Will raising taxes on wealthy Americans pay off our country's massive debt? Here's some food for thought.
In accordance with his plan to reduce the deficit by taxing the wealthy, President Barack Obama has defined (for tax purposes) anyone making $200,000.00 or more per year as "wealthy." However, a recent report from the IRS shows that people earning an adjusted gross income of $200,000.00 filed only 3 percent of tax returns for the 2009 tax year. This means that approximately 97 percent of the U.S. taxpaying population would not fit the President's definition of "wealthy".
The IRS report also revealed that out of 140 million tax returns received in 2009 only 0.2 percent (236,883) were filed by Americans earning $1 million or greater. The numbers are even slimmer for Americans who earned an adjusted gross income of $10 million or more. According to IRS findings, only 8,274 people could claim that kind of wealth.
A recent CNN/ORC International Poll showed that over 60 percent of respondents (1,800 people interviewed) believe raising taxes on wealthy Americans and businesses is the only way to pay off the country's huge debt.
In effect, a large majority of the U.S. population believes that taxing the "rich" can pay off the US debt. Yet in the 2009 tax year, 1,470 out of approximately 4 million Americans defined as "rich" did not pay any income tax. But those who did pay taxes reported almost $2 trillion of earned income.
That would work out to more than one quarter of 2009's total taxpayer income. Those are impressive figures, especially when factoring in Obama's tax proposals. They include oil and gas companies and corporate jet buyers losing their tax breaks, and reinstating higher tax rates for households in higher income brackets.
The top tax rates now are 35 and 33 percent. If the Bush tax cuts expire next year, those rates will return to 39.6 and 36 percent, respectively. Despite the smaller percentage of high earners, President Obama projects revenue would jump to $750 billion over 10 years, thanks to the increased taxes. This is still short by several trillion dollars.
So, the short answer is "Who knows if these new taxes can or will solve our debt problems!" What is certain is that solving the debt crisis remains a "taxing" problem.