WSJ: Taxing Rich Won't Be Enough

on Thursday, February 26, 2009

Duh.

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.

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.
Nothing shocking here. Back of the envelope math from the WSJ figures that even if Obama confiscated 100% of the taxable income of everyone in America earning over $500,000 per year, it would still only yield enough to cover a measly one-third of what Obama plans to spend next year alone.

Of course the rich won't be able to pick up the tab for everyone else. Only in Obama's magical fairy land will he be able to tax only the rich, cut the deficit by 1/2, and still have enough pocket change to spend the $4 trillion he wants for his 2010 budget. Obama knows this, but instead of being up front about it, he is trying to buy time before he finally admits to your face that your taxes are headed for top of Mt. Everest to cover all his special projects that are, somehow, supposed to be puting money back into our pockets.

As we've already pointed out ad nauseam, there is no way Barack can keep this up without raising taxes on everybody - including the middle and lower classes. In fact, with the Bush tax cuts ready to expire and with Obama vowing to not renew them, we're all going to see Obama's promise of not seeing our taxes go up "one single dime" be broken. *Sigh* What's one more broken promise...

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