Saturday, March 13, 2010

Taxing the Rich

There has been a lot of debate on whether taxing the rich can help reduce government deficits. I recall reading that even if the rich were taxed at 100%, the U.S. wouldn't be able to eliminate the deficit. Interestingly, I just found a Summary of Latest Federal Income Tax Data by the Tax Foundation that shows otherwise.

According to the article, the taxpayers with the top 10% of income made $4.2 trillion and paid $0.79 trillion in federal income tax. Since the 2010 budget deficit is about $1.4 trillion, the U.S. could achieve a balanced budget by collecting $2.2 trillion from these taxpayers. This would only be 52% of their income, leaving another 48% that could be collected to pay off the national debt:-)

I can now see why politicians are targeting the rich for higher taxes. However, I expect the rich, working with their accountants, will figure out ways to reduce their taxable income before higher tax rates are enacted.

For more on Reflections and Musings, check back every Saturday for a new segment.

This is not financial, tax or political advice. Please consult a professional advisor.

Copyright © 2010 Achievement Catalyst, LLC

1 comment:

bv said...

This assumes that our spending would remain constant. I bet the government would act like someone who just won the lottery if we started taxing at a higher rate. They would go on a spending spree creating tons of new welfare and entitlement programs. We would then have a conversation about how if we only taxed the rich at 75% we would be free and clear.

I wouldn't be so against increased taxes if I thought the government was running as efficiently as possible and we really did have a revenue problem. But I don't think anyone can say that's the case with a straight face.