Obama's 2% Illusion

Discussion in 'Politics' started by Skull Pilot, Feb 26, 2009.

  1. Skull Pilot
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    Skull Pilot Platinum Member

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    Obama's 2% Illusion - WSJ.com

    Take everything they earn, and it still won't be enough.

    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."

    I have been trying to tell you why this Obama promise will be impossible to keep and many of you refused to listen or even consider that your leader of hope could bre either lying to you or just plain ignorant of simple math.

    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.

    So folks where do you suppose the rest of the money will come from if Obama's plan to tax the rich falls short?


    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.

    Fast forward to this year (and 2010) when the Wall Street meltdown and recession are going to mean far few taxpayers earning more than $500,000. Profits are plunging, businesses are cutting or eliminating dividends, hedge funds are rolling up, and, most of all, capital nationwide is on strike. Raising taxes now will thus yield far less revenue than it would have in 2006.

    Mr. Obama is of course counting on an economic recovery. And he's also assuming along with the new liberal economic consensus that taxes don't matter to growth or job creation. The truth, though, is that they do. Small- and medium-sized businesses are the nation's primary employers, and lower individual tax rates have induced thousands of them to shift from filing under the corporate tax system to the individual system, often as limited liability companies or Subchapter S corporations. The Tax Foundation calculates that merely restoring the higher, Clinton-era tax rates on the top two brackets would hit 45% to 55% of small-business income, depending on how inclusively "small business" is defined. These owners will find a way to declare less taxable income.

    I know i will find ways to lower my taxable income.

    The bottom line is that Mr. Obama is selling the country on a 2% illusion. Unwinding the U.S. commitment in Iraq and allowing the Bush tax cuts to expire can't possibly pay for his agenda. Taxes on the not-so-rich will need to rise as well.

    And here it is folks. We will ALL be paying more. Of it may not be an income tax but how about higher federal gas taxes, or new sin taxes on soda, candy, coffee, etc

    On that point, by the way, it's unclear why Mr. Obama thinks his climate-change scheme won't hit all Americans with higher taxes. Selling the right to emit greenhouse gases amounts to a steep new tax on most types of energy and, therefore, on all Americans who use energy. There's a reason that Charlie Rangel's Ways and Means panel, which writes tax law, is holding hearings this week on cap-and-trade regulation.

    The cap and trade scheme will cripple this country. You think manufacturers are leaving the US now, just wait until this scam becomes law.

    Mr. Obama is very good at portraying his agenda as nothing more than center-left pragmatism. But pragmatists don't ignore the data. And the reality is that the only way to pay for Mr. Obama's ambitions is to reach ever deeper into the pockets of the American middle class.

    Have a nice day.
     
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    Last edited: Feb 26, 2009
  2. Skull Pilot
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    Skull Pilot Platinum Member

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    wow no libby wants to tell me how I am a rich elitist who hates the workin' man?
     
  3. PoliticalChic
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    PoliticalChic Diamond Member

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    Speaking of working women, did you know that women do better economically under Republican Administrations?
    Vote Republican If You Want Equal Pay - WSJ.com
     
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  4. driveby
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    driveby Gold Member

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    :eusa_whistle:
     
  5. Ravi
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    Ravi Diamond Member

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    I can't read your posts, they give me a headache. Lose the bold, the italics and the colored font.

    I'll take a stab at what your post was about: Obama sucks, taxes are going to kill us, yada, yada, yada.
     
  6. Skull Pilot
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    Skull Pilot Platinum Member

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    someone call the whaaaaambulance

    here's an idea click the link
     
  7. LiveUninhibited
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    LiveUninhibited Caffeine Junkie

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    Yeah when he said that I had a flashback to the first Bush's read my lips comment. Time will tell and it's hard to say a lot right now because we don't have all the details yet. On NPR they said Obama says he has identified ways to cut 2 trillion in spending over 10 years, or 200 billion per year. As far as what is meant by that it's not yet certain enough to be made public, I guess.

    Aside from the possibility of revenues increasing from a recovery, infrastructure spending does, in fact, improve our economy in the long term for sure, and hopefully in the near-short term with jobs. Not a perfect solution. What's a better one?

    It's a combination of that and cutting spending in areas he deems unimportant. I do find his claims hard to believe but after the last president my standards of performance are pretty low.

    That data could be used to argue the opposite case. Raising taxes on the bottom 98% isn't going to make an impact because there's nothing there to tax. The lower middle class having more disposable income means a larger proportion of money will be spent because they must spend a larger proportion of their income in general, especially on basic needs.

    The richest 1% earned 22% of income. That's an amazing concentration of wealth. How many of them are struggling to get by? Maybe hard times like this should be their time to give back to the country that has given them so much?

    It's progressive, but not as progressive as it might seem. America has an amazingly convoluted tax system with all kinds of esoteric tricks for sheltering income that mostly the rich understand. For example, while it is true that America has one of, if not the highest capital gains tax rates in the world, what they actually pay is among the lowest.

    There's plenty of wasteful spending to offset that. America does a lot of things wrong from incarcerating the highest proportion of its people in the world, to preemptive wars, to the most inefficient and most private healthcare system in the world.

    They always do that. Lower taxes are not going to cause businesses to employ more people out of the goodness of their hearts, but lower taxes on the lower and middle classes may increase consumer spending. Hoarding the money and not contributing to the economy would be more of an option during these times of panic for those with incomes well above average.

    It doesn't have to be about climate change. If we can find a way to produce most of our own energy, including that to fuel our vehicles, then fewer American dollars will go to enrich people in the Middle East, and that means more American dollars staying in America and fewer trickling down to the terrorists. In general fair trade is a healthy thing, but lets stop bending over for OPEC.
     
    Last edited: Feb 26, 2009
  8. editec
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    editec Mr. Forgot-it-All

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    My concern is that Obama is promising more than he can deliever.
     
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  9. AVG-JOE
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    AVG-JOE American Mutt Staff Member Gold Supporting Member

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    Clearly the republican strategy of allowing the wealthiest 5% of Americans to control most of the resources is a cluster-fuck... I'll assume you are not in favor of continuing their style of mis-management.

    Apparently you aren't a fan of the Presidents plan for changing the way we coexist and manage our limited resources.

    Do you have any suggestions or solutions, now that we have some inkling of what Bush did to us, or are you just bitching?

    -Joe
     
  10. driveby
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    driveby Gold Member

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    Letting the gubment and the left wing politicians control them is a much better idea.....:rolleyes:
     
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