Looming ahead of President Obama in the next 50 days is mandatory 11% across the board cuts for most federal government departments including devastating cuts to the Department of Defense. As part of a deal cut before the election, these cuts will automatically take place unless reversed by new legislation. The center of this partisan storm is controversy over whether to increase taxes on people making more than $250,000 per year. If you were to listen to the rhetoric without looking into the numbers you would think that this issue is “make or break” for controlling the budget and bringing the deficit under control. Is there any truth to this public perception? Absolutely not.
If Obama’s proposed taxes were imposed against families earning more than $250,000 per year were put into place, this measure would add approximately $65 billion to the national coffers. Just to put that into perspective, that is about .5% of the increase in the national debt estimated for 2013. (Tax Increase Budget Impact) This negligible impact on the national debt will come at a price that means that the average family making $250,000 will spend approximately $138,000 of that income on taxes and education – about 55% of their income. (Impact On Families) According to Obama during the campaign, that makes these folks just plain greedy.
Repeatedly during the campaign, Obama called for those wage earners “just to pay their fair share” which is ironic given that about 50% of America pays ZERO income taxes, these “greedy rich” pay about 38% of ALL federal income taxes and the top 20% pay more than 94% of federal income taxes. (Paying More Than Fair Share) Clearly this is a purely political argument with no merit trying to get the Occupy movement types reenergized and angry at this “enemy.”
What is even more ironic is that the Democrats are not even shooting at the right villain in their own story. Whenever President Obama talks about the dark forces of the rich skating by without paying their fair share, he always attacks folks like Governor Romney or Warren Buffet or Donald Trump arguing that these “rich folks” pay less taxes than their poor secretaries. While this makes for good political fodder it is a complete red herring. NOTHING in the President’s proposed tax increases would impact the truly rich. Mr. Trump, Mr. Romney and Mr. Buffet pay capital gains taxes on virtually all of their income (15% tax rate) and are able to take advantage of other loopholes that reduce the tax they pay even further. Again, there is nothing in the President’s plan that would change any of that.
So, let’s recap, 1) the proposed tax increase will raise less than .5% of the money necessary to balance the federal budget, 2) the truly rich will pay no more tax than they already pay, 3) those earners who work to earn more than $250,000 will pay 55% of their income in taxes and education, 4) the 1% suffering the additional taxes already pay 38% of federal income taxes and will now be asked to pay more than 41% of those taxes, and 5) 50% of Americans pay ZERO federal taxes. Remind me, how is that fair?