Tax the rich, pay for 1 percent of budget

The tax debate rages on, with the more liberal Democrats in Washington insisting on raising taxes for the rich (less liberal Democrats say they’re open to at least a temporary extension of the current tax rates for all). After four years of jacking up federal spending, congressional Democrats and President Obama now want you to believe that they’ve become fiscal hawks because they want to raise tax rates on 2 percent of Americans.

To which The Economist magazine says, hooey:

The irony in this drama is that the money at stake is, in the larger scheme, trivial. Raising taxes on the top 2% of households, as Mr Obama proposes, would bring in $34 billion next year: enough to cover nine days’ worth of the deficit. Indeed, the problem with the tax debate is not that Democrats and Republicans disagree, but that they mostly agree. Democrats think 98% of Americans should not pay higher taxes; the Republicans say 100% should not.

In a budget of $3.5 trillion, $34 billion comes out to a little less than 1 percent. Heck, it’s only a fraction of the annual interest payment on our national debt, and wouldn’t even cover the budget of eight separate federal departments: Defense, Health and Human Services, Transportation, Veterans Affairs, State, Housing and Urban Development, Education and Homeland Security.

The big money is in a middle-class tax hike, for the simple reason that — contrary to what Democrats want you to believe — the middle class receives about three-quarters of the savings from the Bush tax cuts.

Cutting the deficit will also take more than the Republican proposal to return non-security spending to 2008 levels. The impact of that plan would be larger than “taxing the rich” and might inspire some economic confidence rather than sapping it, but those cuts alone would still be woefully inadequate. The broader plan they’re expected to roll out Thursday had better be more impressive than that.

The deficit will shrink to some degree as the economy recovers and more people get back to working and paying taxes. As former Congressman J.C. Watts has said, “We don’t need more taxes, we need more taxpayers!”

To get the rest of the way there, “taxing the rich” won’t come close to sufficing. If you favor tax hikes to close the budget gap, you better be prepared for everyone’s taxes to rise.

Don’t believe anyone who tells you otherwise.

199 comments Add your comment

retiredds

September 21st, 2010
12:04 pm

We don’t need more taxes is the mantra that we have heard for 20 years and look where we are. The mythical supply-side economic ruse has never been able to gain traction because? Drum roll please!!! Neither Republicans nor Democrats have the the stomach to cut spending. And, voila!!, we have deficits. You know Kyle, whether it be Repubs or Dems in charge the deficits in the future are only going to get worse because no one wants their candy take away. We have become a nation that wants it all with NO sacrifice (except to send our young men and women to war). And, by the way, if you look at CT’s column today you can see where the cuts need to be made. Any bets that can be done?

Ivan

September 21st, 2010
12:33 pm

All the kids are out in full force on CT’s blog. Too much mudslinging and ego stroking over there. In fact, I think I’ve lost credible IQ points for reading the mess. So I’ll ask the question here…

Do you think the tax increase will go towards the deficit?

Linda

September 21st, 2010
12:50 pm

Obama knows that tax revenues increased when capital gains taxes were lowered & decreased when capital gains taxes were increased under Reagan, Bush, Clinton & Bush. So why does he want to increase them for 100 million Americans, many of whom have invested their life savings in the stock market for their retirement? Because 50 hedge fund managers who “work the stock market” made too much money & it was NOT FAIR!!!!

http://www.youtube.com/watch?v=WpSDBu35K-8

Jefferson

September 21st, 2010
12:52 pm

Got to start somewhere, take one for the team.

Left wing management

September 21st, 2010
12:53 pm

And we publish voices like yours, Kyle, why?

Because it makes us feel better to think we provide “balance”. Just ask some CNN — sorry, Time Warner – suit sitting in a gleaming midtown (NY that is) office building because in his little mind this notion of balance, while obviously no solution to anything – at least bides a little more time where no one notices that all we have covering our ideological bankruptcy is a fig leaf. (We won’t even talk about Mr. Right wing media from down under.)

Balance – the hobgoblin of little minds who don’t want to face that they’ve already succumbed to the state of being ideologically bankrupt.

Jefferson

September 21st, 2010
12:55 pm

Look at it as being noble, setting a good example, pay your fair share.

Vindicator

September 21st, 2010
1:06 pm

I have been hammered with taxes all my life. By ponying up tens of thousands each year I would consider myself a huge patriot by Biden’s standards. This soaking-the-rich policy in this country by Democrats is a hateful idea and out right discriminatory. I, for one, am tired of carrying all these free-loaders on my back.

retiredds

September 21st, 2010
1:10 pm

Jefferson, I agree with your 12:52 statement. I am sorry to say that in today’s politics there are only two teams: US (and that is not United States) and THEM. Neither side wants to give in so they are willing to destroy a great country to get OUR results. See below:

The Pew Research/National Journal poll finds that Republicans, in particular, favor politicians who don’t give an inch, with 62% saying they admire leaders who stick to their positions. Democrats take the oppose approach: 54% said they prefer elected officials who compromise.

The point is that if you “compromise” you are a wimp. This is why I say that it doesn’t matter whether there are Republicans or Democrats in charge the result is the same. You and I get screwed over (and over, and over). I love the promises that Republicans are making now that they are the out party. When they become the in party the result will be the same and the old Newt Gringrigh play book, “we take no prisoners” will rule.

