Word: taxed
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...growth in the ranks of those who pay no income tax does raise an important question that both Obama and McCain failed to fully answer during the current campaign: How the heck are we going to finance our government? The question has been looming for a while because of the chronic deficits of the Bush years and the soon-to-escalate demands on Social Security and Medicare. It has gained urgency lately, with Washington committing vast sums to fighting financial panic and with more deficit-financed emergency aid surely...
Obama's partial answer is that he will raise taxes on those making more than $200,000 a year ($250,000 for two-earner households) by returning their tax rates to the levels that prevailed before 2001. McCain's partial answer is that he will cut government spending. But both are also pledging big tax cuts. The Tax Policy Center, a joint venture of the left-leaning Urban Institute and Brookings Institution that also has a reputation for getting its numbers right, estimates that Obama's tax proposals would increase the deficit by up to $3.5 trillion over the next...
...upshot is that you can probably throw out the window most of the tax proposals Obama and McCain have been talking about on the campaign trail. The demands on government are growing, and investors around the world won't finance huge U.S. deficits forever. Four or eight years down the road, the likeliest scenario is that the overall tax burden will be higher, not lower...
...will pay those taxes? Obama's plan to target the highest earners has merit, given that almost all income gains in recent years have gone to the top 1%. But because the rich can afford good tax lawyers, there are diminishing returns to increasing their tax rates. Returning to the pre-2001 top rate of 39.6% (from 35% now) would surely bring in more money, but going much higher might not. Also, the bulk of the recent gains at the top of the income spectrum has come from huge paychecks in the financial sector--paychecks that are almost sure...
...lucky duckies. Trouble is, they're an even less promising target. The share of pretax income going to the bottom 40% of households dropped from 20% in 1980 to 15.9% in 2005, according to the Congressional Budget Office, and that decline has been counteracted only modestly by tax credits. There's simply not enough money there to close any budget gaps...