Over the same period, the average federal income tax rate for all taxpayers declined to 9.3 percent from 9.9 percent.
The top income tax rate is 35 percent, so how can people who make so much pay so much less than that in taxes? The nation’s tax laws are packed with breaks for people at every income level. There are breaks for having children, paying a mortgage, going to college and even for paying other taxes.
The top rate on capital gains is only 15 percent.
There are so many breaks that 45 percent of U.S. households will pay no federal income tax for 2010, according to estimates by the Tax Policy Center, a Washington think tank.
“It’s the fact that we are using the tax code both to collect revenue, which is its primary purpose, and to deliver these spending benefits that we run into the situation where so many people are paying no taxes,” said Roberton Williams, a senior fellow at the center.
The sheer number of credits, deductions and exemptions has Democrats and Republicans calling for tax laws to be overhauled. House Republicans want to eliminate breaks to pay for lower overall rates, reducing the top tax rate to 25 percent from 35 percent. Republicans oppose raising taxes, but they argue that a more efficient tax code would increase economic activity, generating additional tax revenue.
President Obama said last week that he wants to do away with tax breaks to lower the rates and to reduce government borrowing. Obama’s proposal would result in $1 trillion in tax increases over the next 12 years.
The proposals from the GOP and Obama included few details, putting off hard choices about which tax breaks to eliminate.
In all, the tax code is filled with $1.1 trillion in credits, deductions and exemptions, an average of about $8,000 per taxpayer, according to an analysis by the independent national taxpayer advocate within the IRS.
More than half of the nation’s tax revenue came from the top 10 percent of earners in 2007. More than 44 percent came from the top 5 percent. Still, the wealthy have access to much more lucrative tax breaks than people with lower incomes.
Obama wants this to change so “the amount of taxes you pay isn’t determined by what kind of accountant you can afford.”
Eric Schoenberg says to sign him up for paying higher taxes. Schoenberg, who inherited money and has a healthy portfolio from his days as an investment banker, has joined a group of other wealthy Americans called United for a Fair Economy. Their goal: Raise taxes on rich people such as themselves.
Loading...
Comments