A new analysis released Monday by the Tax Policy Center finds that President Obama’s newest budget proposal will leave the top one percent of earners with two-thirds of the tax increase burden suggested by the administration.
Families making between $30,000 and $40,000 would see their taxes increase by an average of $54 by 2023 should lawmakers make no changes to the president’s proposal. Households with earnings between $500,000 and $1 million would see an average federal tax increase of $13,474.
The study should come as good news to the Obama administration, which is eager to increase taxes in order to ensure the wealthy surrender a “fair share” of their income to the government. Although the Tax Policy Center is officially non-partisan, it is a joint venture of the Brookings Institution and the Urban Institute, both of which were listed as “liberal” in a 2011 USA Today study, with 97.6 percent and 100 percent of their respective employees’ political donations going to Democrats.
President Obama plans to raise taxes by $1 trillion over the next ten years.
“Top earners would be subject to a minimum tax rate of 30 percent, limits on their deductions and an increase in the estate tax rate to 45 percent from 40 percent,” Bloomberg notes. Wealthier individuals would also “have limits the ability to contribute to tax-favored retirement accounts.”
Lower income earners, on the other hand, would receive expanded tax exemptions for things like child care and college tuition. But those tax savings may be negated “by increases in tobacco taxes and Obama’s proposal to link tax brackets and the standard deduction to the slower-growing chained Consumer Price Index.” The administration has proposed using chained CPI in an effort to restore some financial health to Social Security.
The president has been adamant in his push for top earners to pay more in taxes throughout his campaign and into his second term. While House Republicans have been reluctant to budge on their opposition to tax increases, particularly after the tax increase that resulted from the fiscal cliff negotiations. Although Obama’s spending-cut suggestions have been modest at best, his proposal to link CPI to inflation is seen as an effort to move toward the middle.
“It is something we are prepared to do as part of a balanced deficit-reduction package,” Treasury Secretary Jacob J. Lew told the House Ways and Means Committee on April 11.
Despite rhetoric from the left that the rich need to “pay their fair share,” many economists have noted that no amount of taxation would be enough to thwart the impending fiscal trouble that will result from the rapid growth of entitlement spending. In a 2009 study of 21 OECD countries [pdf], Harvard economists Alberto Alesina and Silvia Ardagna found tax increases to be far less effective for reducing deficits than spending cuts, and frequently counterproductive.
Republicans conceded on the tax issue at the beginning of the year during the fiscal cliff negotiations, raising taxes for households earning more than $450,000. Most GOP observers feel it is the Democrats turn to concede on spending.
The Congressional Budget Office announced Monday that it will release its cost analysis of the administration’s budget proposal in May.
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