Once again, President Obama is threatening to put ideology ahead of practicality. In his first domestic policy address since his reelection, the President has declared there will be no deal on the so-called “fiscal cliff” starting in January 2013 unless taxes on the richest Americans go up.
Tea Party Patriots know taxing the rich is a useless policy when it comes to fairness or deficit reduction, but here are four points for convincing your friends:
- Raising taxes on the rich have historically trickled down to impact the middle-class. Consider that the individual income tax and the Alternative Minimum Tax (AMT) went from hitting only the wealthy to hitting many middle-class earners, for two prominent examples.
- The top one percent of earners pay 1,500 times the taxes of the bottom 20% of earners. That’s not enough?
- Taxing the rich simply won’t bring in much more tax revenue. The much-ballyhooed “Buffett Rule,” which would hike taxes on the wealthy to 30%, would bring in $47 billion over ten years, according to the Joint Committee on Taxation. For a point of comparison, we’ll borrow that much by Thanksgiving. For another point of comparison, if Washington took every dollar from every American earning at least one million dollars annually in 2009, only $235 billion more would come into the federal coffers. This barely covers one-fifth of the Fiscal Year 2012 deficit.
- There are two other, more effective, ways to bring in more revenue to the federal government. The first is to enact tax reform that eliminates loopholes and does some combination of direct deficit reduction and lower rates. The second is to create opportunities for economic growth, which would increase incomes, which would increase money taken in by the federal government. Tax reform would, of course, greatly help create more opportunities for economic growth.
The simple fact is that America’s debt problems were not created by a lack of federal taxation. We must curtail spending, and any policy that fails to address this root cause of our massive debt is either dishonest or lacking simple facts. Since the President has access to some of the best facts available related to the national debt, I know which way I’m leaning…
Correction: This post has two errors: First, it adds all income taxed at 100% to the federal government, neglecting to subtract the 29% of income already paid into the federal coffers. Using the numbers given by Politico in the link in the post, this means only $170 billion would be raised if a 100% tax was implemented, or 15.5% of the 2012 deficit.
However, this calculation only addresses income at one million dollars, not above one million. This information is difficult to find, so for a point of comparison I used a CBO analysis that shows taxing the top 1% of earners (never mind the top .1%, which is what the Politico article focused on) at 100% would bring in about $942 billion more to federal coffers, including taxing income Politico did not consider in its article.
Either way, the point still stands: Raising taxes on the wealthy is inadequate to the task of balancing the budget, and it certainly won’t solve the core problem facing the country in the next generation: massive, irresponsible spending.