Wednesday, November 28, 2012

The Working Poor Pay High Taxes, Too



As Washington works out a deal (or doesn't) to resolve the fiscal cliff, negotiations will center on federal marginal income tax rates. President Barack Obama wants rates to go up on high earners, with the top rate returning to nearly 40 percent. Congressional Republicans would prefer to trim back tax deductions to avoid rate increases.

But marginal tax rates are not as large a problem for the wealthy as they are for the poor and working classes. According to a recent report from the Congressional Budget Office, the Americans paying the highest effective marginal tax rates are, for the most part, low- to middle-income individuals. It's these Americans -- not House Speaker John Boehner's "job creators" -- who are materially discouraged by their effective marginal tax rates.

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