"It's Where the Money Is"

Unexpectedly (the LSM word used whenever the inevitable manifests) the Democrats propose to close the gaping budgetary chasm which their spending has opened via increased taxation.  They are currently formulating this as a surcharge on “the rich” which they consider to be “fair.”

First off, the only “fair” tax is an absolutely flat tax, wherein EVERYONE pays the exact same percentage of their income (however derived).

Second, taxing “the rich” won’t close the gaping chasm.

Where the Tax Money Is

Obama targets the middle class while pretending to tax only the rich.

A dominant theme of President Obama’s budget speech last Wednesday
was that our fiscal problems would vanish if only the wealthiest
Americans were asked “to pay a little more.” Since he’s asking, imagine
that instead of proposing to raise the top income tax rate well north of
40%, the President decided to go all the way to 100%.

Let’s stipulate that this is a thought experiment, because Democrats
don’t need any more [stupid and economically suicidal] ideas. But it’s still a useful experiment because it
exposes the fiscal futility of raising rates on the top 2%, or even the
top 5% or 10%, of taxpayers to close the deficit. The mathematical
reality is that in the absence of entitlement reform on the Paul Ryan
model, Washington will need to soak the middle class–because that’s
where the big money is.

Thus is the nose of the camel inserted under the tent flap, soon to be followed by the rest of the camel…

]]>< ![CDATA[...in search of the green on which it feeds.

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.

1taxes
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%.

Soaking the rich won’t work, and just greases the skids for the “unexpected” confiscation of the earnings of the middle class down the road.

We recognize that 2008 was a bad year for the economy and thus for
tax receipts, as payments by the rich fell along with their income. So
let’s perform the same exercise in 2005, a boom year and among the best
ever for federal revenue. (Ahem, 2005 comes after the Bush tax cuts that
Mr. Obama holds responsible for all the world’s problems.)

In 2005 the top 5% earned over $145,000. If you took all the income
of people over $200,000, it would yield about $1.89 trillion, enough
revenue to cover the 2012 bill for Medicare, Medicaid and Social
Security–but not the same bill in 2016, as the costs of those
entitlements are expected to grow rapidly. The rich, in short, aren’t
nearly rich enough to finance Mr. Obama’s entitlement state
ambitions–even before his health-care plan kicks in.

So who else is there to tax? Well, in
2008, there was about $5.65 trillion in total taxable income from all
individual taxpayers, and most of that came from middle income earners.
The nearby chart shows the distribution, and the big hump in the center
is where Democrats are inevitably headed for the same reason that Willie
Sutton robbed banks.

It’s where the money is.

Do as we say not as we do update:

President Obama and wife Michelle paid $453,700 in federal taxes on $1.7 million 2010 income

How about that leadership?

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