Raise tax rate or cap deductions on the rich?

Obama said it’s a matter of fair shares when he wanted to raise tax rate on the rich. He wants to go back to Bill Clinton’s top tax rate of 39.6%.

Republicans insisted on not to raise the tax rates but cap deductions on the rich instead.

So, which method will be more effective? What is the difference between the 2 methods?

Let us do some arithmetic using our most famous millionaire—Mr. Mitt Romney, of course.

Let us use numbers in Romney’s 2011 tax return to figure out what he would need to pay if Obama has his way—i.e. using 2000 tax rates. Then let us compare that to what he would pay if Republicans have their way—i.e. using 2011 tax rates with a cap on deduction of $100,000.

2011 Romney’s tax figures (real numbers from his return)

line 38 AGI $13,696,951
line 40 Itemized Deductions $4,681,842
line 41 $9,015,109
line 42 Exemptions $7,400
line 43 Taxable Income $9,007,709
line 44 Tax $1,340,834

 

2011 Romney’s tax figures using Obama’s proposed method (using Bill Clinton’s 2000 tax rate)

line 38 AGI $13,696,951
line 40 Itemized Deductions $4,681,842
line 41 $9,015,109
line 42 Exemptions $7,400
line 43 Taxable Income $9,007,709
line 44 Tax $3,539,721

 

His true effective tax rate would be 26%

2011 Romney’s tax figures using Republicans’ proposed method (cap deduction at $100,000 and using 2011 tax rate)

line 38 AGI $13,696,951
line 40 Itemized Deductions $100,000
line 41 $13,596,951
line 42 Exemptions $7,400
line 43 Taxable Income $13,589,551
line 44 Tax $4,726,214

His true effective tax rate would be 35%

Should we raise tax rate or cap deductions on the rich?

Mitt Romney would end up paying more tax with Republicans’ method than Obama. So why wouldn’t that be a “fairer share” for millionaire to pay?

The issue is that the Republicans’ method is really Mitt Romney’s method—presented during the campaign.

Obama who won the election by 2.6% would not tolerate using Romney’s tax plan.

Obama would rather put his tax plan in place so the radical lefts would be able to say “they raise tax rate on the rich”.

Obama and Democrats would rather be politicians than policy makers. And as a result, we Americans are heading toward the so-called “fiscal cliff”. However, I truly don’t mind if we go there. Let us go back and implement Bill Clinton’s tax rates…as long as we also go back to using Bill Clinton’s budget—which was under control as Newt Gingrich and Republicans forced him to keep it so.

Another reason why Democrats would not want to cap deductions is that tax deduction is politician’s power. Why do you think politicians created tax deductions—not because of the benefits of the country but rather because of special interest lobby groups.

 Ch3 Nguyen

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One comment on “Raise tax rate or cap deductions on the rich?

  1. Obama wants to raise tax but has no spending cut or entitlement reform in his proposal. Let them liberal all jump off the cliff. We conservative will all survive, since we don’t overspend or live off our budget. The second recession will turn Obama to a worst prez ever.

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