Battle begins over who will pay more taxes
http://www.nbcnews.com/business/economywatch/battle-begins-over-who-will-pay-more-taxes-1C7118819
One of the biggest political battles in decades - how to spread the
tax burden of helping to balance the federal budget - has just begun.
It's likely that not many taxpayers will emerge unscathed.
President Barack Obama met Friday with Congressional leaders to begin
work on an agreement over how – or whether – to raise more revenues to
help pay down the deficit. Both sides in the long-simmering debate
have until the end of the year to head off hundreds of billions of
dollars in tax hikes scheduled to take effect in January.
The White House has said the president wants to raise some $1.6
trillion in new revenues over the coming decade – mainly from
top-income earners. "When it comes to the top 2 percent, what I'm not
going to do is to extend further a tax cut for folks who don't need
it," Obama said at a news conference Wednesday.
The president campaigned on a plan that would raise the current top
two tax brackets of 33 percent and 35 percent to 36 percent and 39.6
percent. Single taxpayers making less than $200,000 a year and married
couples making less than $250,000, would not see their tax rates go
up.
Republican opponents of the plan argue that the higher rates would
hurt small businesses, many of which pay individual, not corporate tax
rates. But the two new tax brackets would hit only 2.5 percent of
small businesses, according to a recent report by the Center on Budget
and Policy Priorities, a research group focused on issues affecting
low- and moderate-income households, based on a Treasury Department
analysis.
The new rates would restore the top tax brackets to pre-Bush levels,
which were already lower than for much of the last century. Until the
sweeping tax reform in 1986, the top marginal rate was 50 percent or
more, although most of the wealthiest households paid a much lower
effective rate, thanks to dozens of loopholes and tax breaks that were
eliminated by the tax code overhaul.
Now, the proposed new tax brackets would also apply to a relatively
small number of households – among the top two percent of incomes.
Most of the new revenues would come from the very top one-tenth of one
percent, or those making an average of $8.4 million a year, according
to a study by the Tax Policy Center.
“The heated debate over whether to extend all of the tax cuts or
whether to extend merely the vast majority largely concerns whether to
extend an extra $310,000 in tax relief to the wealthiest 120,000
taxpayers,” wrote Tax Policy Center researcher Adam Looney.
Despite the sizeable income pool at the top, the new revenues raised
by the proposed higher rates would be a drop in the deficit bucket,
the study found, raising roughly $68 billion a year – or about 7
percent of the current deficit. That leaves the White House roughly
$920 billion short of its goal to raise revenues by $1.6 trillion over
the next ten years.