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Archive for Friday, August 13, 2010

Tax increase wouldn’t cost high earners much

August 13, 2010

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— President Barack Obama’s plan to let lapse the Bush-era tax cuts for the highest-income Americans would have little effect on 76 percent of those taxpayers, a study says.

Under the Democrats’ plan to end a tax break for those earning more than $200,000 per individual or $250,000 per couple, the 3.8 million filers who fall in the $200,000 to $500,000 income range would pay $2 billion more in 2011 taxes, or an average of $532, according to a July 30 letter from the nonpartisan congressional Joint Committee on Taxation.

The July 30 study conducted for the House Ways and Means Committee shows that those earning between $200,000 and $500,000 would account for 5 percent of the planned $38 billion tax increase; the biggest burden would fall on the 608,000 taxpayers who make between $500,000 and $1 million and the 315,000 who earn more than $1 million. The first group would pay $6 billion more, or an average of $9,868, and the second group would owe $30 billion more, or $95,238 on average, the analysis said.

For those under $500,000, the tax increase is “relatively low,” said Roberton Williams, an economist with the Urban Institute who studied the joint tax committee report. “It’s less than 1 percent.”

Democrats and Republicans are digging in for a September battle over the tax cuts that President George W. Bush pushed through Congress in 2001 and 2003 that will expire at the end of this year unless lawmakers take action. Obama and congressional Democrats say they’ll extend Bush-era tax cuts for individuals earning under $200,000 and couples making less than $250,000. They would reinstate higher rates on income and investments that exceed those amounts starting Jan. 1.

Republicans such as Sen. Jon Kyl of Arizona and House Minority Leader John Boehner of Ohio say restoring higher tax rates on high-income households would penalize investors and hurt job creation in a struggling economy.

White House spokesman Robert Gibbs said Wednesday that the debate could extend into the campaign for the November congressional elections. The tax cuts “will be a big part of the 2010 election,” Gibbs said.

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