Wealthy Americans to Face Higher Taxes
April 7, 2010
About 7.5 million Americans will likely face higher federal taxes in 2011, as President Obama and Congressional Democrats are targeting the rich as a means of reducing the deficit, according to USA Today. Obama's proposed $3.8 trillion budget includes measures that would extend President Bush's 2001 and 2003 tax cuts for middle-income families, but would let the tax cuts for those making more than $200,000 expire.
The Treasury Dept. has determined that the "effective" tax hike on these upper income earners would generate about $41 billion next year and $969 billion over the next 10 years, money that the White House is promoting as a deficit reducer.
Bush's 2001 and 2003 tax cuts expire at the end of this year, at which time the top two income tax rates would rise to 36 percent and 39.6 percent, where they stood prior to the Bush cuts. Rates on capital gains and dividends would also revert to levels in place prior to the Bush cuts.
House Ways and Means Committee Chairman Sandy Levin, D-Mich., said Obama's tax plan is fair because middle-income Americans are struggling, while wealthier Americans are not. "It's based on the realities of the last 10 years," he said. "The decade for middle-income families has been on the average a very difficult one, and much of the increase in income and wealth went to the very wealthy."
The vote could prove difficult for Democrats from more conservative districts who also voted for Obama's health care measure. The health law will raise Medicare payroll taxes on upper-income Americans and tax the most generous health insurance plans. "Small businesses are going to pay these higher taxes, and that will only make it tougher to create jobs in this country," said Rep. Dave Camp, R-Mich. "Raising taxes is the last thing we should do right now."
A March poll by Quinnipiac University in New York found 60% of Americans support raising taxes on those earning more than $250,000, if the money is used to reduce the deficit.
Andrew Roth of the anti-tax Club for Growth said letting taxes rise would curtail job growth and send stocks tumbling. Obama and Democrats probably will win the legislative battle this year, he said, but "we're going to make it tough on them politically."
Obama and Democratic supporters of the hikes picked up some "unlikely allies" on Tuesday, with one group of more than 700 wealthy Americans pledging to donate their 2010 tax cut amounts and to lobby for letting the cuts expire next year, and another group of wealthy Americans calling for the expiration while releasing a report showing that upper-income Americans reaped about $700 billion in tax cuts in the past decade.
One of our favorite financial bloggers, Professor Mark Perry of Carpe Diem, said in rebuttal that "for any of the wealthy who are anxious to pay more taxes, they don't have to wait for the Bush tax cuts to expire, they can pay more right now. Here are some ways:"
1. They can make a gift to the U.S. Treasury at any time (why not today?), here is the website with instructions.
2. They can pay their 2009 taxes at the higher Clinton tax rates of 2000, instead of the current lower rates.
3. They don't have to itemize deductions on their 2009 taxes; instead they can take the standard deduction of $5,700 for singles married individuals filing separate, or $11,400 for married couples, which would typically result in a much higher tax liability for rich people.
