Surprising results reported at the Tax Foundation here. Excerpt:
To the surprise of some, even though Senator Obama’s tax plan lowers taxes for the bottom four quintiles, marginal tax rates would fall only for the very lowest-income couples. Taking both income and payroll taxes into account, those at the very bottom of the income distribution would see their effective marginal tax rates fall from 27.4 percent to minus 58.6 percent due to proposed changes to the earned income tax credit and Senator Obama’s new “Making Work Pay” credit. Most low- and moderate-income couples would see their effective marginal tax rates rise, in some cases, significantly. Indeed, some low- and moderate-income taxpayers will see their marginal rates rise to more than 50 percent. High-income taxpayers can also expect their effective marginal tax rates to rise—to 47.2 percent-under Senator Obama’s tax plan. This increase is caused by rolling back the 2001 and 2003 reductions in the top two tax rates, curtailing deductions and exemptions at high income levels, and potentially raising Social Security taxes. Senator McCain’s tax plan also changes marginal tax rates. His proposal to replace the exclusion for employer-based health insurance with a new health tax credit boosts taxpayers’ taxable incomes by their health insurance premiums which generally pushes taxpayers into higher tax brackets, but not to as great an extent as Senator Obama’s tax plan.
(It would be interesting to calculate how much overall tax a person would end up paying under the Obama plan considering the sum of the following: (1) federal tax owed under the highest income tax bracket, (2) state income tax, (3) local tax (which we pay here in the East), and (4) self-employment tax if you are self-employed. Also, add to that real estate taxes (also very high in the East) and sales tax.)