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Raising taxes on rich unlikely to cut deficit

By Patrice Hill, The Washington Times

Taxing wealthier people is back in style with Democrats in the White House and running Congress, but the government’s fiscal house is in such disarray that even that well-trodden path will prove to be no cure-all for the nation’s soaring $1 trillion budget deficits.

Estimates by nonpartisan groups such as the Urban Institute and Tax Policy Center show that without any serious efforts to cut spending, tax rates on the wealthiest people earning $200,000 or more — the group targeted by President Obama — would have to rise to prohibitive levels of between 77 percent and 91 percent just to bring the yearly budget deficit down to manageable levels of around 2 percent to 3 percent of economic output.

Despite those estimates, the trend toward raising taxes on higher-income earners is well under way. Mr. Obama’s health care reform program nearly doubled the Medicare tax on people earning more than $200,000 and subjected their investment income to the health care tax for the first time.

The health program adds to what is already a steeply progressive tax code by using the upper-income tax revenues to subsidize health care for people with incomes under $50,000 — the same group that currently pays little if any federal income taxes.

In fact, thanks in part to Mr. Obama’s “making work pay” tax credit enacted last year, only about 3 percent of families with incomes under $50,000 will pay any federal income taxes this year, although most of those will continue to pay Social Security payroll taxes, according to estimates by Deloitte Tax and the Tax Policy Center.

Meanwhile, Mr. Obama’s budget proposes letting the tax rate on people with incomes of more than $200,000 revert to Clinton-era levels between 36 percent and 39.6 percent at the end of the year when President George W. Bush’s tax cuts expire. And a myriad of proposals have emerged in Congress to further tax the same group to pay for everything from education to clean energy.

To read more, visit: http://www.washingtontimes.com/news/2010/apr/15/raising-taxes-on-rich-unlikely-to-cut-deficit/?utm_source=newsletter&utm_medium=email&utm_campaign=newsletter_must-read-stories-today

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