One of the most important pieces regarding President Obama’s speech this week comes from yesterday’s WSJ. Read it, then read again. And then, if it hasn’t sunk through yet, read it a third time:
The 2% Illusion
Take everything they earn, and it still won’t be enough.
President Obama has laid out the most ambitious and expensive domestic agenda since LBJ, and now all he has to do is figure out how to pay for it. On Tuesday, he left the impression that we need merely end “tax breaks for the wealthiest 2% of Americans,” and he promised that households earning less than $250,000 won’t see their taxes increased by “one single dime.”
This is going to be some trick. Even the most basic inspection of the IRS income tax statistics shows that raising taxes on the salaries, dividends and capital gains of those making more than $250,000 can’t possibly raise enough revenue to fund Mr. Obama’s new spending ambitions.
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. [...]
This information is extremely important to all you liberal/Democrats who because it completely blows a crater into the Marxist rhetoric we constantly hear from Obama (and from John Kerry back in' 04) that “the rich aren’t paying their fair share!” and that, as VP Biden has repeatedly said “it’s time for the wealthiest among us to be patriotic and be part of the deal,” i.e. pay more taxes. (That would be the same Joe Biden who, despite his pleasure in calling everyone else greedy and selfish, only paid 0.2% of his income in charitable donations over the past decade--a total of $3,690 over the past ten years--and the same John Kerry who, even though he and his wife were among the richest 0.01% of the nation, managed to pay only 12% in income taxes in 2003.) Because if the richest 1% have paid almost 40% of all income tax revenues while earning about 22% of reported U.S. income, then they’re already paying twice their fair fare. And if the 2% that Obama targeted in his speech already pay 62% of all federal income taxes, how dare he hinge his entire economic plan on soaking them even more. The piece concludes:
Note that federal income taxes are already “progressive” with a 35% top marginal rate, and that Mr. Obama is (so far) proposing to raise it only to 39.6%, plus another two percentage points in hidden deduction phase-outs. He’d also raise capital gains and dividend rates, but those both yield far less revenue than the income tax. These combined increases won’t come close to raising the hundreds of billions of dollars in revenue that Mr. Obama is going to need.
The bottom line is that Mr. Obama is selling the country on a 2% illusion. Unwinding the U.S. commitment in Iraq and allowing the Bush tax cuts to expire can’t possibly pay for his agenda. Taxes on the not-so-rich will need to rise as well.
On that point, by the way, it’s unclear why Mr. Obama thinks his climate-change scheme won’t hit all Americans with higher taxes. Selling the right to emit greenhouse gases amounts to a steep new tax on most types of energy and, therefore, on all Americans who use energy. There’s a reason that Charlie Rangel’s Ways and Means panel, which writes tax law, is holding hearings this week on cap-and-trade regulation.
Mr. Obama is very good at portraying his agenda as nothing more than center-left pragmatism. But pragmatists don’t ignore the data. And the reality is that the only way to pay for Mr. Obama’s ambitions is to reach ever deeper into the pockets of the American middle class.
Truthfully, I really don’t think Obama really expects his plan to work. His primary goal has always been sticking it to the evil, selfish, greedy rich, in the name of “fairness.” Despite his lie to Joe the Plumber and other productive Americans, everything Obama has ever planned to do specifically punishes success and increases dependency on Big Government.
It wouldn’t be surprising if most of the approximately 40% of Americans who don’t even pay income taxes at all were Obama/Biden voters. You fell for the false rhetoric that the eeeevil rich weren’t paying their fair share. So you elected these Marxists who promised to stick it to them on your behalf, and now they’re mobilizing to make good on that promise. My question for you is: Which Americans are really being the greedy and selfish ones?
At the rate Obama is going so far, pretty soon that 40% of non-income tax payers are going to increase to more than half of the American population. We will then have a majority of less-productive Americans simply voting for how much the more-productive minority should pay more in taxes.
Welcome to the future, suckers.
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