Since the President has taken the class warfare position in the budget discussion by pretending that taxing the rich can pay for the large government that he claims we need in order to prosper, here is a nice reminder from the WSJ today about where the most taxable income is. If you think President Obama is correct that we can dig out of this hole by mostly taxing the rich, you need to read this:
Consider the Internal Revenue Service’s income tax statistics for 2008, the latest year for which data are available. The top 1% of taxpayers—those with salaries, dividends and capital gains roughly above about $380,000—paid 38% of taxes. But assume that tax policy confiscated all the taxable income of all the “millionaires and billionaires” Mr. Obama singled out. That yields merely about $938 billion, which is sand on the beach amid the $4 trillion White House budget, a $1.65 trillion deficit, and spending at 25% as a share of the economy, a post-World War II record.
Say we take it up to the top 10%, or everyone with income over $114,000, including joint filers. That’s five times Mr. Obama’s 2% promise. The IRS data are broken down at $100,000, yet taxing all income above that level throws up only $3.4 trillion. And remember, the top 10% already pay 69% of all total income taxes, while the top 5% pay more than all of the other 95%.
Try the same experiment in 2005, when there were more revenues after the Bush tax cuts, and there still wasn’t enough income to tax at the top to pay for our liabilities. Where is the taxable income? Take a look at the middle portion of the graph in the WSJ story, otherwise known as the middle class.
But President Obama only wants to tax the rich, right? Not so fast, as the WSJ reminds us. The President is proposing limiting tax deductions that would hit the middle class hard. Unlike Congressman Ryan’s plan, passed in the House at the end of last week, President Obama’s wouldn’t lower overall tax rates to accompany those deduction reforms.
The President wants to play class warfare, but his proposal is more about getting re-elected than actually solving our serious problems. And with S&P cutting its outlook for America’s credit rating, we can’t afford class warfare that promotes unrealistic solutions.
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