How much Federal Tax you paid then - and now

A comparison of income taxes under Presidents Clinton and Bush has been making the rounds of the Internet, showing up in forwarded e-mails and on numerous blogs and message boards. The message claims what should be intuitively obvious to most people, i.e., that individual marginal income tax rates under President George W. Bush are lower than marginal income taxes rates under President Bill Clinton. After all, a 3% lower rate on an Adjusted Gross Income of $100,000 results in a taxpayer savings of $3,000 - annually.

Tax Foundation data was relied upon to make the original comparison. While the message circulating on the Internet contains some mathematical errors, the basic message of the comparison is correct.

The Tax Foundation subsequently issued an interesting statement saying that the comparisons are exaggerated by the fact that annual inflation adjustments in the tax code would have lowered tax bills in 2008 relative to 1999 under a constant nominal income amount. What they say is true, to an extent. However, the Tax Foundation does not quantify their statement and they appear to be trying to obscure important facts. Not only are taxpayers in 2008 paying fewer numbers of tax dollars, adjusted for inflation, and at lower marginal rates, but those taxpayers are paying with tax dollars having far less value in a constant-dollar comparison with 1999. In fact, taxpayers will pay significantly less tax in 2008 than they paid in 1999. Maybe some examples will help:

If you earned $30,000 in 1999, unless you earn $38,009.60 in 2008, your standard of living will have diminished.

Similarly, if you earned $50,000 in 1999, your income in 2008 should be $63,349.34 if you want to maintain a constant-dollar standard of living. That of course assumes you didn't benefit from career progression, such as a promotion and a commensurate pay increase.

If you earned $75,000 in 1999, your break-even income target for 2008 is $95,024.01.

What about those who earned $125,000 in 1999? Good luck; you need $158,373.35 just to keep even.

Maybe a graphical presentation of the Consumer Price Index in recent years will help you to extrapolate the period from 1999 to 2008:

In your wallet assume the you have one single dollar. In historical terms, while looking at the graph, what is that dollar worth, i.e., what is it's purchasing power (not the blue line)? What is the trend?

Rather than display the incorrect tax data circulating on the Internet, the figures below illustrate the correct amount of tax paid by hypothetical taxpayers in the Internet comparison. Note that this comparison considers adjusted gross income and does not take into account the Alternative Minimum Tax. Taxpayers in these examples are assumed to have taken the standard deduction and do not have children.

Individual Income Taxes Under Presidents Clinton and Bush, 1999 Law and 2008 Law

Taxpayer
Single, income of $30,000
Tax under Clinton, 1999 tax law - $3,157.50
If you were paying the same amount today as in 1999, in constant dollars, your tax bill would be $4,000.51
Tax under Bush, 2008 tax law - $2,756.25

Assume you are one of the chosen few whose income has kept pace with inflation since 1999. Your income in 2008 would be over $38,000. You are now in a different tax bracket. Welcome to the demographic group liberals call wealthy Americans. You have just experienced "bracket creep," a phenomenon in which you are making no more money (no greater purchasing power than in 1999), but your taxes have increased.
Your marginal tax rate under Clinton, 1999 tax law, would have been 28%.
Your marginal tax rate under Bush, 2008 tax law, is 25% - 3% less.

------------------

Single, income of $50,000
Tax under Clinton, 1999 tax law - $7,262.50
If you were paying the same amount today as in 1999, in constant dollars, your tax bill would be $9,201.49
Tax under Bush, 2008 tax law - $6,606.25

However, assume you are one of the chosen few whose income has kept pace with inflation since 1999. Your income in 2008 would be over $63,000. Your tax bracket may have changed.
Your marginal tax rate under Clinton, 1999 tax law, would now have been 31%.
Your marginal tax rate under Bush, 2008 tax law, is 25% - 6% less.

-----------------

Married, income of $50,000
Tax under Clinton, 1999 tax law - $5,085.00
If you were paying the same amount today as in 1999, in constant dollars, your tax bill would be $6,442.63
Tax under Bush, 2008 tax law - $4,012.50

However, assume you are one of the chosen few whose income has kept pace with inflation since 1999. Your income in 2008 would be over $63,000. Your tax bracket may have changed.
Your marginal tax rate under Clinton, 1999 tax law, would have been 28%.
Your marginal tax rate under Bush, 2008 tax law, is 15%

-----------------

Single, income of $75,000
Tax under Clinton, 1999 tax law - $14,262.50
If you were paying the same amount today as in 1999, in constant dollars, your tax bill would be $18,070.40
Tax under Bush, 2008 tax law - $12,856.25

However, assume you are one of the chosen few whose income has kept pace with inflation since 1999. Your income in 2008 would be over $95,000. Your tax bracket may have changed.
Your marginal tax rate under Clinton, 1999 tax law, would have been 31%.
Your marginal tax rate under Bush, 2008 tax law, is 28%

-------------------

Married, income of $75,000
Tax under Clinton, 1999 tax law - $9,426.50
If you were paying the same amount today as in 1999, in constant dollars, your tax bill would be $11,943.25
Tax under Bush, 2008 tax law - $7,762.50

However, assume you are one of the chosen few whose income has kept pace with inflation since 1999. Your income in 2008 would be over $95,000. Your tax bracket may have changed.
Your marginal tax rate under Clinton, 1999 tax law, would have been 28%.
Your marginal tax rate under Bush, 2008 tax law, is 25%

