Taxing The Rich Really is Taxing All of Us

If elected, my understanding is that Barack Obama has proposed at least 188 new spending proposals, the cost of 111 of which has been estimated to be $1.4 trillion over 5 years, according to Sen. Wayne Allard (R-CO), as stated in Amendment 4246 to the senate budget bill (3/14/2008). Because of timing, Sen Allard was unable to complete the analysis of the remaining 77 proposals, which will add millions if not billions more to this estimate. To put this into perspective, these proposed increases are 10% more than President Bush’s proposed FY2009 spending bill, 5 times the amount of money spent by the entire United States on imported oil in 2007, 4.5 times the annual general fund expenditures of 42 states combined, and the estimated first year expenditure increase of $300B is 60% larger than any one-year federal spending increase ever.

According to the Congressional Budget Office, Bill Clinton’s 1993 tax increase raised taxes $240.6B over five years. Sen. Daniel Patrick Moynihan (D-NY) called it the “largest tax increase in the history of public finance in the United States or anywhere else in the world.” But Obama's proposal will increase spending $300 B in a single year.

To pay for this, Obama proposes to: (1) eliminate all Bush tax cuts over the past 8 years; (2) increase taxes on the top 5% of wealthiest Americans; (3) increase estate taxes; (4) increase the corporate tax rate; (5) increase the top individual tax rate; (6) impose “excess profits” taxes on the top five oil US oil companies; (7) increase payroll taxes; and (8) probably a half a dozen other actions I have forgotten. He claims that this is “fair” and would reduce the taxes on 95% of all Americans.

Well, here are some facts. The top 5% of wage earners pay almost 60% of total individual income taxes, while the top 10% pay about 70%, and the top 50% pay approximately 97%. Translation: Just half of all taxpayers pay almost 100% (96.93%) of all income taxes, while almost 50% pay no income taxes at all. So in effect, Obama’s comment is partially true: from a socialist perspective, those paying no tax (ironically referred to by Obama as “hard working” Americans) will receive additional benefit at the expense of those who are already paying the taxes (ostensibly NOT “hard working” Americans). What is fair about this? Nothing. However, it will have support because … you guessed it, the 50% receiving the benefit at no additional cost to themselves will more than likely put these socialists in charge of all three branches of government.

To drive the point home, here is an estimate by Senator Richard Burr (R-NC) of Obama’s proposal. Burr argued that Obama’s promise to raise taxes just on the Democrats’ “attractive target” of people earning over $250,000, will only generate $225 billion over 5 years, far short of the estimated $1.4 trillion which represents only 60% of Obama’s proposed programs over the same time frame. According to Burr:

“ If Obama wanted to raise taxes on only the top 1% (earning over $365,000) to fund his plans, those citizens’ tax bills would have to rise by over $40,000 annually, an increase of 57%. Given the impossibility of that scenario, even under complete Democratic control of government, the tax hikes would have to trickle down to the American middle class.

“So if Congress decides to widen the pool of taxpayers footing the bill, it would have to raise taxes on the top 5% by 38%; or the top 10% by 32%; or the top 25% by 26%; or the top 50% of taxpayers by 23%. The top 50% of American taxpayers, who already pay 96.9% of all federal income taxes, are those who earn $31,000 (AGI) or more.

“To translate this point into language everyone can understand: if you have an income of $104,000 or more, the plan will cause your tax bill to go up at least an additional $5,300 a year; if you have an income of $62,000 or more, the plan will cause your tax bill to go up at least $2,300 a year. This is on top of the $2,300 increase already assumed by the failure to extend current tax policy.”

So, alas, the tax on the rich really is a tax on the rest of us. Clearly, it appears that there is less and less incentive to work … at least for the rest of them.