Top 1% would see $90,000 tax rise, report says

| | Comments (0) | TrackBacks (0)

The Wall Street Journal
By: John D. McKinnon
March 22, 2012

Top 1% would see $90,000 tax rise, report says

Americans whose income ranks them in the top 1% of earners would see their taxes rise by more than $90,000 on average next year under President Barack Obama's budget proposal, according to a nonpartisan research group's new estimate.

"Almost all of the rich would end up paying a lot more," said Roberton Williams, a senior fellow at the nonpartisan Tax Policy Center, a joint venture of the Brookings Institution and the Urban Institute, which conducted the study.

Mr. Williams questioned the wisdom of reducing federal deficits through tax increases only on those making more than $250,000, as Mr. Obama wants to do. "While they have a lot of money, they don't have enough money to solve our budget problems on their backs alone," Mr. Williams said.

The White House didn't immediately respond to requests for comment, but has previously cited a growing income gap between the wealthy and other groups as a reason for raising taxes on those making more than $250,000. Raising taxes on the wealthy is "about the nation's welfare," Mr. Obama said in a December speech in Osawatomie, Kan. "It's about making choices that benefit not just the people who've done fantastically well over the last few decades, but that benefits the middle class, and those fighting to get into the middle class, and the economy as a whole."

Mr. Obama proposed about $1.4 trillion in tax increases over the next decade for higher earners--defined as couples making more than $250,000--in his February budget. That includes allowing the Bush tax cuts for higher earners to lapse, causing the top marginal income-tax rate to return to 39.6% from 35%. He also would impose substantial new limits on the value of income-tax deductions and other breaks.

Mr. Obama has proposed both sets of changes since taking office, but the deduction limit was expanded significantly this year to include tax-exempt bond interest, employer-sponsored health insurance and retirement contributions.

As a result, for 2013, the top 1% of earners--defined as households making more than $593,000--would see their total federal taxes go up by an average of $93,707 from current tax levels, according to center's estimate. That includes individual and corporate income taxes, payroll taxes and estate tax.

The study found that after-tax incomes for the top 1% would fall by 7.8%, and the average effective federal tax rates for that group would rise 5.3 percentage points to 36.8%.

The top 0.1% of earners--those making more than $2.7 million--would see their taxes go up by an average of $510,724 next year, the center said. Their after-tax income would fall by 10%. Their average effective federal tax rate would increase by 6.5 percentage points to 41.7%.

House Republicans criticized the results. "No matter how much money someone makes, the federal government should not be taking that much of their income," said Sage Eastman, a spokesman for Rep. Dave Camp (R., Mich.), the Ways and Means Committee chairman. "Taking more money out of the economy is not going to lead to more jobs, it will only lead to more government and wasteful Washington spending."

The administration's proposal to end the Bush-era tax cuts for couples making more than $250,000 would raise about $850 billion over the next decade. Mr. Obama also wants to limit the value of many deductions for families making more than $250,000. That would raise a further $584 billion over the decade.

.But millionaires likely would find legal ways to avoid paying higher taxes under another of Mr. Obama's new tax proposals, his so-called "Buffett Rule," a separate congressional estimate found.

The proposal--spelled out in Mr. Obama's State of the Union address but not included in his budget--would impose a 30% minimum tax rate on those who make more than $1 million a year. It's named for the billionaire investor Warren Buffett, who advocates higher taxes on the very wealthy.

Taxpayers' likely efforts to sidestep the rule's impact mean it would raise about $47 billion in extra revenue over the next decade, according to a new estimate by the nonpartisan Joint Committee on Taxation, a congressional advisory body that functions as the official congressional scorekeeper for legislation affecting government tax revenues. The Tax Policy Center had estimated the Buffett rule would raise about $114 billion over the next decade.

0 TrackBacks

Listed below are links to blogs that reference this entry: Top 1% would see $90,000 tax rise, report says.

TrackBack URL for this entry:

Leave a comment

About this Entry

This page contains a single entry by CFED published on March 22, 2012 4:38 PM.

Housing math: Buying is now cheaper than renting 98% of the time was the previous entry in this blog.

Income gap closing: Women on pace to outearn men is the next entry in this blog.

Find recent content on the main index or look in the archives to find all content.