U.S. income tax rates vary across five tiers of income. The state median income and tax rate aligns with the second fifth of Americans. Shown here are the current tax rates (w/ cuts) and the amount of taxes paid, compared to what the tax rates will be if the Bush tax cuts expire (w/o cuts). Source: U.S. Bureau of the Census
Earlier this month, Sen. Joe Manchin, D-W.Va., said the best solution to the fiscal crisis might involve restoring federal income tax rates as they were before the Bush-era tax cuts.
If those higher rates under Clinton were restored, Manchin added, the increases could be phased in over three years, between 2013 and 2015.
There is no single "fiscal cliff" issue that will determine what happens after Jan. 1.
Congress can re-enact, revise or eliminate a wide range of income and other tax provisions, as well as federal spending programs.
"A Fiscal Obstacle Course, Not a Cliff," a paper by Josh Bivens and Andrew Fieldhouse published by the Economic Policy Institute, a nonprofit Washington, D.C. think tank, argues economists and policymakers should stop talking about the upcoming "fiscal cliff."
Federal leaders, they argue, should come up with "a plan to ensure that the budget deficit is not reduced so quickly that it harms the economy and worsens unemployment."
Earlier this month, the National Economic Council said income taxes would increase for 600,000 middle-class West Virginia families if the tax cuts expire. Other tax cuts will also expire, including the expanded Child Tax Credit and the American Opportunity Tax Credit.
"If Congress fails to act, every American family's taxes will automatically increase, including the 99 percent of West Virginia families who make less than $250,000 a year," the National Economic Council's report states.
Some Republicans, including U.S. Rep. Shelley Moore Capito, have said letting the tax rates rise for those making above $250,000 would harm small business owners. But opponents of extending the tax cuts for the wealthiest Americans say that's a red herring.
"Nationwide, only 3 percent of small business owners make more than $250,000 a year. Allowing Bush tax cuts to expire for upper income taxpayers would not affect our nation's most important job creators -- small business owners," said Gary Zuckett, director of the West Virginia Citizen Action Group.
"Let tax rates go back to what they were during the Clinton era -- an era of robust jobs growth and balanced budgets. Going back to those tax rates will help the economy," Zuckett said.
In the latest annual edition of its "State of Working America," the Economic Policy Institute reports that the richest 1 percent of American households have accumulated 288 times more "household wealth" than the median American household in 2010.
The wealthiest 1 percent of all Americans own 35 percent of all wealth in the U.S., according to the Economic Policy Institute, which attributes the growing wealth gap to deregulation of financial institutions, lower tax rates and weaker protections for the rights of collective bargaining.
Reach Paul J. Nyden at pjny...@wvgazette.com or 304-348-5164.
CHARLESTON, W.Va. -- On Jan. 1, among the many effects if no budget deal is reached by Congress and the Obama administration, taxes could go up for 114 million middle-class families, according to a report earlier this year from the White House's National Economic Council.
As part of a deal, President Obama and many congressional Democrats have said they want to keep income tax cuts for 98 percent of Americans, and let tax cuts for the wealthiest Americans expire for incomes over $250,000.
Republican leaders have said they're against letting the tax cuts expire for anyone, although several GOP lawmakers have said in recent days that, in the wake of Obama's re-election victory, tax rates on the top-earning Americans will have to go up.
If no deal is reached, though, all of the George W. Bush-era tax cuts will expire -- meaning various increases for people with different income levels.
For example, the median household income in West Virginia in 2011 was $38,482, according to the U.S. Census Bureau. The tax rate for that household is currently 25 percent; if the tax cuts expire, it would be 28 percent.
In terms of dollars, that household's federal income tax payment would rise from $9,620 to $10,775.
(That number doesn't include a wide variety of deductions that people often claim on their taxes, including the standard IRS deduction, business expenses, health care and education costs and charitable donations.)
The effects of other tax rate changes, if the tax cuts expire on Dec. 31, include:
Of the poorest 20 percent of American households in 2011, the highest income was $20,262. That household's rate is now 10 percent and would rise to 15 percent -- an increase from $2,026 to $3,039.For the next 20 percent of households, the highest income in 2011 was $38,520. At that income, the tax rate would rise from 25 to 28 percent, going from $9,630 to $10,756.For the middle 20 percent of Americans, the highest household income in 2011 was $62,434. Those households now have an income tax rate of 28 percent; it would rise to 31 percent, meaning an increase from $17,482 to $19,355.The top household income for those in the next 20 percent was $101,582. If their tax rates increased from 33 percent to 36 percent, their taxes would increase by $3,048.At a household income of $250,000 -- the point where many Democrats are willing to let the tax cuts expire -- the tax rate would rise from 35 to 39.5 percent, meaning an increase in taxes from $87,500 to $98,750.A millionaire household would face the same percentage increase, and taxes there would rise from $350,000 to $395,000.According to the National Economic Council, allowing the tax cuts to expire for the wealthiest 2 percent of Americans would save $850 billion if tax cuts end for the wealthiest two percent. A proposed increase on estate taxes for the same group would add another $150 billion in federal revenue.
Earlier this month, Sen. Joe Manchin, D-W.Va., said the best solution to the fiscal crisis might involve restoring federal income tax rates as they were before the Bush-era tax cuts.
If those higher rates under Clinton were restored, Manchin added, the increases could be phased in over three years, between 2013 and 2015.
There is no single "fiscal cliff" issue that will determine what happens after Jan. 1.
Congress can re-enact, revise or eliminate a wide range of income and other tax provisions, as well as federal spending programs.
"A Fiscal Obstacle Course, Not a Cliff," a paper by Josh Bivens and Andrew Fieldhouse published by the Economic Policy Institute, a nonprofit Washington, D.C. think tank, argues economists and policymakers should stop talking about the upcoming "fiscal cliff."
Federal leaders, they argue, should come up with "a plan to ensure that the budget deficit is not reduced so quickly that it harms the economy and worsens unemployment."
Earlier this month, the National Economic Council said income taxes would increase for 600,000 middle-class West Virginia families if the tax cuts expire. Other tax cuts will also expire, including the expanded Child Tax Credit and the American Opportunity Tax Credit.
"If Congress fails to act, every American family's taxes will automatically increase, including the 99 percent of West Virginia families who make less than $250,000 a year," the National Economic Council's report states.
Some Republicans, including U.S. Rep. Shelley Moore Capito, have said letting the tax rates rise for those making above $250,000 would harm small business owners. But opponents of extending the tax cuts for the wealthiest Americans say that's a red herring.
"Nationwide, only 3 percent of small business owners make more than $250,000 a year. Allowing Bush tax cuts to expire for upper income taxpayers would not affect our nation's most important job creators -- small business owners," said Gary Zuckett, director of the West Virginia Citizen Action Group.
"Let tax rates go back to what they were during the Clinton era -- an era of robust jobs growth and balanced budgets. Going back to those tax rates will help the economy," Zuckett said.
In the latest annual edition of its "State of Working America," the Economic Policy Institute reports that the richest 1 percent of American households have accumulated 288 times more "household wealth" than the median American household in 2010.
The wealthiest 1 percent of all Americans own 35 percent of all wealth in the U.S., according to the Economic Policy Institute, which attributes the growing wealth gap to deregulation of financial institutions, lower tax rates and weaker protections for the rights of collective bargaining.
Reach Paul J. Nyden at pjny...@wvgazette.com or 304-348-5164.
Get Connected