It’s probably never a bad time to be rich. But the good times for America’s wealthy could soon be a little less so.
President Barack Obama wants to boost income taxes for the wealthy to pay for tax cuts for everybody else. He wants to limit the deductions that high-income families take for mortgage interest and charity contributions to help pay for providing more people with health insurance.
House Democrats are planning to hit the wealthy with even higher income taxes to pay for their version of a health care overhaul.
Between the plans, a family of four with an income of $5 million a year would see its annual income taxes skyrocket by more than $440,000. A similar family making $800,000 a year would get a tax increase of $30,000, according to an analysis by the financial services firm Deloitte Tax.
“I still think being wealthy is better than being poor,” Clint Stretch, who heads tax policy at Deloitte Tax, said with a touch of understatement. “But this is a pretty high proposed tax burden.”
Taxing the rich to pay for health insurance would represent a significant departure from the way Americans have financed safety net programmes in the past.
Both Social Security and Medicare are supported by broad based payroll taxes. Although the rich pay more — they have bigger incomes — the burden is shared by the middle class and even the working poor.
By contrast, the health care plan working its way through the House would impose $544 billion in new taxes over the next decade on just 1.2 percent of households — joint filers making more than $350,000 a year.
The bill would impose a new 5.4 percent income surtax on couples making more than $1 million a year, starting in 2011. Couples making more than $350,000 would have to pay a surtax of 1 percent tax and those making more than $500,000 would pay a 1.5 percent surtax.
If certain savings in the health care system are not achieved by 2013, the surtax would rise to 2 percent for families making more than $350,000 and to 3 percent for those making more than $500,000.
For a family of four making $450,000 a year, the initial tax increase would be $1,000, according to the Deloitte analysis. But for the super rich, like a single filer making $5 million a year, the tax increase would be $452,000. The analysis assumes a typical mix of earned income, capital gains and itemised deductions for each income level.
Democrats said that for most of the affected taxpayers, the surtax would be far smaller.
“What we’re talking about is frankly very, very small amounts for the overwhelming majority of people who will pay it,” said Rep. Artur Davis, D-Ala.
The top marginal income tax rate now is 35 percent, on income above $372,950. Obama wants to boost the top rate to 39.6 percent in 2011 by allowing some of the tax cuts enacted under former President George W. Bush to expire.
The House Democrats’ proposed health care surtax would increase the top rate to 45 percent, making it the highest top rate since 1986, when it was 50 percent.
Republicans complain that some taxpayers would face marginal tax rates above 50 percent, when federal and state taxes are combined. They also say that tax increases on the wealthy hurt small business owners who typically pay their business taxes on their individual returns.
Democrats say the tax increases would affect only 4.1 percent of tax filers who report small business income. Those small businesses, however, tend to be the ones that employ the most workers, according to data from the National Federation of Independent Business.
“We shouldn’t have to resurrect the 1970s to remember that when tax rates go too high, people lose the incentive to build new businesses and create jobs,” said Rep. Wally Herger, R-Calif. “These massive tax increases are no substitute for real fiscal responsibility.”
Obama has tried to make the rich a popular target for tax increases as Democrats struggle to find ways to pay for his plan, intended to assure that virtually everyone gets health care. He regularly portrays the wealthy as big winners under Bush, noting that their taxes dropped and incomes soared during Bush’s eight years in office.
“I think the best way to fund (health care) is for people like myself who have been very lucky, to pay a little bit more,” Obama said recently.
The argument, however, omits the fact that Bush also cut taxes for middle- and low-income people. Their incomes didn’t jump as much as they did for the wealthy, but effective federal tax rates for middle-income and low-wage workers are at or near 30-year lows.
This year, 47 percent of filers won’t owe any federal income taxes — including some families making as much as $50,000 a year, according to separate projections by the Tax Policy Centre and Deloitte Tax.
“Right now, if you are middle class or below, you are not expected to help pay to solve these problems,” said Stretch, the tax policy adviser.
Lawmakers Want CBN To Halt Naira Devaluation
The House of Representatives has asked the Central Bank of Nigeria (CBN), to urgently put in place a policy to check further devaluation of the naira to the United States dollar and other international legal tenders.
The House decried that while the Nigerian currency was losing value, others in Africa were appreciating.
At the plenary on Wednesday, the House unanimously adopted a motion moved by the Deputy Chairman of the Committee on Pensions, Mr Bamidele Salam, which warned the CBN of the implications of further devaluing the naira.
The motion was titled, ‘Matter of urgent public importance on the need for the Central Bank of Nigeria to urgently put in place monetary policies to stop the free fall of the naira against the dollar and other international legal tenders’.
Salam recalled that the CBN governor, Godwin Emefiele, while addressing the Bankers’ Committee at a summit on the economy in Lagos earlier in February, informed the committee about the naira devaluation against the dollar.
The lawmaker also quoted Emefiele as saying at the summit that the official exchange rate stood at N410 to the dollar.
“That is 7.6 per cent weaker than the rate of N379 published on the central bank’s website,” Salam noted.
According to the lawmaker, while the value of the naira relative to the dollar had declined by nine per cent in the last six months, the South African rand and Ghanaian cedi had appreciated by 11.4 per cent and one per cent, respectively.
Salam also recalled that the CBN adopted multiple exchange rates in 2020, in a bid to avoid an outright devaluation.
