G.D.P.: How much do we want to spend?

The Cloak of Raised Taxes

Surprising, coming from the NY Times. But I agree. Not included in that 39.6% tax rate is the effect of all the credits and deductions that phase out at $150,000. They are significant and effectively add another 3% to 4% to one’s tax burden when they cross-over. The more over and above $150,000 one reports, the less the impact. The loss of a $2,000 deduction is going to pinch accountants much more than someone making a couple million a year. These phase-outs have been the Congressional instrument of choice for the past decade or so to effectively raise taxes on the wealthy (those with more than $150,000 incomes) without raising the tax rates. Then they have the gall to go in public and say they’ve not raised taxes. Many of the credits of late (under Bush II and Obama) have been passed as "refundable" credits. This means that a low income taxpayer can get money back from the IRS that they never paid in. This is a direct transfer of wealth and a dangerous trend in American tax policy. One think-tank projects that close to one-third of all American taxpayers will be exempt from income taxes within a couple of years. Many of those will receive refunds for money they never paid in. When you disconnect that many people from the cost of government it is not a wise path. They can demand more and more without realizing the cost.