Early in George W. Bush's first term as U.S. president, he temporarily cut taxes for all Americans. President Barack Obama, who renewed all the so-called Bush tax cuts in 2010, is now saying that the rates for those who make more than $250,000 should return to their higher, pre-2001 levels.
As Mr. Obama turns income inequality and raising taxes on the rich into a campaign focus, we asked Canadians in the U.S. how the issue of paying taxes was playing out in their states.
This is part of our U.S. Election 2012:Canadians in America series – expats talking about life and politics south of the border.
David Levine, lawyer in New York City:
I mostly hear about taxes and tax rates from those who self-identify as Republican, but rarely from Democrats, even though New York City is very Democrat and is one of the highest-taxed jurisdictions for a number of reasons. First, we not only pay federal and (very high, comparatively) state taxes on our income, but also city taxes.
Secondly, we tend to earn much higher amounts than the average citizen of the United States, mostly because this city is a very expensive place to live. Rents are astronomical, real estate is inaccessible for most (try $700,000 minimum for a very basic one bedroom apartment in Manhattan), and I've seen quarts of milk for sale for $7.99.
All that to say that I think that cost of living has to be taken into account in the tax code. If places like New York City and Silicon Valley and Stamford, Conn., didn't exist, I'd say that someone making $250,000 was rich, as they would be anywhere else in the US. However, this isn't the case in certain geographical regions. $250,000 in New York City is pretty average.
Jeff Gebhart, IT manager in Oak Ride, Tenn.:
This comes down to the fundamental question that dominates U.S. politics: Who is better able to spend money? The individual or the government? In my opinion, the money should be left in the hands of the private sector. Regardless of how you spin it, it is the private sector in the U.S. that creates jobs and builds wealth for the nation.
Jonathan Havercroft, professor in Norman, Okla.:
I am actually of the view that all income taxes should reset to their pre-Bush tax cut levels. The economy was growing well then and the government was not running any deficits. If you go back to the debates in early 2001 over the tax cuts people were arguing that the danger was the U.S. would pay off all of its debt and would be stuck with too much money. Hard to believe isn't it, given where the government is now? Resetting the tax rates back to 2000 levels wouldn't close the deficit hole entirely, but it would go a long way. It would raise my rates by about 3 per cent, which would be a bit of a hit, but would not be terrible.
In terms of President Obama and my personal finances, I am amazed at how much my taxes have been cut over his term (none of which I really wanted, but all of which I was happy to take). In the original stimulus bill he introduced the Making Work Pay tax cut, which earned my wife and I an extra $800 a year. We also collected a huge tax credit to install energy efficient windows, and we have also benefitted from the cuts to the payroll over the last few years.
Carla Swanson, mother in Big Lake, Minn.:
I don't think this will be seen as a genuine effort to help the economy especially this close to the election. Also for any business owners out there, they realize that while $250,000 sounds like a lot, many small business owners are grossing a quarter million and are not feeling as if they have any money left to spare. I think this may result in companies deciding not to hire, or in families opting not to hire a nanny, housekeeper, window washer or whoever. It could also mean these income earners cancel or downscale vacation plans or eat out less.
Brian Monkman, tech manager in Mechanicsburg, Penn.:
Taxes are always a topic of conversation. Pennsylvania is a flat tax state for everyone. So state taxes really aren't a huge issue. However, in the recent weeks the budget is of huge concern – getting agreement has been challenging. Add to that that the capital of Pennsylvania, Harrisburg, is insolvent and the city's finances are being being managed by a state appointed manager.
Most people I talk to generally shrug their shoulders when it comes to taxes and tax changes. There is kind of a malignant attitude towards it – a sort of "those idiots in D.C. don't care about me, not much I can do about it" point of view. Whenever terms like "job creators," "the 1 per cent," "tax equality," "largest middle class tax hike" are voiced there tends to be a rolling of the eyes.
Pennsylvania on average has lower unemployment then the national average. If you eliminate the larger urban areas of Philadelphia and Pittsburgh the unemployment rate gets even lower. People who have full time employment most often have some form of health insurance, albeit often not great insurance. So a lot of these issues tend to be non-issues to them directly.
Robert Slaven, actuarial in Camarillo, Calif.:
Everyone in California complains about state taxes being too high. And it is true that Californians pay a higher percentage of their income in state/local taxes (income tax, sales tax, property tax, at state and county and municipality levels).
But it's high only by U.S. standards. It's all about what you're used to, and what you're surrounded by, eh? Californians look east to Nevada, which has no state income tax; the state's take from the casinos more than makes up for it. Nevada has a sales tax (which varies from county to county), but it's in the same ballpark as California's sales tax. So someone in California thinks: "Oh man, my state taxes are way too high!" While we Canadians groan and roll our eyes at such statements.
Michelle Curry, stay-at-home mother in Baltimore, Md.:
I was shocked by the amount of money we get on our tax return. We would never get that much back in Canada. My husband was deployed and paid zero tax for that year, and we still got thousands back. I don't know but I feel like there is something really wrong with that system.