Obama budget: restoring income equality in the US?
Liberal economists see the $3.6 trillion proposal as a 'step in the right direction.'
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Of course, many of those with little financial wealth have also been hit by pay cuts, unemployment, housing losses, and bankruptcies.Skip to next paragraph
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The Obama budget would make the tax code "far more progressive," that is, taxing the rich more than the middle class or poor, states the Committee for a Responsible Federal Budget. It would allow the 2001 and 2003 tax cuts for richer Americans to expire in 2011, raising their marginal income-tax rate back to the Clinton era level (39.6 percent). The estate tax would be fixed at the 2009 level, not hitting anyone who inherits less than $3.5 million, and block the Bush plan for this tax to disappear entirely in 2010. It would not allow hedge fund managers to assume that all their income was capital gains and thus taxed at a low 15 percent rate. It would create or expand a number of "refundable" tax credits that are targeted toward lower earners, including some who do not pay income taxes at all.
John Irons, who describes himself as a "budget geek" at the EPI, found reading the Obama budget "a pleasure" because it was more honest than Bush budgets and proposed various measures that would "at least lean against the wind" [of income concentration at the top].
But what the White House proposes in a budget, Congress disposes. It's reported key legislators want to study more Obama's proposal limiting tax deductions (charity donations, property taxes, state taxes, etc.) by the wealthy to no more than 28 percent of their income. Those in lower income-tax brackets get a reduction in their taxable income of perhaps only 10, 15, or 25 percent of their income.
Any tax hike brings out opposition from those whose "ox is being gored," notes Paul Van de Water, an economist at the Center on Budget and Policy Priorities in Washington. That includes charities. But he calculates the 28 percent limit would affect only the top 1.2 percent of affluent US households and reduce total charitable contributions by about 1.3 percent. Some in the philanthropic community have figured "maybe this isn't the end of the world," he adds.
It could be more important for cultural organizations (museums, opera and ballet companies, etc.). They are often beneficiaries of the rich. The poor and middle class are more likely to give money to religious groups.
Edward Wolff, a wealth expert at New York University, suspects some or most of the Obama tax proposals will pass Congress because he has "political momentum on his side." And these changes will have "a pretty big impact on the inequality situation."