TaxProf Blog: President Obama and Tax Fairness

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TaxProf Blog: President Obama and Tax Fairness:

President Obama and Tax Fairness

Wall Street Journal op-ed:  The Latest News on Tax Fairness, by Ari Fleischer:

A new CBO report shows the share of taxes paid by the top 20% has gone up over the last 30 years, while the share of taxes paid by everyone else has gone down.

If fairness in paying taxes means the amount you pay is based on the amount you make, then the only group in America paying at least a "fair share" is the top 20% -- people who make more than $74,000. For everyone else, the tax code is a bargain."

You wouldn't know this from President Obama's rhetoric, but our tax system, according to a recent report by the CBO, is incredibly progressive. Consider: The top 1% of income earners pay an average federal tax rate of 28.9%. (See the nearby table.) The average federal tax rate on the top 20% is 23.2%. The 20% of taxpayers earning between $50,100 and $73,999 pay an average 15.1%, and so on down the line. The CBO report includes payroll as well as income taxes paid.

There's also another way of looking at fairness, and that's the tax burden. Here, consider the top 20% of income earners (over $74,000). They make 50% of the nation's income but pay nearly 70% of all federal taxes.

The remaining 30% of the tax burden is borne by 80% of the taxpayers, those who make less than $74,000. In short, this group's share of taxes paid, 30%, is lower than the share of income they earn, 50%.

One reason our country is so divided is because the president keeps dividing us. If taxes need to be raised to fight a war or fund a cause, the president should ask everyone to pitch in. If the need is national, the solution should be national—and that includes all of us.

But that's not how Mr. Obama governs. We learned during the 2008 campaign that he believes in spreading the wealth around. And recently we learned he doesn't believe that successful people made it on their own. Without the government, the president tells us, job creators and entrepreneurs would not be able to make it in America.

It's really the other way around. Without job creators and the successful, the government wouldn't have any money. So next time Mr. Obama meets someone in the top 1% or even the top 20%, instead of saying they're not paying their fair share, he should simply say thank you.

'via Blog this'


from the Tax Policy Center:
http://www.taxpolicycenter.org/taxtopics/2012-candidates-tax-plans.cfm

Major Tax Proposals by President Obama and Governor Romney

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Major Federal     Tax Issues

President Barack Obama

Governor Mitt Romney

Individual Income and Payroll Tax Provisions
Expiring Tax Cuts
2001-2008 Cuts1	Extend except for high-income    households2	Extend all
2009-2010 Cuts3	Make remaining 2009 income tax cuts permanent3	Allow to expire
Tax Rates and Brackets	Allow top two tax rates to revert to pre-2001 levels: 10%   15%   25%   28% 33%4   36%   39.6%	Make 2001 rate cuts permanent and reduce all rates by 20%: 8%   12%   20%  22.4%   26.4%   28%
Tax Rates on Capital Gains and Dividends	Up to 20% tax on long-term capital gains; up to 39.6% tax on dividends	Exempt capital gains, dividends, and interest for households with AGI below $200,0005; 15% maxiumum rate for others
Taxes on Investment Income Under the Afforable Care Act 2010	Additional 3.8% tax on capital gains and dividends for high-income households6,7	Repeal8
Exemptions, Deductions, Credits, and Other Tax Preferences	Limit the value of income exclusions and itemized deductions to 28%9	Reduce or eliminate unspecified tax preferences to replace revenue lost due to rate cuts while also maintaining current progressivity of federal taxes. Romney has suggested capping itemized deductions and other tax preferences and possibly denying them entirely for high-income taxpayers.
Alternative Minimum Tax	Index all parameters	Repeal
Refundable Credits	Maintain current refundable tax credits	Allow Obama expansion of refundable credits to expire3 and consider further reductions as part of base-broadening
Other	Impose a “Buffett Rule” tax to ensure that “No household making more than $1 million [pays] a smaller share of their income in   taxes than middle-class families pay.”
Payroll Tax
Temporary Cut in FICA Tax Rate	Allow temporary cut to expire after 2012	Allow temporary cut to expire after 2012
Medicare Tax Under the Affordable Care Act of 2010	0.9% tax on earnings for high-income households6	Repeal8
Business Tax Provisions
Top Corporate Tax Rate	35%   28%10	25%
Tax Preferences	1) Increase tax incentives for domestic manufacturing 2) Reduce fossil fuel preferences 3) Impose additional fees on financial and insurance industries	1) Extend for one year of the expensing of capital expenditures and enact a temporary investment tax credit 2) Expand the R&E credit
International Taxation	Reform international tax rules to limit benefit of deferral and discourage income shifting	1) Territorial tax system 2) Immediate Repatriation holiday
Other	Revenue neutral reduction in corporate rate to 28%; unspecified base broadening10	Broaden the base (unspecified provisions) in exchange for further corporate rate reductions
Estate Tax Provisions
Estate tax	Index starting from 2009 law11	Repeal

http://www.taxpolicycenter.org/taxtopics/upload/tax-plan-comparison-v7.pdf


From the Tax Foundation:
http://taxfoundation.org/article/quick-guide-obama-and-romney-tax-plans