What's Obama Doing to Your Taxes?

When President Obama outlined his 2011 budget proposal in February, he said government cannot "continue to spend as if deficits don't have consequences... as if the hard-earned tax dollars of the American people can be treated like Monopoly money."

On April 15, after laboring through their taxes, many Americans may be asking if the president meant what he said. More than three quarters of Americans, according to a CBS News/ New York Times poll released that same month, thought the Obama administration has either kept taxes the same for most Americans or increased them. The latest CBS News/ New York Times poll released yesterday shows that as many as 34 percent of Americans think Mr. Obama raised taxes.

Today, thousands of Tea Partiers will descend on Washington to declare they've been "Taxed Enough Already." Yesterday's poll found that 64 percent of Tea Party supporters think the administration has raised taxes -- a finding that might leave Democrats banging their heads against their desks.

"The American people need to be reminded that 98 percent of Americans got a tax cut last year," Senate Majority Leader Harry Reid said Wednesday.

Tax Day Brings Rally to Washington

Reid was referring to the impact of the American Recovery and Reinvestment Act, otherwise known as the stimulus -- essentially, the only Obama policy to really impact people's 2009 tax returns. In fact, tax refunds reached an all-time high this year in part because of the stimulus, the president said in his weekly address on Saturday. Meanwhile, taxes are at their lowest levels in 60 years, according to William Gale, co-director of the Tax Policy Center and director of the Retirement Security Project at the Brookings Institution.

"The relation between what is said in the tax debate and what is true about tax policy is often quite tenuous," Gale told Hotsheet. "The rise of the Tea Party at at time when taxes are literally at their lowest in decades is really hard to understand."

Skepticism surrounding the president's tax policies likely stem from a variety of factors: First, it's simply harder to open one's wallet for the government during a recession, and some state and local tax increases added to some people's burden. Additionally, many Americans may be more concerned with potential tax increases in the future. On top of all that, it can simply be hard to have a firm understanding of what's going on in Washington from the hyper-partisan rhetoric often used to talk about taxes.

Here's a look at what the president did for your tax return in 2009, what he may do in the future and whether it all adds up.

What Happened in 2009?

One third of the Recovery Act was made up of tax credits, the White House emphasizes.

"No one I've met is looking for a handout," Mr. Obama said in his address Saturday. "And that's not what these tax cuts are. Instead, they're targeted relief to help middle class families weather the storm, to jumpstart our economy, and to bring the fundamentals of the American Dream -- making an honest living, earning an education, owning a home, and raising a family -- back within reach for millions of Americans."

The credits included:

• An increase in the Earned Income Tax Credit
• An expansion of the Child Tax Credit
•  For those who work, the Making Work Pay tax credit offered $400 per individual and $800 per couple
• For those who lost their job, there was a 65 percent tax credit to help cover the cost of health care. The first $2,400 in unemployment benefits went tax-free
• Up to $2,500 under the American Opportunity Credit for students and parents paying for college tuition
• $8,000 for first-time home buyers
• A deduction of state and local taxes paid on a new car
•  Up to $1,500 for home improvements to increase energy efficiency

Even conservative advocacy group Americans for Tax Reform, which advocates for a single, national flat tax rate, found some praise for the Recovery Act -- specifically for provisions allowing small businesses to write off a wider range of business expenses.

More generally, "all tax relief has the minimum value of depriving the government of revenue," Americans for Tax Reform's tax policy director Ryan Ellis said.

While most Americans said in yesterday's CBS News/ New York Times poll that they paid a fair amount of taxes this year, Tea Party activists are less satisfied. And conservative economists are quick to point out that a sizable portion of the Recovery Act's tax credits went to people who already had zero or less than zero income tax liability. Nearly half of Americans who file federal income tax returns do not pay any federal income taxes, the Heritage Foundation reports.

Liberals would counter that people pay more than just federal income taxes -- there are payroll taxes, state and local taxes, sales taxes and more. Additionally, they say the stimulus purposefully targeted working middle-income families.

"We know those are the right people to get tax relief if we want to see wider economic effects," said Michael Linden, associate director for tax and budget policy at the Center for American Progress. "If you give additional resources to low and middle income people they spend it, because they have no option."

Nevertheless, conservatives see a trend they don't like -- piling more taxes onto a smaller share of the population.

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Tax Day Resources from MoneyWatch.com

What Tax Policies is Obama Advocating for the Future?

People may, in part, think their taxes went up last year because they are looking prospectively, conservatives say.

Mr. Obama has proposed letting the Bush tax cuts expire for individuals making more than $200,000 a year or couples making more than $250,000. That means by the end of this year, Washington is likely to, among other things:

• Raise the top two income tax brackets from 33 percent to 36 percent, and from 35 percent 39.6 percent
• Raise the capital gains tax rate from 15 percent to 20 percent for married filers with incomes above $250,000
• Raise the tax on dividend income from 15 percent to 20 percent for married filers with incomes above $250,000

Gerald Prante, a senior economist for the Tax Foundation, a non-profit, non-partisan tax research organization, said these tax increases would likely only directly impact about 2 to 3 percent of tax returns.