------------------

Single, income of $125,000*
Tax under Clinton, 1999 tax law - $29,378.50
If you were paying the same amount today as in 1999, in constant dollars, your tax bill would be $37,222.17
Tax under Bush, 2008 tax law - $26,472.25

However, assume you are one of the chosen few whose income has kept pace with inflation since 1999. Your income in 2008 would be over $158,000. Your tax bracket may have changed.
Your marginal tax rate under Clinton, 1999 tax law, would have been 36%.
Your marginal tax rate under Bush, 2008 tax law, is 28%

----------------------

Married, income of $125,000*
Tax under Clinton, 1999 tax law - $23,426.50
If you were paying the same amount today as in 1999, in constant dollars, your tax bill would be $29,681.07
Tax under Bush, 2008 tax law - $19,462.50

However, assume you are one of the chosen few whose income has kept pace with inflation since 1999. Your income in 2008 would be over $158,000. Your tax bracket may have changed.
Your marginal tax rate under Clinton, 1999 tax law, would have been 31%.
Your marginal tax rate under Bush, 2008 tax law, is 28%

-------------------

*These figures do not take into account the Alternative Minimum Tax - which Congress refuses to eliminate.

Additionally, many Congressmen and women, including current presidential candidates, want to abolish the Bush Administration tax cuts. Look at the graph above. Study it. Is that what you want? What will huge tax increases do to your standard of living? What will it do to the United States economy? If you are so fortunate as to be one of those paying income taxes, do not harbor the naive thought that your taxes will in some way benefit you personally.

As a matter of observation, have you noticed that the only people in the entire world not enjoying the benefits provided by United States taxpayers are those citizens actually paying the taxes?

And you're going to vote for whom? Don't even think about voting to raise my taxes.

http://www.taxfoundation.org/publications/show/151.html

Hat tip:
Richard D., Scottsdale, AZ
-------------------------

Response from Tom W.:

If you want to know just how effective the mainstream media is, it is amazing how many people that fall into the categories above think Bush is screwing them and Bill Clinton was the greatest President ever. Obama and Clinton say they will repeal the Bush tax cuts. A good portion of the people who fall into the categories above can't wait for that to happen. This is like the movie "The Sting" with Paul Newman - you scam somebody out of some money and they don't even know what happened.

I remember when Bill Clinton whipped up this class envy thing during one of his administrations. He said he was going to tax the rich and use the money to fund entitlement programs for the poor. The masses fell for it hook, line & sinker. They couldn't wait to stick it to the rich. They loved Clinton for being the "Champion of the Poor". Imagine their surprise when the tax increase went through and these people suddenly discovered that being "rich" applied to anybody making $35,000 a year or more! The worst part is, the tax was approved in October and the bastard made it retro-active to January 1st of that year. ( I talked to the owner of a small manufacturing firm last July who said he was STILL paying off the IRS from that tax increase!)

I had this discussion with Grant the other night. I told him that all these class envy tactics the Democrats are using now had been done before, the "Lets go after Exxon Mobil and Wal-Mart for making too much profit", the notion that somehow corporate America's profits are the reason YOU aren't rich, those are windfall profits and they didn't earn them and don't deserve them. These same things were done 30 and 40 years ago. But the problem we have now is there are millions of young people of voting age in this country who weren't born yet the first time this BS was going around, so it's all new to them. And since very few of them care to study history and learn from it, we are destined to re-live it.

These young people are being seduced by the empty rhetoric of an inexperienced, unqualified candidate who happens to have an appealing oratory style in the person of Barrack Obama. They don't care WHAT he says, they just love the WAY way he says it! This guy knows as much about the economy, global politics, and the war on terror as your 9 month old grandson, Max. Come to think of it, I apologize. That's an insult to Max; he probably knows more!

All I know is, with the Socialist leanings of the Liberal Left, if people like Hillary Clinton, Barrack Obama, Nancy Pelosi, Harry Reid, and Ted Kennedy were spouting this bilge back in the 50's, Joe McCarthy would have nailed their asses for being part of the Communist Party. Today, stupid-ass Americans can't wait to vote them into office so they can take even more of our paychecks to support Washington's spending addiction. With this economy on the brink of recession, all we need is a Democratic President and a Democratic Congress who will eliminate tax cuts, bring back the old Alternative Minimum Tax, raise Capital Gains taxes, and reinstate the death tax.

Their next move will be to establish Universal Health Care, and that's it for Capitalism, "game, set, and match."

That financial burden will be so huge we will have to resort to becoming a Socialist State in order to pay for it. The budget for the Democratic version of Universal Health Care will make the Defense Budget look like chump change. And the quality of healthcare will decline like most Americans could never imagine. Bill and Hillary want to emulate the Canadian healthcare system. Well, I've talked to several Canadians who tell horror stories about waiting years for surgeries, triage systems where patients die waiting to be seen by specialists, and those who had to come to American doctors in order to be seen in time to save their lives. And the Clintons want us to adopt that?! You first, Bill!

McCain wasn't my first choice, but right now he looks like the only choice. He's the only hope we have to fend off this push toward Socialism by the Liberals. Hell, if you listen to Hillary's proposals for government programs, it sounds like it came right out of Karl Marx's Communist Manifesto. This broad is a Marxist!

OK, that's my rant for today. I guess I've turned into one of those "Angry White Males"!! I'd like to form a whole damned FRATERNITY of them!

Tom W.

Posted February 26, 2008 07:55 PM
Read more on Budget, Taxation and Fiscal Policy