He noted that the official rate used as a basis for budget preparation and other official transactions differed from a closely controlled exchange rate for investors and exporters known as the Nigerian Autonomous Foreign Exchange Rate Fixing Methodology.
He stressed that the naira had traded in a tight range between N400 and N410, while the NAFEX rate was different from the parallel market, considered illegal by the CBN, where the naira closed at 502.
Salam said, “The House is concerned that devaluation is likely to cause inflation because imports will be more expensive any imported goods or raw material will increase in price; aggregate demand increases, causing demand-pull inflation. Firms/exporters have less incentive to cut costs because they can rely on the devaluation to improve competitiveness.
”The concern is that the long-term devaluation may lead to lower productivity because of the decline in incentives.
”The House is further concerned that devaluation of the naira makes it more difficult for Nigerian youths especially in the IT sector, whose businesses are online and must necessarily transact businesses in the US dollars.
“It also reduces real wages. In a period of low wage growth, a devaluation that causes rising import prices will make consumers feel worse off “.
Four West African Countries To Buy Nigeria’s Unutilised Electricity
Four West African countries, Niger, Togo, Benin and Burkina Faso, are collaborating to buy the unutilised power produced in Nigeria.
The Chairman of the Executive Board of the West African Power Pool (WAPP), Sule Abdulaziz, disclosed this at the WAPP meeting on the North core project in Abuja, on Wednesday.
Abdulaziz, who is also the acting Managing Director of the Transmission Company of Nigeria (TCN), said the four countries were collaborating to make the power purchase from Nigeria through the North core Power Transmission Line currently being built.
He explained, “The power we will be selling is the power that is not needed in Nigeria.
“The electricity generators that are going to supply power to this transmission line are going to generate that power specifically for this project. So, it is unutilised power”.
He said Nigeria was expecting new generators to participate in the energy export for the 875km 330KV Northcore transmission line from Nigeria through Niger, Togo, Benin to Burkina Faso.
Abdulaziz said, “In addition, there are some communities that are under the line route, about 611 of them, which will be getting power so that there won’t be just a transmission line passing without impact”.
The WAPP chairman noted that the project, funded by World Bank, French Development Council and the African Development Bank, had recorded progress, adding that the energy ministers would be addressing security issues for the project at another meeting in Abuja.
He said, “Nigeria has the greatest advantage among these countries because the electricity is going to be exported from Nigerian Gencos (generation companies).
“So, from that, the revenue is going to be enhanced and a lot of people will be employed in Nigeria”.
The Secretary-General, WAPP, Siengui Appolinaire-Ki, said the cost of the project was about $570 million, adding that part of the investment in each country would be funded by that particular nation.
According to him, the countries in the partnership, including Nigeria, are also being supported by donors.
He said the funding agreement was ready as partner countries were awaiting the disbursements.
Appolinaire-Ki, however, said the donor agencies had said they needed a Power Purchase Agreement between the buying and the selling countries to be executed before releasing the fund.
Reps Probe N275bn Agric Loans Under Yar’Adua, Jonathan, Buhari
The House of Representatives has resolved to investigate the disbursement of loans and credit facilities by the Federal Government in the agriculture sector since 2009.
The period under review covers the administrations of the late Umaru Yar’Adua, Goodluck Jonathan as well as the present President, Muhammadu Buhari.
The resolution was sequel to the unanimous adoption of a motion moved by Hon. Chike Okafor at the plenary last Wednesday, titled ‘Need to investigate disbursements of all agricultural loans/credit facilities to farmers from 2009 to date to enhance national food security’.
Okafor said, from 2009 to date, the Federal Government had approved the disbursement of funds to farmers in various schemes to the tune of over N275billion, ranging from Commercial Agricultural Credit Scheme to the Nigeria Incentive-Based Risk Sharing System for Agricultural Lending, to help farmers improve agricultural production and guarantee food security in Nigeria.
The lawmaker also noted that apart from increasing food supply, the schemes were to grant agricultural loans to large and small-scale commercial farmers to lower the prices of agricultural produce, generate employment and increase foreign exchange earnings.
He said, “The House is aware that since the approval, most farmers have not been able to access the loans due to stringent requirements being demanded by banks from prospective borrowers and the alleged siphoning of over N105billion meant for farmers by management of NIRSAL.
“The House is concerned that food production has not attained the expected level, despite the approval of over N275billion facilities to farmers.
“The House is worried that the projected diversification of the economy from oil production to agricultural production and increase in agricultural output, food supply and promoting low food inflation will not be achieved if farmers are unable to access loans meant to increase agricultural production”.
Adopting the motion, the House resolved to mandate the Committee on Banking and Currency to “investigate disbursements and compliance of all agricultural loans/credit facilities to farmers from 2009 to date to enhance national food security in the country”.
- Business4 days ago
‘OPEC Member Countries Lost $trn To Oil Price Plunge In Two Years’
- Politics4 days ago
Bill To Unbundle NIPOST Passes 3rd Reading In Senate
- Business4 days ago
Insecurity May Cause Food Shortages In Nigeria – AFAN
- Politics4 days ago
Electoral Act: Rumbles In Senate Over Card Reader, Results’ Electronic Transmission
- Politics4 days ago
LG Polls: Lagos PDP Concludes Primaries
- Niger Delta4 days ago
Yenagoa Law School: Ijaw Group Commends Wike’s Magnanimity
- Politics4 days ago
Zamfara Gov Reinstates Three Commissioners
- Opinion5 days ago
Governance And Peer Review Mechanism