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Calculate Your Obama Tax Cut!

Thursday, September 4, 2008 3:20 PM - By David Lat

Barack Obama Senator Barack Hussein Obama Above the Law blog.jpgDid you watch Republican vice-presidential nominee Sarah Palin’s speech last night? Of course you did; it was a must-see. And regardless of your politics, you can’t deny that she delivered it superbly, with polish and poise. In short, at least as a stylistic matter, it was the Best Speech Ever.

But how was the Palin speech as a matter of substance? The AP fact-checked it and identified some issues:

PALIN: “The Democratic nominee for president supports plans to raise income taxes, raise payroll taxes, raise investment income taxes, raise the death tax, raise business taxes, and increase the tax burden on the American people by hundreds of billions of dollars.”

THE FACTS: The Tax Policy Center, a think tank run jointly by the Brookings Institution and the Urban Institute, concluded that Obama’s plan would increase after-tax income for middle-income taxpayers by about 5 percent by 2012, or nearly $2,200 annually. McCain’s plan, which cuts taxes across all income levels, would raise after tax-income for middle-income taxpayers by 3 percent, the center concluded.

Who cares about Kansas — what about Biglaw associates (and partners)? How would they be affected by Obama’s tax plan? With their six- and seven-figure salaries, some are doing a lot better than “middle income.”

Check out some surprising numbers, after the jump.

A series of guest posts on ATL by Ted Frank — here, here, and here — suggested that Obama’s tax plan wouldn’t be kind to denizens of law firms. But under the latest version of his plan — new and improved, arguably for political expediency — most ATL readers will receive a tax cut.

Shortly before the Labor Day holiday (so some of you probably missed it), an online tool allowing you to calculate your Obama tax cut made its debut. Check it out here (via TaxProf Blog). You can enter your approximate adjusted gross income and see what Obama can do for you.

A few data points relevant to firm lawyers:

  • If your adjusted gross income is around $150,000 — let’s say you’re a first-year associate at a firm that’s not quite on the $160K scale, like a decent midsize or regional law firm — your Obama tax cut will be $235.76.

  • If your adjusted gross income is around $200,000 — this is roughly what Biglaw first-year associates (in their non-stub year) earned in 2007 — your Obama tax cut will be $2,775.62.

    What about law firm partners? If you enter $500,000+ into the calculator, you get this message: “You will probably not get an Obama Tax Cut.”

    And you might even get an Obama tax hike. Check out this table, based on research by the Tax Policy Center:

    Tax Policy Center comparison Obama McCain tax plans.jpg

    So many partners at Am Law 100 firms, who fall into that $603,403 to $2.87 million band, will see their taxes go up by about ten percent in an Obama administration. Top partners at Am Law 100 firms, who earn more than $2.87 million, will see their taxes go up even more.

    But who’s going to feel bad for millionaires — and millionaire lawyers, to boot — whose taxes go up so we can have a better health care system?

    Calculate Your Obama Tax Cut [TaxProf Blog]
    Obama and McCain Tax Proposals [Washington Post]

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