Why Obama's rising tax plan will not solve America's fiscal crisis

More than half the American voters Tuesday support higher taxes for those individuals making more than $250,000. And President Barack Obama has indicated he intends to make good on his campaign promise to hike taxes for the very wealthy. "In the long term [Obama] is going to need to raise taxes on more than just the rich," Len Burman, a professor of public affairs at Syracuse University and a co-founder of the bipartisan Tax Policy Center, said in an interview with The Daily Ticker. "The budget problem isn't going to be solved without broader-based tax increases, preferably done in the context of tax reform and also serious entitlement reform. We're not going to be able to solve this on the tax side alone." In fact, Burman said if the White House and Congress would agree to raise the capital gains rate, higher taxes would not be necessary for any income group. “The problem with a low tax rate on capital gains is not that it allows Mitt Romney and Warren Buffett to pay very low taxes but that it creates this huge opportunity for tax sheltering," he notes. "There's a whole industry that's devoted to coming up with these schemes. [Raising capital gains rates] could make the tax system more progressive and allow for lower tax rates.” One likely remedy for revenue-raising will be to take the current dividend tax rate of 15 percent and hike it 5 to 10 percentage points, Bill Gross, Pimco' co-CEO, said in an interview with "Squawk Box." His company oversees the largest bond fund in the world and has $1.8 trillion assets under management. "Obama ran on a higher-tax agenda," Gross said during the interview. "Marginal income taxes go from 35 to 40 (percent), capital gains from 15 to 20, dividends from 15 to who knows what...so they could go high, high and higher." As a result, higher dividend taxes make those companies less attractive and thus take the stock market down 5 to 10 percent, he said. That's "the ultimate danger here for the stock market," he said. "Dividends are sheltered in 401(k)s, they're sheltered in pension funds. At the margins investors pay dividend tax rates. To the extent that you raise them from 15 to, say, 25 (percent), that implies in terms of equaling after tax rates another 5 to 10 percent down in terms of stock prices. We've been very spoiled for the last 10 years." If that happens and the payroll tax holiday goes away for 160 million Americans who earn a pay check each week, the reduction in consumer spending could be more than the already anticipated $120 billion for 2013. The payroll tax holiday, first approved as a temporary imitative in 2011, is set to expire at midnight New Year’s Eve. If Congress allows the measure to expire, payroll taxes will jump two percent beginning with the first pay check of 2013.