Soaking the Rich
Liberals have an amazing ability to overlook the obvious. This is particularly true when it comes to deficits and debt. Their proposals to tax their way to solvency is akin to proposing to rescue a sinking ship by moving the water to another deck. The left imagine they can bail out the boat by soaking the rich. Simply stopping the flood of deficit spending somehow escapes them.
What is now inescapable is Washington’s rising debt. In just two years, the government’s ratio of debt to the economy has risen 50%. During 2009-2010, Washington’s deficit has averaged $1.391 trillion. Only in 1992 did total federal spending equal today’s average deficit.
Of course, the problem is not 1992’s spending but today’s. Over the last two years, spending has averaged 24.5% of the economy. Roughly one quarter of all America produces is now being spent in Washington. Not since World War II’s aftermath has Washington consumed so much of America’s economy.
Washington will spend more in 2010, than was spent in 1999 and 2000 combined. Of today’s spending, two of every five dollars (39.4%) is deficit spending. On average, Washington spends $3.8 billion in borrowed money every day.
Faced with overwhelming evidence, liberals respond: America needs more taxes. Interestingly, even with today’s recession-ravaged revenues, Washington will collect enough taxes to have balanced the federal budget of just seven years ago.
And who will pay these liberal taxes? The left want us to believe “the rich” can and should pay them. However, the facts don’t support the liberals’ promise.
According to Congress’ official revenue estimator, the nonpartisan Joint Committee on Taxation, the wealthiest group of taxpayers, those making $1 million or more annually, comprise just 0.2% of total taxpayers and earn a total income of $1.111 trillion. Even if every cent they earned was taken in taxes, Washington would still have a $280 billion deficit this year.
Let’s look at it more comprehensively. America’s total income-tax revenue is estimated at $1.281 trillion this year. Doubling the total tax burden, would again leave a $110 billion deficit.
How about just focusing on those making $50,000 and above? This group comprises 43.1% of all taxpayers and pays 99.2% of all income taxes. Sorry, but they pay $1.270 trillion—so even doubling this group’s taxes would still leave a deficit.
Liberals will protest but economic improvement and spending cuts will lower the deficit and the need for more taxes. Forgetting the fact that the left have produced neither sufficient economic growth nor spending cuts thus far, let’s humor them and assume that only a quarter of the current deficit, $348 billion, will be higher taxes’ share.
Let’s further assume this $348 billion will only be raised from “the rich”—say those making over $200,000. This group comprises 3.7% of all tax returns and pay $701 billion in taxes annually. Eliminating just a quarter of the current deficit would still require this group to pay 50% more in taxes.
This group now has an average tax rate of 24.3% and top marginal rates of 33% and 35%. Getting 50% more income tax from them would, on a thumbnail estimate, require their average rate to increase to over 36% and their top marginal rate to leap to 51%. Of every additional dollar earned, they would keep just 49 cents of it, after the IRS took its cut.
Who would be willing to work and earn at this level of taxation? Such earners would certainly shift their remuneration away from taxable income. Inevitably they would reduce their work. With our most productive workers working less, where would the economic recovery, which we had counted on halving the deficit in the first place, come from?
Will liberals say that income taxes are just one of several types of taxes Washington collects?
Well, what other taxes would liberals increase to offset their spending? Corporate and payroll taxes? The U.S. already has the industrialized world’s second highest corporate rates (only Japan’s are higher) and a 9.5% unemployment rate. Increasing either would only raise the cost of doing business in America and the attractiveness of doing so abroad.
Saving the ship by soaking the rich won’t work. They will need more than the rich to pay. The only real solution is cutting spending. But that is the obvious solution to which the left is oblivious.