Obama has cut taxes for 98.6% of working* households**

Someone did their homework on Obama's promise of 95% tax cut to middle class. Obviously, the media will ignore this.

From Five Thirty Eight website:

But more often, Obama used phrases like “working taxpayers” or “working families” when referring to his tax cuts on the campaign trail. This is a promise that Obama has kept.

Let’s take a look at the tax cuts contained in the stimulus package in a little bit more detail. First is the Making Work Pay tax credit. As I mentioned, this applies to single filers making less than $95,000 and joint filers making less than $190,000. Using the IRS tax tables that I linked to earlier, this means that about 102 million taxpayers, or about 92.4 percent of “working” tax filers, will be eligible for the credit.

Then there’s the AMT reduction. The Tax Policy Center has helpfully estimated the percentage of Americans who are subject to the AMT by income bracket. For instance, about 79.2 percent of earners between $100,000 and $200,000 should be subject to the AMT by this time, according to estimates that the Tax Policy Center put together a couple of years ago. All told, this works out to about 24 million tax filers according to the estimates that I linked to above, or 26 million according to newer (but unfortunately much less detailed) estimates. If we perform this calculation for each income bracket based on the 24 million figure, this includes about 6.8 million tax filers who are not eligible for the Making Work Pay tax credit.

That leaves only about 1.6 million working tax filers who will not benefit from either the Making Work Pay credit or the AMT patch. And most of them are out of luck, since while there are a number of other tax cuts in the stimulus package, most of them phase outs at amounts equal to or lower than the threshold for Making Work Pay. One exception, however, is the deduction for the purchase of new vehicles, which doesn’t completely phase out until $135,000 for single filers and $260,000 for couples.

The automobile purchase credit operates by allowing taxpayers who buy new vehicles to deduct state and local sales taxes from the amount they owe to the IRS – something they ordinarily can’t do. The average new car purchased today costs about $25,000 before sales taxes, which at prevailing sales tax rates of about 5 percent, means that it comes with an additional $1,250 sales tax burden. Allowing people to make an “above the line” deduction on these sales taxes should reduce their tax burden by about 30 percent of $1,250, or $375. Since the total amount allocated to this tax credit is $1.7 billion, this implies that about 4.5 million people will benefit from it, or about 4.3 percent of the tax filers who are eligible for it.

What we’re concerned with, though, in evaluating the breadth of the tax cuts, are people who are eligible for the auto purchase credit but who weren’t eligible for Making Work Pay and who didn’t benefit from the AMT patch. This will be the fraction of individual filers making between $95,000 and $135,000 and joint filers making between $190,000 and $260,000 who were not subject to the AMT – a rather small number of people. We can probably assume, however, that participation rates will be higher in this group, since they’re making good money and are more likely to be able to afford a new car. Specifically, we’ll guess that the participation rate among this group will be 8.6 percent, twice the average of 4.3 percent. This works out to another 80,000 tax filers or so who had not been eligible for one of the other tax credits.

Adding everything up, I come up with about 98.6 percent of working tax filers – see upthread for how I caveated that description – who are eligible for one or more of these tax cuts. This is before accounting for any direct or indirect benefit from the various small business tax credits, or from oddball circumstances like when a high-income earner avoids the phase-out for the home purchase tax credit because they book it on their 2008 return.