Still, he said, "Relying on the backs of people making just $250,000 or $200,000 -- you can't keep going to that well. At some point, the economic cost of going to that same income group isn't worth it."

Curtis Dubay, a senior policy analyst at the Heritage Foundation, added that the wealthy already pay "the lion's share of all taxes."

"You have a serious problem of how are taxes are distributed," he said. "The left is trivializing it by saying you can raise taxes on the rich."

You can raise taxes on the rich, Linden countered, because the economic growth that happened during the Bush administration was concentrated at the top. Letting the tax cuts expire for the wealthy would help pay down the deficit with little economic effect, he said.

"We're talking about going back to rates that existed under Bill Clinton. It's not as if that was a bleak economic period," Linden said. "We had eight years under President Clinton who raised taxes. Everybody said it would destroy the economy, and all we got was incredible economic growth and a balanced budget."

Does Tax Reform Mean More Taxes?

What About Health Care?

It's not just the wealthy, however, concerned about tax increases.

"People see the massive spending [of the administration], and they correlate high spending and high deficits with future tax increases," Dubay from the Heritage Foundation said. "I think that's where a lot of the anger comes from for the Tea Party."

Mr. Obama's health care reforms, which go into effect over the next few years, are often cited as the prime example of a policy that will lead to higher taxes. The president himself says it includes "the largest middle class tax cut for health care in history," referring to the tax credits lower-income people will get to purchase insurance. "One thing we have not done is raise income taxes on families making less than $250,000," he said Saturday.

While there were no middle class income taxes in the legislation, it still raises revenue from the middle class. For instance, the individual mandate, which requires all Americans to purchase health insurance starting in 2014, was fashioned as a "tax." Middle class earners will also be hit by the provision limiting medical expense deductions.

Republicans have protested that the health care reforms will include more than $500 billion in new "taxes." Supporters of the legislation say that the costs imposed on the middle class will be balanced out by the benefits received, including subsidies. Families making more than $250,000 per year will be hit with a 3.8 percent tax on investment income.

"It's almost exclusively high income households" that will see tax increases because of the health care bill, said Gale of the Brookings Institution.

Partisan Politics

Even with all the significant policy changes this administration is responsible for, from the stimulus to health care, the public's perceptions of President Obama's tax policies are indisputably at least partially attributable to partisanship.

CBS News polls from this year show conservatives are more likely than Americans overall to think President Obama raised their taxes. Prante of the Tax Foundation said that during the Bush years, he conducted research on similar polls asking Americans if they supported tax cuts.

"When you mention the word 'Bush,' the party split widened significantly," he said.

Meanwhile, politicians have no qualms about using extreme political messaging that plays off of people's already-established ideas. While the rhetoric can sometimes cross the line, both political parties are skilled at pushing the envelope without all together abandoning the facts. A recently released video from the Republican National Committee dramatizes the taxes in the health care bill.

"Sneezing: taxed," says a narrator while the words "tax on allergy medicine" appear in the video. "Breathing: taxed," the narrator says, while the video shows the message, "tax on oxygen tanks."

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Watch CBSNews.com's Stephanie Condon on "Washington Unplugged" discuss this story as well as the latest CBS News/ New York Times poll:

Watch CBS News Videos Online

[jeannie25]

Everything just keeps going up but are pay!

[jeannie25]

They need to stop raising taxes on the stuff we need to buy pretty soon we won't be able to go to work or look for a job because we can not afford to pay the gas prices. Or buy groceries!

[Stevenapoli7]

Before we proceed further down the road to government meddling in health care, let's see what happens to our taxes once we are done soaking the successful. My family is from Hungary...check out their Medicare and Social Security taxes compared to ours.

U.S.: 7.45%/ 7.45% employee/ employer (1.45 + 6.2 = 7.45)

Hungary: 17%/ 28.5%

This European style government subsidized health care that Obama, Pelosi, Krugman and his ilk support leads to long wait times, poor conditions, and you end up going to the doctor's private practice after work and pay cash anyway. Classic lose-lose situation which the U.S. will learn about first hand coming soon.

[tzimiscechi]

There is a BIG DIFFERENCE between a Tax CREDIT (whereas you can deduct something from your taxes) and a Tax CUT (whereas the tax rates come down.)

Offering the public a laundry list of Credits is NOT Cutting taxes.

Sloppy journalism like this is one of the biggest reasons why CBS News is dead last in the ratings.

[Smash23]

Except that the article doesn't claim that Obama is cutting taxes. The premise of the article is how your taxes are being affected, in whatever way that's happening. And tax credits obviously affect how much people pay. So the point is that most people saw a reduction in the amount they paid in taxes for 2009, because of the credits. Whether they're cuts or credits really makes no difference in such a discussion, paying less is paying less.

