Friday, February 23, 2018

Running numbers on tax hikes for rich

As a practical matter, the debate over higher taxes is finished. If there's an agreement to avoid the "fiscal cliff," it will almost certainly contain large tax increases mostly or entirely on the wealthy. President Barack Obama defines them as couples with more than $250,000 of income and singles with $200,000 or more. The open questions are which taxes would go up, by how much and with what effect.

Let's try to make sense of the numbers.

The president wants $1.6 trillion in higher taxes over the next decade. To provide perspective: In the unsuccessful 2011 budget negotiations, House Speaker John Boehner reportedly supported a deal with $800 billion of tax increases. So the president — flush with victory for a second term — has doubled his demand over Boehner's previous best offer. This could be a huge obstacle to agreement.

But Obama can claim that this has been his position all along. The White House included the $1.6 trillion figure in its 2013 budget submission, though the figure didn't receive much attention. According to Donald Marron, head of the nonpartisan Tax Policy Center, the administration would raise the $1.6 trillion as follows:

• The top individual tax rates would rise from their present 33 percent and 35 percent to 36 percent and 39.6 percent for those over Obama's income thresholds. The 10-year revenue gain: $442 billion.

• Tax deductions would be trimmed. They would be phased out for the very rich and would provide no more than a 28 percent writeoff for others in high tax brackets. Revenue gain: $707 billion.

• Tax rates on dividends from stocks would rise from today's 15 percent to the rates on wages (up to 39.6 percent). Revenue gain: $206 billion. (Ownership of stocks is heavily concentrated among richer Americans.)

• Rates on capital gains — profits from sales of assets such as stocks — would rise from 15 percent to 20 percent. Revenue gain: $36 billion.

• The personal exemption for the wealthiest taxpayers would be phased out. Revenue gain: $42 billion.

• The estate tax would be restored to its 2009 level. At present, there's an exemption from taxes for estates up to $5.1 million, and the tax rate on the remainder is 35 percent. In 2009, the exemption was only $3.5 million, and the tax rate was 45 percent. Revenue gain: $119 billion.

As intended, the rich bear the burden of these increases.

The top 1 percent, with incomes beginning at $597,000, would pay an average $72,000 in higher taxes, representing a 5.1 percent decline in their aftertax income, the TPC has estimated. The wealthiest 0.1 percent (included in the top 1 percent), with a minimum income of $2.9 million, would pay an extra $403,000, a 6.6 percent drop in their aftertax income, says the TPC. The richest 95th to 99th percent of taxpayers (income threshold: $252,000) would pay an average of $5,765 more.

Though significant, these increases would roughly restore the tax burden on the rich to where it was before the Bush tax cuts in 2001 and 2003, other TPC estimates suggest. The top rate was then 39.6 percent, the rate on capital gains was 20 percent and the estate tax was higher than now. Possibly altering this conclusion are tax increases on the wealthy — the same income definitions — passed as part of Obamacare. The tax on wage and salary earnings was raised 0.9 percentage points; on capital gains and dividends, it was increased 3.8 percentage points.

"With state income taxes, top marginal rates will now be approaching 50," says Marron. "This creates an incentive for the wealthy to spend more time with their lawyers and accountants to change how they structure their activities to minimize taxes."

To reduce this, many economists favor limiting tax breaks to keep rates low. Republicans have been more open to this approach, because (they argue) lower rates might mitigate the adverse effects of higher tax burdens on the economy. Individuals would still have incentives to work hard; they'd keep a higher percentage of any increase in earnings. Similarly, small businesses — which often pay taxes at personal income rates — would have incentives to hire.

The TPC estimated that limiting taxpayers' itemized deductions — including mortgage interest payments, charitable contributions, and state and local taxes — to $17,000 could raise $1.7 trillion over a decade. Marron points out, however, that some resulting tax increases would fall on those below Obama's $200,000/$250,000 threshold.

There's plenty left for negotiation.

© 2012 Washington Post Writers Group

Editorial: Improve school security plans with gun controls

Editorial: Improve school security plans with gun controls

Gov. Rick Scott and key members of the Florida Legislature offered ambitious proposals Friday that would plug some holes in the stateís safety net, strengthen school security and spend up to a half-billion dollars in response to last weekís massacre ...
Updated: 6 hours ago
Editorial: Six proposals for reasonable gun control

Editorial: Six proposals for reasonable gun control

Enough is enough. The mass shooting at Marjory Stoneman Douglas High School has renewed conversations about gun control in Washington and Tallahassee. Young people are demanding action, and there are cracks in the National Rifle Associationís solid w...
Updated: 10 hours ago
Editorial: The time to act on guns is now

Editorial: The time to act on guns is now

The nationís conversation on guns took an encouraging step this week in three essential places ó South Florida, Tallahassee and Washington ó as survivors, victimsí families and elected leaders searched painfully and sincerely for common ground after ...
Published: 02/22/18

Editorial: FDLE probe of state fair fiasco falls short

It should go without saying that Florida law frowns upon public officials who take freebies from vendors and whose agency throws business to their family. But that wasnít enough to move the Florida Department of Law Enforcement to find that the ex-di...
Updated: 7 hours ago
Editorial: They value guns, not kids

Editorial: They value guns, not kids

They value guns over kidsSix days after 17 were killed at Marjory Stoneman Douglas High by a teen-ager firing an AR-15 semi-automatic rifle, the Florida House refused to even debate a bill banning the sale of assault weapons. The vote, 71 to 36, wasn...
Published: 02/21/18

Editorial: Nursing home rule should be stronger

It shouldnít take months or another tragedy for Florida ó which is hot and full of seniors ó to protect its elderly population from heat stroke in the event of an emergency. Thatís why Gov. Rick Scott had the right idea last year in calling for nursi...
Updated: 6 hours ago
Editorial: Listen to Marjory Stoneman Douglas students demanding change

Editorial: Listen to Marjory Stoneman Douglas students demanding change

Students from Marjory Stoneman Douglas High School are traveling to the state capital today and declaring "never again.íí A prominent Florida Republican fundraiser vows he wonít raise another nickel until his party approves new gun controls. Across F...
Published: 02/19/18

Editorial: No more doubt about Russian meddling in election

The latest indictment by the Justice Department special counsel, Robert Mueller, refutes President Donald Trumpís claims that Russian interference in the 2016 election was a Democratic hoax. The indictment details the lengths Russian conspirators too...
Published: 02/19/18

Another voice: Tips should belong to workers, not their bosses

The Trump administration is under fire for proposing a Labor Department regulation that could result in hotel and restaurant employers dipping into the tips customers leave for their employees, depriving the nationís 14 million hard-working restauran...
Published: 02/18/18
Updated: 02/20/18
Editorial: Trumpís rising deficits and misplaced priorities

Editorial: Trumpís rising deficits and misplaced priorities

Itís not popular in Washington or virtually anywhere else these days to express concern about the rising federal deficit. Congressional Republicans who used to be deficit hawks first voted to cut taxes by $1.5 trillion over the next decade, then rais...
Published: 02/17/18