Congressional negotiators, trying to avert a fiscal crisis in January, are examining ideas that would allow effective tax rates to rise for the wealthy without technically raising the top tax rate of 35 percent. They hope the proposals will advance negotiations by allowing both parties to claim they stood their ground.
One possible change would tax the entire salary earned by those making more than a certain level — $400,000 or so — at the top rate of 35 percent rather than allowing them to pay lower rates before they reach the target, as is the standard formula. That plan would allow Republicans to say they did not back down in their opposition to raising marginal tax rates and Democrats to say they prevailed by increasing effective tax rates on the rich. At the same time, it would provide an initial effort to reduce the deficit, which the negotiators call a down payment, as Congressional tax-writing committees hash out a broad overhaul of the tax code.
Feeling good about "standing their ground" because "technically" the top rax rate of 35 percent isn't raised? What a magnificent exercise in splitting hairs. Whatever they call it, the net result will be more money out of the private sector and into the public sector, which will be a drag on an already fragile economy and an encourgement for even more spending and debt.
Bah!
