Lisa Simpson
Aug 3,2009
In: Finance

Taxes on Rich Americans to Be Increased

taxes

White House and the Congress have come up with proposals to impose further taxes on the rich – the highest rate since the last 25 years.

The latest proposal came from House Ways and Means Committee chairperson Charles Rangel (Democrat) and some others. The plan is to levy surtax of a maximum of 5.4% on those with an annual income of $350,000 or more. These funds would go to restructuring the health care system. This proposal will have an impact on 500,000 taxpayers who are earning more than a minimum of $1 million. They will have to pay the full surtax.

The budget of Obama that had been released last February puts a stop to tax cuts on the top earners – a measure that had been introduced at the beginning of this decade. It will come to an end in 2011. This will cause an increase of the top rate from 35% to 39.6% on earnings more than $373,000.

Obama had focused on the upgrading of Social Security during his campaign trail. He wanted to subject income above $250,000 to 12.4% payroll tax. Equal amounts would be paid by the employed and employers. Currently the tax is placed on earnings up to $102,000.

The overcall picture is that by shifting the tax weight on rich Americans the actual rate of taxes would cross 45% – something unprecedented. Clint Stretch of Deloitte Tax LLP said that these levels have never been seen. Previously there were shelters when tax rates were high to bring down the percentage.

Robert Gibbs, the White House Press Secretary recently said that President Obama, “believes that the richest 1% of this country has had a pretty good run of it for many, many, many years.” The Tax Policy Center, a non-partisan entity, said that the richest 1% had income calculating to a minimum amount of $557,000.

The plan of making the top income group pay for other benefits might be overturned if the Republicans regain power said William Gale of Brookings Institution – a famed think-tank. He said, “We cannot do this on the backs of the rich.”

Robert McIntyre speaking for The Liberal Citizens for Tax Justice said that ultimately Obama has to look over and above stretching his vision beyond the taxpayers (6.4 million) whose incomes are more than $200,000. He opined, “At some point, you just can’t squeeze them anymore.”