Thursday, May 05, 2011

Martin Feldstein's Stealth Income Tax Hike

Martin Feldstein
Even when he served as President Reagan's economic adviser, Martin Feldstein was known as a spoilsport (we called them deficit hawks). Is the ploy for sharply increasing the federal income tax that Feldstein describes in today's NY Times op-ed Machiavellian enough to work? Same tax rates. Same deductions. Yet income tax revenue would jump by almost 30 percent and keep on increasing.

The secret ingredient in the fiendish recipe? A cap, equal to only 2 percent of adjusted gross income, on the amount by which deductions and certain exclusions could reduce a taxpayer's tax.
With the 2 percent cap, individuals would continue to benefit [sic] from all of their current deductions, exclusions and credits. It is the total tax benefit and not any particular tax reduction that is limited. 
The net result, says, Feldstein, is that most itemizers would suffer less by settling for the standard deduction.

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