The next time a winger whines about increasing taxes on the wealthy.......

MarketWatch, via Yahoo!:




A $5,000 or $6,000 deduction for IRA contributions, a $4,000 deduction for college tuition and fees, a $1,000 child tax credit — these are hefty tax breaks for which a taxpayer may understandably yearn. But they’re small beans when compared with the tens of thousands of dollars in savings some reap through deductions and credits.

How about taking a $50,000 deduction for state and local taxes paid, a $37,000 deduction for medical expenses, a $28,000 deduction for mortgage interest, or a $21,000 deduction for charitable contributions?

Those are the average amounts claimed for each of those deductions in 2008 by taxpayers with adjusted gross income higher than $250,000, the group with the highest average claim for each of those deductions that year, said Mark Luscombe, principal tax analyst with CCH Inc., a Riverwoods, Ill.-based tax publisher and unit of Wolters Kluwer. (The average dollar amounts are rounded, and count only those taxpayers who claimed that particular deduction.)

....(snip)....

“For one reason or another these very, very wealthy people have set up their financial situation in such a way that they avoid U.S. federal income taxes entirely.” ..............(more)

The complete piece is at: http://custom.yahoo.com/taxes/article-111999-01e557a6-efff-4d4c-a8d1-f14bcd802b7b-tax-deductions-with-some-of-the-biggest-payouts

Isn't this what the AMT was supposed to address? Maybe we need to make that work properly instead of simply alleviating it's effects.

This article is misleading.

The purposes of most features of the tax law are to try to take into account legitimate expenses that reduce the amount people have available for fed tax.

I know it sound radical but something like

Income from all sources.
$0 to $40K in income - 0% rate
$40K - $80K - 10% rate
$80K - $250K - 18% rate
$250K - $1 mil - 25% rate
$1 mil - $5 mil - 35% rate
>$5 mil - 42% rate

Obviously the exact rates would need some analysis by CBO to match current revenue requirements but the above illustrates the concept.

Your taxes could be done on a postcard. People with less than $40K in wages wouldn't even have federal income taxes witheld from paychecks. Witholding would begin at >$40K in income.

You can raise the marginal rates to 91% but the deductions, credits, and exemptions allow people to minimize the taxes paid. What sense does it make to raise taxes and then increase deductions so the EFFECTIVE tax rate remains the same (or even falls).