Robert Klein, a nationally renowned accountant who has written widely on taxes for many respected journals, was astonished to learn how much the taxes on his wealthy clients jumped just in the last year:
For [my] clients in the 39.6% tax bracket … their average federal income tax liability was $436,000, $51,000 greater than their 2012 tax liability … an average increase [of] 13.3%....
In summary, if you were in the 39.6% tax bracket in 2013, the 4.5% increase in your tax bracket, combined with additional income-tax liability resulting from additional tax on Medicare wages, a loss of itemized and personal exemption deductions, a 5% surcharge on long-term capital gains and qualified dividends, and the 3.8% tax on net investment income, reduced your spendable income considerably.
The damage was [even] greater for those subject to state income tax to the extent that unfavorable state tax law changes took effect in 2013.
What was most revealing, and unnerving, in his study was how few people fall into his super-wealthy client category. In 2012, the IRS processed 137 million income tax returns, but only 2 ½ million showed an income in excess of $250,000. However, they paid 40 percent of all income taxes. In simple terms, there aren’t enough really rich people to fund the government's debts and so most of the burden must fall on the middle class.
That was made abundantly clear in the latest report issued earlier this week by the Congressional Budget Office (CBO) of its analysis of Obama’s budget proposal presented in March. Despite huge increases in taxes, deficits will continue into the future unabated, adding some $7 trillion in new debt to the country’s already unsustainable $17 trillion national debt. By 2024, the national debt, according to the CBO, will exceed $25 trillion. And this despite raising taxes by an estimated $1.4 trillion over that period.
Especially concerning is the CBO’s discovery that, with Obama’s planned cuts in deductions and exclusions along with a new category of income tax, total income taxes will be higher than at any time in the nation’s history. Here’s how the CBO explains it:
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