"Our Country!
In her intercourse with foreign nations may she always be in the right;
but right or wrong, our country!"

    --Commodore Stephen Decatur

Friday, December 10, 2010

Tax Reform and the "Hidden" Marriage Penalty

Stop the presses!!!  Longtime readers know that the Prolix Patriot is not usually a fan of President Obama.  However, today's New York Times suggests that massive losses for his party in 2010 are bringing the President around to more reasonable policies with genuine bipartisan appeal:

While administration officials cautioned on Thursday that no decisions have been made and that any debate in Congress could take years, Mr. Obama has directed his economic team and Treasury Department analysts to review options for closing loopholes and simplifying income taxes for corporations and individuals, though the study of the corporate tax system is farther along, officials said.

The objective is to rid the code of its complex buildup of deductions, credits and exemptions, thereby broadening the base of taxes collected and allowing for lower rates — much like a bipartisan majority on Mr. Obama’s debt-reduction commission recommended last week in its final blueprint for reducing the debt through 2020.

Republicans have made much hay over provisions such as the "marriage penalty" which was supposedly abolished as part of the Bush tax cuts of 2001 and 2003.  However, the graphic above shows that even after doubling the standard deduction for married couples, the tax code is still extremely unfair for married couples, especially for people with modest incomes.

In the graphic, the green and purple bands represent tax savings for married couples vs. the amount they would have owed Uncle Sam if they each filed as singles.  Conversely, the red and blue bands represent an increased tax burden for the couple after celebrating their nuptials.  From this, we can see that the current tax code punishes couples with similar incomes--even without the massive increases that will go into effect for 2011 if Congress fails to extend the current rates.

For hardworking parents who each bring home $25,000 a year in taxable income, the net tax savings from getting married is exactly zero.  Then, for two people who each bring home a taxable income of $40,000 a year before marriage, their taxes will actually increase by 10 dollars a year after saying, "I do."  Meanwhile, if a millionaire is betrothed to a pauper, his or her taxes will actually decrease by thousands of dollars each year.

Of course, liberals can take consolation that if couples both make six-figure salaries, they will really get taken for a ride at tax time.  If two people each make $110,000 a year and are thinking of getting married, they are actually better off staying single to the tune of $1,300 a year.  If you think the wedding reception is going to be expensive, just multiply the increased tax burden by 20, 30, or even 50 years of wedded bliss!

Bottom line: whether a couple is earning a modest income or is at the top of the income ladder, the tax code punishes hard working families with dual incomes and rewards single-income families--especially the super rich--with higher tax savings.  Given that the majority of American families have two incomes, meaningful tax reform that rewards hard work is long overdue.  If Obama wants to make good on his promise to lower taxes for the middle class, abolishing the hidden marriage penalty would be a good place to start.

Thursday, December 9, 2010

Belated Thanksgiving Trivia

The next time you're on an eight-hour flight from Amsterdam to Boston, and you hear the pilot come on the intercom to announce that there is some turbulence ahead, consider this: it took the pilgrims 66 days and they didn't have free wi-fi.

Friday, December 3, 2010

One State, Two State, Red State, Blue State

As armchair quarterbacks anaylze the aftermath of the 2010 election, potential presidential challengers are quietly gearing up for the 2012 cycle.  With sweeping Republican gains in statehouses across the country, the 2010 census apportionment is likely to give a slight edge to the GOP in congressional races, but more interesting are the demographic shifts which will benefit the Republican presidential nominee.

The map above shows the states which went to Obama and McCain in the 2008 presidential election, but with a twist.  Instead of varying the shading by the depth of partisan support, the darkness of each state instead corresponds to the predicted changes in the electoral college.  Meanwhile, several states are also shaded to indicate a potential weakness for the opposing party to pick up electoral votes in the 2012 cycle.

Dozens of states shifted perceptibly to the right in 2010, especially in the midwest.  Even President Obama's home state of Illinois, while still solid blue, is less so.  Mark Kirk won the Senate race there and the state legislature is slightly less lopsided in favor of Democrats than it was.  Also, like many liberal bastions, Illinois will be losing an electoral vote after the 2010 census reapportionment.

Republicans completely swept the 2010 election by winning races for governor, both houses of the state legislature, and a majority of the congressional delegation in seven states that went to Obama in 2008: Florida, Indiana, Michigan, Ohio, Pennsylvania, Virginia, and Wisconsin.  Meanwhile, Republicans also now control at least one house of the state legislatures in Colorado, Iowa, Maine, Minnesota, New Hampshire, and North Carolina.

Democrats can take some consolation that during redistricting they will at least have some leverage in Arkansas, Kentucky, Mississippi, and West Virginia.  However, with the exception of West Virginia, none of these states are seriously in play for 2012--unless Hillary Clinton mounts a successful renegade primary challenge to her current boss.

Numerous factors, such as gerrymandered minority districts, weak turnout in an off-year, and the potential for improvement in the economy make it hard to draw strong conclusions from 2010 about the upcoming presidential race.  2012 will still be a very difficult year for Republicans, especially because there is no clear favorite with the widespread appeal that will be necessary to convince independents who voted for Obama to change their vote this time around.

However, Obama's political team should have reason to worry that no less than 117 electoral votes will be at stake in the seven states that slipped away from the Democrats in a complete rout this past cycle.  Adding other traditional battlegrounds like Colorado, Iowa, and New Hampshire into the mix presents a daunting race to the 270 electoral votes that will be needed to keep President Obama from joining the 15 million Americans currently on the unemployment rolls.