Sunday, April 17, 2011

For Super Rich, Taxes Keep Falling

For Super Rich, Taxes Keep Falling
April 17, 2011
ABC News' Kevin Dolak reports:

With just one day left for Americans to file their tax returns, the super wealthy can look forward to paying significantly less than they would have two decades ago: Since 1992, the average federal income tax actually paid by the wealthiest 400 households in the country has fallen from 26 percent to 17 percent.

But why, if the top income tax rate in the U.S. is 35 percent, are the very, very wealthy paying such a small percent of their income into taxes? Short answer: tax breaks. There are built-in tax breaks in every bracket that everyone can take advantage of, including breaks for having children, paying a mortgage and furthering education.

According to Washington, D.C.-based think tank Tax Policy Center, the number of tax breaks is so high that this year it is estimated that 45 percent of households will not pay any taxes whatsoever.

Roberton Williams explained to The Associated Press the conundrum that leads to these tax-free households.

"It's the fact that we are using the tax code both to collect revenue, which is its primary purpose, and to deliver these spending benefits that we run into the situation where so many people are paying no taxes," Williams said.

This has led to efforts to overhaul the tax laws on both sides of the political aisle, and today on “This Week with Christiane Amanpour,” Treasury Secretary Timothy Geithner accepted that disagreements remain with Republicans on the scope of how to reform the tax.

"We have very big disagreements on what the right balance is," Geithner said. "The things we're going to disagree on for some time, we can take more time to resolve."

However, he said he does not believe fundamental deficit reduction can happen without ending the Bush-era tax cuts for the wealthiest Americans, which were extended in a temporary agreement last December, and remain in place in House Budget Committee chairman Paul Ryan's budget plan passed Friday by the House.

Geithner said he thinks the deficit can be reduced without raising taxes on the middle class, by ending tax loopholes and deductions that primarily go to wealthier Americans who itemize their tax returns.

"Those benefits, even like the mortgage interest deduction that lets people have two homes, pretty expensive homes … if you target them on the most fortunate Americans, they can afford to take a little bit larger share of the burden," Geithner said. “They can afford to do that, and it's the responsible thing to do for the economy."

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