Contrary to Popular Belief, the Wealthy Benefit from Extension of Middle-Class Tax Cuts
There's this myth going around. It seems many people think the extension of Bush-era tax cuts on the first 250k in income per family exclude wealthy families. They do not. While policy makers are debating letting the Bush-era tax cuts exclusively targeting those with family incomes above 250k, these families would not be excluded from the Democratic proposal to extend these other tax cuts. Indeed, in dollar terms, the wealthy fair better under the so-called middle-class tax cuts, than the middle-class.
Further, the Obama administration has proposed a permanent reduction of dividend taxes to be included in the so-called middle-class tax cut extension. The current rate of 15% is set to sunset along with the other Bush-era tax cuts, at which time, capital gains would be taxed at 1990's levels as regular incomes. If the dividend tax is fixed permanently at 20% instead of rising back to 1990's levels, as Obama has suggested, the wealthy fair even better:
The middle-class tax-cut package The Joint Tax Committee analyzed does not extend the reduction in the tax rate on dividends for couples with incomes over $250,000 (and singles over $200,000). President Obama has proposed, however, that the dividend top rate for high-income people be permanently set at 20 percent, rather than being allowed to return to its pre-2001 level of 39.6 percent. If Congress follows that approach and incorporates this proposal into a middle-class tax-cut package, the average tax cut that high-income households will receive from enactment of such a package will be considerably larger than the figures just cited, and the dollar amount by which the average tax cut going to high-income households exceeds the average tax cut for middle-income households will be significantly larger, as well.