I just don’t believe most people think we should raise the top income rate above the current 35%. All of the examples given are of the super rich, like Warren Buffet and Mitt Romney, who earn millions each year and pay a total tax of between 15% and 20%. This is the unfair situation that most people think of and most politicians describe when they ask the rich to pay their fair share. Maybe the easiest way to fix this problem is to revamp the Alternative Minimum Tax. Why can’t we simply tax all earnings over $250,000, no matter the source, at the maximum 35% rate? This would include interest earned on tax exempt bonds, dividends, capital gains, carried interest, and any other type of income that is otherwise tax exempt or taxed at lower rates. It that doesn’t generate enough revenue, then start taking away itemized deductions based on income. If need be, take away all itemized deductions.
The idea above presumes that we need to increase revenues (taxes) to help solve our deficit problem. Of course, the biggest cause of our problem is that spending has increased too rapidly. So, the biggest part of the solution should be to reduce spending.
The chart at the link below shows clearly that our deficit problem is due to uncontrolled spending, not that revenues (taxes) are too low.
Chart showing the history of federal revenues and federal spending: http://www.heritage.org/federalbudget/growth-federal-spending-revenue
Several years ago, as part of the stimulus package, Congress and the President agreed to cut student loan interest in half – temporarily. Like so many other temporary cuts, there is tremendous pressure to continue them. Take the Bush Tax cuts and the Social Security tax cut. Congress need to buck up and let all of these tax cut expire – on everyone. We have a tremendous budget deficit and debt. We are absolutely cheating our children and grandchildren. We must actually reduce our deficits – through a combination of significant spending cuts and letting the various tax cuts expire and by closing special interest loopholes in the tax code.