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Obama’s Tax Hike (41% on Low & Middle Class)

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Posted on February 4 2010 9:35 pm
Liz Blaine is a financial analyst, author and freelance writer on finance, economics and politics. Follow her on Twitter and her blog Liz Blaine.
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By: Douglas Holtz-Eakin and Alex Brill

The stunning victory of Scott Brown in Massachusetts may prove to be a game-changer for the President’s health-care “reform” agenda. This is good news for the ability of lower-income families lacking insurance to climb up the ladder of American prosperity. His associated rhetoric notwithstanding, the President’s policies in the stimulus bill and health-care debate increase current barriers to the American dream. These legislative efforts (we use the Senate health-care bill for illustration) raise to shocking levels the effective marginal tax rates (EMTR) on lower and middle-income singles and families–with the government taking up to 41% of each additional dollar.

The mechanics are simple. The effective marginal tax rate is the answer to the question: “If I earn $1 more, how much less than $1 do I get to save or spend?” If you can keep that full dollar for your disposal, the effective marginal tax rate is zero. If earning another dollar does not raise your disposable income by even a penny, the effective marginal tax rate is 100 percent.

Read more at the Wall Street Journal

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