The Wall Street Journal takes a look at the illusions that Barack Obama is selling. Taxes, according to Obama, will only rise for the “rich”. The Journal points out the absurdity of that claim:

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.

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.

The Journal also points out that the carbon cap and trade scheme is nothing more than another – brutal – tax that American taxpayers will pay. That tax is completely regressive. It will impact the less well off much harder. All energy will cost more. You and I will pay for all of that.

Do not be confused here. The word “rich” will have to be defined downward in the coming years. Eventually, anyone with a part time job at a fast food stand will be considered a plutocrat.

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3 Responses to Illusions

  1. K T Cat says:

    The tax that is coming will not be in the form of money sent to the government. Instead, it will be in the form of massive inflation. Your post hits the nail on the head. Even if you taxed 100% of what the “rich” earn, it would not close the deficit. The remainder will be made up by printing money, the very definition of inflation.

  2. Pingback: Taxing the Rich Won't Cover Our Spending | Axis of Right

  3. Hrothgar says:

    Dead on Cat, the trick is that the numbers of those rich making more than $250,000 will soon be swelled as the actual value of printed money decreases, leading to inflation, including wage inflation, thus swelling the tax load onto. Note that the O! never mentioned inflation indexing of the definition of rich (sort of like the beloved AMT).

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