Kerry Tax Plan Hits High-income Earners Hard

Kerry Tax Plan Hits High-income Earners Hard

Jon E. Dougherty, NewsMax.com
Friday, Aug. 27, 2004

If you are an American citizen earning a good living, Democratic presidential contender Sen. John Kerry of Massachusetts has a tax plan that is going to hit your wallet hard.

Congress has passed two major tax reduction bills under President Bush. Both have been signed into law. Both have saved American workers billions of dollars.

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But if John Kerry is elected, and can get enough backing from congress, he plans to do away with the Bush tax cuts, just as president bush would push congress to make them permanent.

According to a study by the Wall Street Journal, the difference between the Bush and Kerry tax plans is substantial.

Planning for Kerry

The race, according to political analysts, is too close to call. For that reason, the Journal says, some investors are already beginning to plan for a Kerry presidency, complete with his tax-the-rich plan.

According to tax specialists at the firm Deloitte & Touche:

A couple earning $1 million a year, plus $27,000 in dividend income and a quarter-million dollars in capital gains, would pay $34,850 more in taxes under Kerry's plan

A single earner making $250,000 annually with $5,000 in dividends and capital gains of $20,000, would pay another $2,500 under Kerry

Married couples earning $500,000 a year would pay $7,100 more under Kerry's plan

Married couples earning $750,000 annually would pay an additional $23,200 under a Kerry regime

Kerry's tax plan would boost the top marginal income-tax rate from its current 35 percent back to 39.6 percent, while the 33 percent rate would climb back to 36 percent

The plan also calls for raising the top 15 percent rate on dividends to as high as 39.6 percent

Kerry would raise the top rate on capital gains from selling securities held more than one year from 15 percent to as high as 20 percent, says the Journal.

(Note: The married figures represent a couple with two children under 17.)

"Deloitte analysts estimate that Sen. Kerry would raise taxes for married couples filing jointly with adjusted gross incomes of about $225,000 or higher, and for single taxpayers with an income of $185,000 or higher.

"These estimates are based on representative taxpayers with typical itemized deductions," the Journal reported.

Certain Increases?

There are also differences in each man's plan regarding estate taxes.

Currently, the basic exclusion from federal estate taxes is $1.5 million. "That exclusion is scheduled to rise in stages, reaching $3.5 million in 2009, while the top tax rate, now 48 percent, is set to decline in stages," says the Journal, disappearing in 2010 but coming back in 2011.

Kerry, meanwhile, favors raising the exemption to $2 million "immediately," says Jason Furman, Kerry's director of economic policy, setting a permanent exemption of $10 million for a small business or family farm.

Kerry's exemption amount would grow with inflation, but Bush wants to kill the so-called death tax for good.

Furman says his boss would extend and make permanent other parts of the 2001 and 2003 Bush tax cuts. And Kerry has proposed other cuts, mostly for lower- and middle income earners, including tax credits for college, child and health care.

Also, Kerry would cut to zero the capital gains taxes on certain start-up enterprises for the first five years.

But regardless of who wins, say some analysts, taxes are going to have to be raised on higher income earners at some point in the future, if only because the government's budget deficit continues to climb.

"Higher income people are going to be paying more in the way of taxes at some point, because the deficits can't go on forever," Len Burman, co-director of the Tax Policy Center and a former Clinton Treasury official, told the paper. "In some ways, Kerry is just accelerating the day of reckoning."

But the Bush administration hopes to upset the Kerry tax apple cart. Under the current White House leadership, low- and high-income earners alike can share in a reduced tax burden.

The Bush team thinks everyone, regardless of what they earn, should have tax relief. The Kerry campaign, according to its boss' plan, does not.

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