2:11 PM EST, December 27, 2012
It has been reported that House Speaker John Boehner may be considering a compromise on taxing those "rich" making over $1 million.
Unfortunately, that threshold, as well as President Obama's desire to increase taxes on those making over $250,000 at the Clinton era tax rate, is not going to solve the long-term deficit problem, especially while spending remains out of control, as it has been during Obama's presidency.
If United States tax policy is supposed to be progressive, a simple analysis of the latest available (2009) IRS tax information shows it is anything but that for those making over $1 million, as the average tax rate is essentially flat.
Simply increasing the tax rate would not address the lack of progressiveness, which is the cause of lower tax revenues.
At incomes over $10 million, the average tax rate is over 2 percent lower than that reported for $1 million, and is most likely due to excessive deductions taken by the ultra rich, like Warren Buffett.
The solution to this lack of progressiveness is to implement what Mitt Romney proposed — capping deductions dependent on income level. This approach would have a more significant positive effect on tax revenues, even though it might not placate the Obama supporters, who are obsessed with increasing tax rates on the rich.
The $250,000 threshold proposed by Obama is even more troubling since the Clinton era maximum tax rate was levied on joint incomes above $288,000 which, if adjusted for a cumulative inflation rate (from 2001 to the present) of over 32 percent, is approximately $380,000 (which means an income of $250,000 now is only worth about $190,000 in 2001 dollars).
So it is apparent that Obama considers the rich to be at an even lower income level than Clinton.
The real solution to our tax related economic problems is to abandon campaign rhetoric and implement meaningful changes to the tax code that are easily apparent to even an arm chair economist.