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Will taxing the wealthy really work?

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President Obama insists that any deal to avoid going over the fiscal cliff must include higher taxes for the wealthy. He has vowed to veto any budget that preserves Bush-era tax cuts for Americans making at least $250,000 a year. That number has proven problematic for Republicans in the past. That’s why there’s talk in Washington of a different definition of wealthy, sliding the income number up to a million dollars in hopes of making a deal. In either case, the discussion is about a rather small group of Americans. Just 2 percent make more than $250,000 annually.

Howard Gleckman, resident fellow at the Tax Policy Center, says raising the income bar to a million would have little impact overall, compared to the numerous other tax and spending issues facing America. He also points out that any large-scale budget deal will require much more than higher taxes on the super-wealthy.

“There just are not enough rich people to pay for the government that we say we want,” Gleckman says.

But in the discussion of how to define wealthy, the numbers are only part of the story. Moving up the income threshold might be politically palatable enough to bring about a short-term solution that averts the fiscal cliff and buys time for a larger and longer-term budget deal.

“You end up with not raising the kind of revenue that the president might want for deficit reduction purposes, but the politics are much better,” says tax consultant Clint Stretch.

Even so, any change to the tax burdens of the rich would be only a small part of a budget solution. There will need to be other tough choices, including serious spending cuts to programs both parties love.

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