posted by: garybucher | August 2, 2010 1:17 PM | Report abuse

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