Tax Bills for Rich Families Approach 30-Year High

The poor rich.

With Washington gridlocked again over whether to raise their taxes, it turns out wealthy families already are paying some of their biggest federal tax bills in decades even as the rest of the population continues to pay at historically low rates.

President Barack Obama and Democratic leaders in Congress say the wealthy must pay their fair share if the federal government is ever going to fix its finances and reduce the budget deficit to a manageable level.

A new analysis, however, shows that average tax bills for high-income families rarely have been higher since the Congressional Budget Office began tracking the data in 1979. Middle- and low-income families aren’t paying as much as they used to.

For 2013, families with incomes in the top 20 percent of the nation will pay an average of 27.2 percent of their income in federal taxes, according to projections by the Tax Policy Center, a research organization based in Washington. The top 1 percent of households, those with incomes averaging $1.4 million, will pay an average of 35.5 percent.

Those tax rates, which include income, payroll, corporate and estate taxes, are among the highest since 1979.

The average family in the bottom 20 percent of households won’t pay any federal taxes. Instead, many families in this group will get payments from the federal government by claiming more in credits than they owe in taxes, including payroll taxes. That will give them a negative tax rate.

“My sense is that high-income people feel abused by being targeted always for more taxes,” Roberton Williams, a fellow at the Tax Policy Center, said. “You can understand why they feel that way.”

Obama and Democratic leaders in Congress insist that any future deal to reduce government borrowing must include a mix of spending cuts and more tax revenue.

Conservatives say raising taxes again on the wealthy would reduce their incentive to save and invest, hurting long-term economic growth.

“Raising taxes hurts the economy, and raising taxes on upper-income individuals — whether those who work for salaries or those who save and earn capital income — always hurts the economy the most,” said J.D. Foster, a fellow at the conservative Heritage Foundation. “Spite and envy are not sound bases for public policy.”

Besides, Republican leaders in Congress say, one tax increase a year is more than enough.

“Let’s make it clear that the president got his tax hikes on Jan. 1,” House Speaker John Boehner  (R-Ohio) said Friday. “This discussion about revenue, in my view, is over.”

This article appeared in print on page 3 of the March 4th, 2013 edition of Hamodia.