Focus Point - Phase-outsCommentary by Pete du Pont
March 21, 2001
I'm Pete du Pont with the National Center for Policy Analysis. The title of a new NCPA Brief Analysis says it all: "If You Like Complicated Hidden Taxes, You'll Love Phase-outs."
Complicated: A bit, but important.
The marginal tax rate is what you pay on an additional dollar of income you earn. It can affect your decisions about whether to work, save or invest. It can push you into a higher tax bracket because various tax deductions, exemptions and credits phase out as taxpayers' incomes rise.
What are phase outs? Well, deductible individual retirement accounts and Roth IRAs phase out with rising income. So are the earned income tax credit, the child credit, even the personal exemption phase out.
So, to take one example, parents with two or more children lose 21 cents of the EITC for every additional dollar earned between $13,000 and $32,000.
What we need are simplified, lower taxes that everybody can understand.
Those are my ideas, and at the NCPA we know ideas can change the world. I'm Pete du Pont. Next time, trashing Edison.