Tags: rich | tax | deductions | itemized

CNNMoney: Rich Use More Itemized Deductions Than Average Taxpayer Does

By    |   Tuesday, 11 Dec 2012 07:58 AM

Wealthier Americans would likely feel the most pain if Congress slaps new limits on itemized deductions as part of a fiscal cliff deal.

CNNMoney analyzed Internal Revenue Service data and found the rich could see their tax burden go up by an average of $14,000 if lawmakers trim itemized deductions.

Taxpayers with adjusted gross incomes of $250,000 or higher deducted nearly $91,000, on average, in 2010, CNNMoney reported.

Editor's Note: Startling Proof of the End of America’s Middle Class. Details in the Video

The most popular deduction among the wealthy was for state and local income taxes. Nearly 96 percent of them used that deduction, reducing their income by an average of about $37,000.

Another popular deduction for the top bracket was for charitable deductions, with more than 90 percent of them using an average deduction of $19,650 for that deduction, CNNMoney said.

According to Forbes, limiting deductions could be the “new tax hike” among fiscal cliff negotiators looking for a compromise.

Forbes suggested Democrats could give way on their preference for tax hikes in exchange for limiting deductions. Either approach would raise government revenues. The Democrats claim limiting tax deductions would not violate the tax-protection pledge signed by many Republicans and a few Democrats.

Even Grover Norquist, founder of Americans for Tax Reform and a prominent opponent of tax increases, agreed that reducing tax deductions in exchange for lower tax rates is not a violation of the “Tax Protection Pledge” that he has long championed, Forbes said.

During the 2012 election campaign, both President Barack Obama and Mitt Romney advocated limiting tax deductions for the rich in their tax plans. It was also recommended by the Simpson-Bowles commission on the deficit, spending and tax reform.

Roberton Williams, a senior fellow at the Tax Policy Center, told The Associated Press that raising tax rates could be a disincentive to working harder, because the person gets to keep less of each extra dollar he earns.

On the other hand, reducing the mortgage interest deduction would cause people to buy smaller homes, Williams said. And reducing the charitable deduction means they might donate less money.

Editor's Note: Startling Proof of the End of America’s Middle Class. Details in the Video

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Wealthier Americans would likely feel the most pain if Congress slaps new limits on itemized deductions as part of a fiscal cliff deal.
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Tuesday, 11 Dec 2012 07:58 AM
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