The Rich to Pay More in Taxes

A new tax system proposed last week will increase overall taxes by 6 to 10%. Those who earn $500,000 or more will be hit hardest by the tax bill proposed by House Ways and Means Committee Chairman Charles Range. There are a number of reasons why Charles Range proposed the tax bill and it appears to make sense. The change may reflect the overall new realities of the economy and the demographic responsibilities of the rich.

The Changes:

Those who earn a million dollars or more currently pay 18% of all federal taxes but that number will rise to 20%. Likewise those who earn $500,000 to $1,000,000 will move from 6.7 % to 7.1%. Those who make between $100,000 to $200,000 will see a drop from 25.4% to 24.3%. Most of the 86 million households would get a tax cut in 2008 and 3.6 million households will pay more taxes.

Lower income houses will get more tax credits and the Alternative Minimum Tax may be repealed (AMT). The AMT was originally designed to encourage the wealthy to pay their taxes and while using the AMT a person cannot get the advantages of a number of different tax bills. However, as inflation has degraded the dollar and people earn more dollars the AMT is not affecting millions of middle class Americans. Getting ride of the AMT and offsetting with additional taxes on the wealth will open some middle class Americans up to these tax breaks.

If Range’s Bill actually gets passed we won’t see any major changes until 2009. Upon that year much of what we currently know about our tax world may change dramatically and the pressure on the Middle Class will be reduced. The new tax proposals are likely to be seen by the super wealthy who controls the government administration and public offices.

The Reasons:

The demographics of the country have changed significantly. There are more current millionaires and new millionaires produced each year then in any other country. At the same time the Middle Class is on the decline due to inflation risks, the loss of manufacturing and the effects of globalization. The top 1% of the country has 38% of the net worth in the country while the bottom 50% have less than 5% of the net worth.

The huge disparities in the economy show that the wealthy are becoming richer and much of the rest of the country is becoming poorer. As inflation raises the income of the middle class is being eaten up. In addition, the middle class which doesn’t have access to millions of dollars can’t open up stores, businesses and other money making propositions.

The new tax bill makes sense when we consider that the wealthy have an unfair advantage and own a major percentage of the economy’s wealth. Therefore, the wealthy are simply paying more of their fair share and can’t hide behind offshore accounts, tax breaks and their government influence to skip on their responsibilities.