31.25% of a day walking S. Epatha Merkerson

When is a tax cut not a tax cut?

March 2nd, 2009 at 08:34am

When it’s a tax credit which becomes part of your taxable income. Barack Obama giveth $13 per week with one hand and instructs the IRS to retrieve it with the other.

Rush Limbaugh Show: Friday February 27, 2009

RUSH: Gail in Lakeside, Arizona, you’re on Open Line Friday. Hi.

CALLER: Hi, Rush. Thank you for all you do for us.

RUSH: Thank you very much.

CALLER: I wanted to share quickly what I found out when I had my taxes prepared last week. The man that prepared my taxes for me cautioned me to watch out for my tax cut. He said, [“]and you may want to adjust your withholding to take that back away, because the tax rate tables for next year when preparing taxes are not changing[“]. So I could possibly owe my tax cut back to the government next year.

RUSH: You gotta be kidding. Not even I was aware of this trick. Say that again. They’re not changing the rates, right?

CALLER: The tax rate tables that they use when you prepare your income tax.

RUSH: Yeah, these are not tax cuts.

CALLER: Right, exactly.

RUSH: These are transfer payments. These are tax credits and all that. There’s no tax cut here. I should have been able to think of this on my own here, absolutely right. You’re getting income, you’re going to be taxed on it next year.

CALLER: Right. And we won’t be able to pay it back $13 a week.

RUSH: ‘Cause the same rates — ah, man, your tax preparer is not only pretty smart but he’s pretty forthright and honest with you on it. So what you are going to do?

CALLER: Change my withholding and take my tax cut away so I don’t have to pay it back next year. Thank you, president, for nothing.

RUSH: (laughing) It just never ends. There’s nothing real from these people. They don’t say anything they mean.

It took me a little while to get my head around this because virtually every tax cut which we receive in Australia is via a change to the tax rate tables, and the federal treasury usually produce examples of what the effective tax cut (ie. increase in net pay, post PAYG witholding) would be for people earning certain incomes, which then get repeated on the news.

The “tax cuts” in the US are not that at all…in fact they’re about half way between the $900 stimulus payments which the Australian government are handing out to a lot of people, and the tax table adjustments. The $900 payments are effectively the government giving people money and are deemed to not be taxable income, and the US $13 per week is similar in that it’s a “discount” on your income tax and is therefore a payment from the US government, however as there are no changes in the tax tables and the $13 per week is not deemed to be untaxable, it ends up becoming taxable income…I’m still struggling to fully comprehend the horribly convoluted legislation which produces such a bizarre outcome, but I sure am glad that I’m paying tax in Australia and not in the US.

The horrid $25,573.48 per taxpayer 2010 budget cements that view.

Samuel

Entry Filed under: General News,Samuel's Editorials

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