Affluent Owed Higher Taxes in ‘93, Study Says

Well-to-do Americans’ taxes rose 16% in 1993, the first year of revisions pressed into law by President Clinton, according to a computer-assisted analysis of Internal Revenue Service data.

People who earned $100,000 or more owed the government an additional $31 billion compared to 1992. Everyone else together owed about $3 billion more.

The tax-law revisions were aimed specifically at reducing the deficit by tapping people with big incomes. When Clinton proposed raising taxes on high incomes, experts expected the affluent to create shelters and loopholes to blunt the impact.

It didn’t happen.

The law took effect in August, 1993, but the new rules were applied retroactively to January. That took some tax planners by surprise.

“We did not see a new surge of tax shelters,” said Robert McIntyre of Citizens for Tax Justice, a Washington advocacy group. “It’s hard to do, and it takes time.”

Clinton had argued that upper-income Americans had paid less than their share of taxes in the years when Republican Presidents Ronald Reagan and George Bush sat in the White House.

He said the new law asked “the well-off to pay their fair share, requiring that at least 80% of the new tax burden fall on those making more than $200,000 a year, and very little on any other Americans, not to punish the successful, but simply to ask something of the very people whose incomes went up most and whose taxes went down during the 1980s.”

The bill added two new tax brackets--36% for income beginning at $115,000 and 39.6% for those beginning at $250,000--but generally left other tax rates alone.

While tax liability declined for people in many brackets, for those making more than $100,000 it amounted to 25.5% of their income before deductions, up from 23% the previous year.

The bill did not differentiate between single-income and dual-income households.

Meanwhile, in a television interview Thursday, Clinton promised to examine Republican proposals to scrap the current income tax system in favor of a flat tax. But he warned that most studies suggest such a move would boost the deficit and increase taxes on Americans earning less than $200,000.

Clinton also said he won’t sign a pledge to refrain from raising taxes. To do so, he said, would run the risk of “breeding cynicism” among Americans.