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Those Soak The Rich Taxes Will Soak...The Rich

Economic Trends


Higher income taxes won't hurt consumer spending, argues economist Maury N. Harris of PaineWebber Inc. He notes that the proposed higher marginal rates, which kick in on joint filers' taxable incomes over $140,000 and single filers' incomes over $115,000, apply to adjusted gross incomes minus deductions. And his analysis of the 2.6 million returns filed in 1991 with adjusted gross incomes between $100,000 and $200,000 indicates that typical joint filers (90% of six-figure returns are joint returns) do not report $140,000 in taxable income until adjusted income is around $180,000.

Thus, Harris estimates that virtually all of the collections stemming from higher marginal tax rates will be paid by those with adjusted incomes over $200,000 (about 1% of taxable returns). And three-quarters of the take will come from those over $500,000.

Similarly, the new marginal rates will affect relatively few businesses paying individual income taxes, claims Harris. Of the 8.8 million individual returns including Schedule C income in 1991, only 183,000 reported adjusted gross income exceeding $200,000, he reports. And only 162,000 returns reporting income for partnerships and Subchapter S corporations on Schedule E had adjusted income over $200,000.

In short, says Harris, the higher rates will affect only a small minority of taxpayers. And "since most of these generally earn much more than they spend, concern about a severe dampening effect on consumption appears misplaced."GENE KORETZ

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