Thursday, February 26, 2009

The 2% Solution

That's the title of the WSJ opinion piece. Obama says he's going to pay for massive entitlement increases by taxing the rich. The problem, as the WSJ points out, is that the money just isn't there

But let's not stop at a 42% top rate; as a thought experiment, let's go all the way. A tax policy that confiscated 100% of the taxable income of everyone in America earning over $500,000 in 2006 would only have given Congress an extra $1.3 trillion in revenue. That's less than half the 2006 federal budget of $2.7 trillion and looks tiny compared to the more than $4 trillion Congress will spend in fiscal 2010. Even taking every taxable "dime" of everyone earning more than $75,000 in 2006 would have barely yielded enough to cover that $4 trillion.

Fast forward to this year (and 2010) when the Wall Street meltdown and recession are going to mean far few taxpayers earning more than $500,000. Profits are plunging, businesses are cutting or eliminating dividends, hedge funds are rolling up, and, most of all, capital nationwide is on strike. Raising taxes now will thus yield far less revenue than it would have in 2006.

Now keep in mind, the tax burden is disproportionately on the wealthy, in fact massively so:
Consider the IRS data for 2006, the most recent year that such tax data are available and a good year for the economy and "the wealthiest 2%." Roughly 3.8 million filers had adjusted gross incomes above $200,000 in 2006. (That's about 7% of all returns; the data aren't broken down at the $250,000 point.) These people paid about $522 billion in income taxes, or roughly 62% of all federal individual income receipts. The richest 1% -- about 1.65 million filers making above $388,806 -- paid some $408 billion, or 39.9% of all income tax revenues, while earning about 22% of all reported U.S. income.
Mr. President, there just isn't enough money for the sunshine and lollipops you want to give away. I just hope Americans will figure this out in time.

1 comment:

Andrew said...

Now remember, this was never about actually raising "revenue" for the government by stealing from citizens. Remember the capital gains tax issue? This is about "fairness."

He knows this won't raise more money, and he knows it won't help our economy.

This is about garnering power from the masses, and class warfare has always been a great way to do that. If you wanted to stimulate the economy and be truly fair, you'd go with a flat tax, or if you respect the Constitution, the national sales tax.

He doesn't care that he's mortgaging our grandchildren's futures. Not when there's party power to be cemented for generations.