[marks6806]

Few people still support Obama - outside the Kool-Aid college kids and those who don't pay income tax (welfare crowd, lower middle class - and others not paying their way). Taxpaying working Americans will vote this fall and in 2012 to restore this great nation to a constitutional, democratic, capitolist-based economic powerhouse.

If you like socialism and want to live in a socialist state you are in the wrong place. Even Obama won't make it happen. He will cause strife and social unrest - but he will never transform our great nation into a 2nd-rate socialst failure. If you do prefer living as a leach in a socialist state please apply to the immigration authorities in Venezuela, Cuba, or one of the bankrupt EU states. You don't belong here.

[jeannie25]

Getting unemployment was not a free ride my husband paid for it 38 years. And you think is getting a free ride now that he is unemployed you are wrong! obviously you have a job and never been unemployed, and do not know how hard it is to find a job that paid half as much as what he use to make. He works part time and along with unemployment still does not make as much as what he use to.

[Giantchiefunwo]

Look past the facade folks...
http://www.youtube.com/watch?v=eAaQNACwaLw

[roryrooorrrr]

Dont you people understand that Obama HAD TO SPEND ALL THIS MONEY???? Come on. And don't you people know that you don't have to raise taxes just because you spend more? Its basic math! COme on...All those Tea Baggers who are just KKK members, even though the KKK were originally democrats they have OBVIOUSLY switched the Tea Party....How can they possibly protest the spending in Washington when you can plainly see how well it is working for everybody! You people should be thanking your president as he spends you tax dollars on your best interest. Obviously you need him too because you cant think for yourselves! I say Thank you Obama for not raising my taxes and instead sticking it to the rich man who would have hired me to design his new swimming pool but now I dont have to work at all I can just extend my unemployment longer and spew hatered against those KKK Tea Baggers who are trying to mess up my free ride! JEEZ

[Giantchiefunwo]

false flag^^^

[mahdeealoo]

Our average income processed out a lower than usual tax. I commend Obama. The squawkers are the ones who make mega bucks, like Bush's cronies.

[Giantchiefunwo]

I do not make mega bucks, don't support Bush and see Obama is Bush X3
http://www.youtube.com/watch?v=eAaQNACwaLw

[clemenhagen1]

The oft repeated report that 47% PAID NO TAXES is disinformation designed as a conservative run-up to the push to extend the completely irresponsible Bush tax-cuts. The reality is that fully FORTY percent of AMERICAN HOUSEHOLDS make less than $40,000 per year. That is 2 out of 5 families. They do pay significant portions of their incomes to taxes: Medicare & FICA plus federal gas tax etc.; state taxes in the form of income, sales, gas, and numerous "fees"; local taxes in the form of property taxes (even if renters they pay the landlords share). If you were to break down the average family of four making less than forty thousand dollars they probably pay a nearly as high a percentage of total taxes as does a family of four making a million. The effective tax rate in the upper brackets rarely applies to wealthy families anyway, as virtually the entire system of "tax shelters" and "write-offs" favor the wealthy classes. EXXON-MOBIL paid ZERO taxes in 2009.

[crashdavisii]

you're right XON pays no fica, no VAT, no duties, no real estate tax, no "fees" and that $15 billion item for income tax expense on their 10K for 2009 was a figment. Listen if you're going to be stupid please do it somewhere else

[clemenhagen1]

"So, essentially the only reason we got a "tax break" last year is because our federal government borrowed the money to pay for it. Since the government's income is OUR money, anyone who received a tax break"

Okay, so let's play this game out to the logical conclusion. Obama passed the tax-cuts, funded by deficit spending, to help us out of the worst financial recession since the Great Depression. Every single economist of any credibility would tell you that is precisely the approach to take given the dire economic circumstances.

George W. Bush, like Ronald Reagan before him, passed massive tax-cuts for the wealthiest Americans. Those tax-cuts, combined with bloated defense budgets under both presidents, led to soaring deficits and the national debt problems in the first place. Scorecard for those playing at home: Reagan = 1 trillion nat. debt became 3 trillion (tripled debt); Bush = 5.5 trillion nat. debt became 12 trillion (more than doubled debt).

Do you use the exact same logic to condemn the Bush tax cuts and the Reagan tax cuts?

[Giantchiefunwo]

You are right in many of your points. Obama has spent more in his term than all other Presidents in US history. And will spend more and more and more and more and more. Bush=Obama, its just a new face to subdue the masses.
http://www.youtube.com/watch?v=eAaQNACwaLw

[brewmaster95060]

In 6 mos obama the noational debt has gone up about 1 Trillion
at the end of his term if nothing changes the national debt will be 20 Trillion.

obama keeps saying their were "tax cuts" NO the bulk were"tax credits"