April 13, 2014
Rob Babek, Partner-In-Charge, Los Angeles Office, Quoted in The Wall Street Journal Article, "Top Earners Feel the Bite of Tax Increases."
By John D. McKinnon
The jump in federal tax rates that kicked in last year is causing sticker shock for many higher earners this tax season.
That, in turn, is rekindling a debate over a question likely to smolder for a long time: How much more could—or should—taxes go up on the well-to-do?
Higher earners' share of the overall federal tax burden has been climbing fairly steadily, even before lawmakers negotiated the fiscal-cliff deal at the end of 2012.
The latest tax-rate increases, passed at the start of 2013, have added to that burden, at least for the highest earners. Those changes included a bump in the top ordinary income rate to 39.6% from 35%, a limit on itemized deductions and an increase in the top rate on investment income. The Obama health-care overhaul also included some tax increases, including another boost in investment taxes.
Largely as a result, overall federal tax receipts from the top 1% of earners rose by 1.3 percentage points to 29.3% of all federal tax revenue, the nonpartisan Tax Policy Center estimates. The share of overall income for the top 1%, now at around 17%, according to the Tax Policy Center, has roughly doubled since the early 1980s, according to Congressional Budget Office figures.
Rob Babek, partner in charge of Marcum LLP's Los Angeles office, said several of his clients have seen their tax bills increase by $100,000 or more. One business owner saw hers rise from around $600,000 in 2012 to more than $700,000, driven mainly by changes in investment-tax rates on the $2 million in dividends she received from her firm.
"She was really shocked by the increase," Mr. Babek said. "That one hit home."