(NY Times) Seeking Ways to Raise Taxes but Leave Tax Rate As Is

Congressional negotiators, trying to avert a fiscal crisis in January, are examining ideas that would allow effective tax rates to rise for the wealthy without technically raising the top tax rate of 35 percent. They hope the proposals will advance negotiations by allowing both parties to claim they stood their ground.

One possible change would tax the entire salary earned by those making more than a certain level ”” $400,000 or so ”” at the top rate of 35 percent rather than allowing them to pay lower rates before they reach the target, as is the standard formula. That plan would allow Republicans to say they did not back down in their opposition to raising marginal tax rates and Democrats to say they prevailed by increasing effective tax rates on the rich. At the same time, it would provide an initial effort to reduce the deficit, which the negotiators call a down payment, as Congressional tax-writing committees hash out a broad overhaul of the tax code.

That idea could be combined with the reinstatement of tax code provisions that once prevented the rich from taking personal exemptions or itemizing deductions. Those rules were eliminated by the tax cut of 2001. Reinstating them would tack an additional one to two percentage points onto the effective tax rates of high-income households without raising the 35 percent rate, but which households would be affected has not been decided. In all, tax experts say, families in the top tax bracket would find their effective tax rate jump to 41 percent, even though the top statutory rate would remain 35 percent.

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Posted in * Economics, Politics, Budget, Consumer/consumer spending, Corporations/Corporate Life, Economy, House of Representatives, Housing/Real Estate Market, Labor/Labor Unions/Labor Market, Office of the President, Politics in General, President Barack Obama, Senate, The National Deficit, The U.S. Government, US Presidential Election 2012

5 comments on “(NY Times) Seeking Ways to Raise Taxes but Leave Tax Rate As Is

  1. Br. Michael says:

    How about taxing all Democrats 100% of every dollar above 250K. Democratic celebrities would pay a surcharge of 125%.

  2. Br. Michael says:

    Otherwise let the existing law go into effect.

  3. jkc1945 says:

    A Value-added tax – – – a national sales tax, on all goods except for foods, medicines, and a few other items which I cannot list – – – seems to me to be the answer to our misery. Probably somewhere around 18 to 21%. No other taxes at the federal level.

  4. Br. Michael says:

    3, a bad answer because it lets the government hide the amount of taxes that it levies. It’s great to finance a welfare state and to give the government the maximum about of largess to distribute to the political cronies of whatever party is in power.

  5. jkc1945 says:

    Br. Michael, help me understand your concern. It seems to me as if, we have a good economy, and the public spending is (for example) 10 trillion in a year, then the next year, the federal budget would be “set” at 1.8 trillion (18%) and that would be the “federal income,” if spending stayed the same. If the economy went in the tank, then the federal income would go there with the general economy, and the federal budget would drop to accomodate the lesser public spending. Am I trying to make this too simple, or am I the one who is ‘simple?” (either could be true haha)