Higher tax rates on the rich won't make the tax code fair

Barack ObamaBill ClintonMitt RomneyCatonsvilleInternal Revenue ServiceJohn Boehner

It has been reported that House Speaker John Boehner is backing a compromise on taxing those "rich" Americans who make over $1 million a year.

Unfortunately, that threshold, as well as President Barack Obama's proposal to increase taxes on those making over $250,000 at the Clinton era tax rate, is not going to solve the long term deficit problem, especially while spending remains out of control as it has been during Mr. Obama's presidency.

If U.S. tax policy is supposed to be progressive, a simple analysis of the latest available (2009) IRS tax information shows it is anything but that for those making over $1 million, as the average tax rate is essentially flat. So simply increasing the tax rate at the high end would not address the lack of progressiveness, which is the cause of lower tax revenues. In fact, at incomes over $10 million, the average tax rate is over 2 percent lower than that reported for $1 million, and that is most likely due to excessive deductions taken by the ultra rich.

The solution to this lack of progressiveness is to implement what Mitt Romney had proposed, and that is capping deductions dependent on income level. This approach would have a more significant positive effect on tax revenues, even though it might not placate the Obama supporters who are obsessed with increasing tax rates on the rich.

The $250,000 threshold proposed by Mr. Obama is even more troubling since the Clinton era maximum tax rate was levied on joint incomes above $288,000 which if adjusted for a cumulative inflation rate (from 2001 to the present) of over 32 percent, is approximately $380,000 (which means an income of $250,000 now is only worth about $190,000 in 2001 dollars). So it apparent that Mr. Obama considers the rich to be at an even lower income level than President Bill Clinton did.

The real solution to our tax-related economic problems is to abandon campaign rhetoric and implement meaningful changes to the tax code that are easily apparent to even an arm chair economist.

Michael Vance Ernest Sr., Catonsville

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