TO BALANCE OBAMA'S BUDGET, INCOME TAXES WOULD HAVE TO NEARLY TRIPLE

Federal Spending So High That Even Prohibitive Income Tax Hikes Would Not Balance Budget

Table 1 Federal Individual Income Tax Rates for Joint Tax Returns Current Law Versus Rates Necessary to Erase Deficit 2010
Tax Brackets for Couples Filing Joint Returns	Current Law Tax Rates	Rates Needed to Close Deficit
0 to $16,750	10%	27.2%
$16,751 to $68,000	15%	40.8%
$68,001 to $137,300	25%	68.0%
$137,301 to $209,200	28%	76.2%
$209,201 to $373,600	33%	89.8%
$373,601 and over	35%	95.2%
Note: The rates are the same for single taxpayers, but the brackets vary. For the bottom three brackets, the threshold amounts are exactly one-half what they are for couples. For the top bracket, the threshold is the same for singles as for couples. Brackets are shown for 2009; inflation adjustment for 2010 will be announced in the summer of 2010. Source: IRS and Tax Foundation

Federal income tax rates would have to be nearly tripled across the income spectrum if Congress were to close the deficit in fiscal year 2010, according to a new report from the nonpartisan Tax Foundation. Instead of taxing joint filers with rates ranging from 10 percent to 35 percent, tax rates would have to start at 27.2 percent and reach up to 95.2 percent.

"Federal government spending levels are so high that even if policymakers were willing to stop debt-financing government services, the federal tax system in its current form wouldn't be able to raise that much," said Tax Foundation Director of Policy and Communications Bill Ahern, who authored the report, "Can Income Tax Hikes Close the Deficit?"

"If high-income people had to pay a federal tax rate over 90 percent, plus state and local income taxes and other taxes, total tax rates would be well over 100 percent for many households," he said.

If the federal government were determined to close the 2010 deficit, even resorting to higher income tax rates across the income spectrum, the average tax payment of someone making between $75,000 and $100,000 would jump from $7,055 to $20,515. Taxpayers with AGIs over $1 million would see their tax bills climb from $800,000 to almost $2 million.

Even in 2012, when the President's Budget projects a lower deficit, tax rates would still be need to be prohibitively high in order to balance the budget: nearly double, with rates ranging from 18.7 percent to 74.1 percent.

"Economists debate the extent to which modest tax rate increases persuade workers to work less and entrepreneurs to risk less, but there can be little doubt that the high tax rates necessary to balance the budget in the next several years would discourage all income-producing endeavors," Ahern said.

The Tax Foundation is a nonpartisan, nonprofit organization that has monitored fiscal policy at the federal, state and local levels since 1937.

TO BALANCE OBAMA'S BUDGET, INCOME TAXES WOULD HAVE TO NEARLY TRIPLE