I am not exonerating the Dems but my position is clear (and Kyle I hope you read and hear this), NONE of the political parties can be trusted, and that INCLUDES the Tea Party. You don’t think for a minute that the Koch brothers, the Rupperts and other billionaires won’t call in the chips on the TP candidates if they are elected. If you think they are in this for the country’s sake, think again. Follow their business model and their contributions. Many had better read up on the Koch brothers to see their stance on where they want the US to be.

So, what’s the answer. I don’t have it, but I would say that when compromise is allowed back into the negotiating sessions on Capitol Hill we might get somewhere. If compromise is not allowed we will go from 11th place (see Tom Friedman, “We’re number 1(1)”. The down-slide will continue to second and third world status for the US. So to sum it up, no compromise – no change from what we have now, and that’s dismal.

Tychus Findlay

September 21st, 2010
1:12 pm

Hey Jefferson- who are you to determine what “fair” share is? Because I make more than you, it’s “fairer” for me to pay a larger percentage of my income in taxes. Note, I say greater percentage because I understand that making more means paying more in actual dollars.

It must be easy for you to be “fair” with other people’s money.

Tychus Findlay

September 21st, 2010
1:13 pm

And retiredds- taking one for the team is a euphemism for not standing up for your beliefs, taking the easy route because it’s more popular. That’s called fascism, pal.

Kyle Wingfield

September 21st, 2010
1:28 pm

“And we publish …”

Not sure how you are part of “we,” Left wing. But what should we call it — not “balance,” I think — when we publish comments like yours that don’t even feign at arguing against the topic at hand, but only call names?

Dave

September 21st, 2010
1:28 pm

It’s not about reducing the deficit like the Dems say, but class warefare and getting re-elected in November….

Kyle Wingfield

September 21st, 2010
1:30 pm

Excellent question, Ivan.

ByteMe

September 21st, 2010
1:31 pm

It’s not really about that 2%, Kyle. It’s about holding a vote to show that Republicans want to protect the wealthiest 2% at the expense of everyone else. It’s called politics and playing to your base.

The broader plan they’re expected to roll out Thursday had better be more impressive than that.

Don’t hold your breath waiting for specifics. In an election season, specifics kill.

retiredds

September 21st, 2010
1:32 pm

Tychus F: Last time I checked facism was defined as follows:

often capitalized : a political philosophy, movement, or regime (as that of the Fascisti) that exalts nation and often race above the individual and that stands for a centralized autocratic government headed by a dictatorial leader, severe economic and social regimentation, and forcible suppression of opposition

Is this what you mean by “taking one for the team is a euphemism for not standing up for your beliefs, taking the easy route because it’s more popular”. I would say that you need to find some other derogatory term to describe your angst: how about socialist, or communist, or liberalist, or Stalinist, Bolshevist, or some other “ist”, pal.

Dave

September 21st, 2010
1:32 pm

I do find it interesting that as soon as Kyle posts something like this refuting their own posts, both Tucker and Bookman quickly change their subjects (to the same thing BTW).

Jefferson

September 21st, 2010
1:33 pm

TF, calm down main, you will still have some left.

Keep it Real

September 21st, 2010
1:37 pm

It;s absolutely funny to see folks who make good money complain about paying taxes. Do you ever admit you probably get a decent portion back when you file for your tax returns due to your deductions and tax write-offs…. I have seen folks who make 6 figures get back more then what they paid out…. C’mon quit complaining so much and let’s address the politicians of Georgia who has not done much for this STATE…

When is the Federal Government responsible for everything, I thought we had a State governement are they to blame for this 15 percent umemployment, traffic and water issues? Or should I blame the Obama Adminstration because he was here 2 months ago…

jconservative

September 21st, 2010
1:37 pm

“The irony in this drama is that the money at stake is, in the larger scheme, trivial. Raising taxes on the top 2% of households, as Mr Obama proposes, would bring in $34 billion next year:”

Very interesting sentence.

Trivial works both ways does it not? If $34 billion is trivial to the federal budget, then $34 billion would be even more trivial to the GDP, would it not?

So if that part of the Bush Tax cuts, 2% with over $250K incomes, is just trivial why all the stink about it? Why not just pass what all can agree on; that the extension of the cuts to the “middle class” is a worthwhile objective. Should pass the Senate 100 – 0.

But that is not what the vote is about. The vote is about the election in 5 weeks.

And please, no one tell me about all the jobs that will be created if the $34 billion in tax cuts passes. Economic policy that depends on predicting human behavior always fails.

We tried this starting in 1981 and it has been a total failure, as the $13.4 trillion dollar national debt proves.

Kyle Wingfield

September 21st, 2010
1:41 pm

“If $34 billion is trivial to the federal budget, then $34 billion would be even more trivial to the GDP, would it not?”

Only if you believe the government spends its next $34 billion better and more productively than the private sector does. I don’t.

Jefferson

September 21st, 2010
1:43 pm

The people who have the most, cry the loudest.

Dave

September 21st, 2010
1:44 pm

Of course the tax code itself was always about power, influence, and class warefare (just ask Rangle)…. that’s why we’ll bever see anything like a flat or fair tax, at least not in my lifetime (or Congressional term limits for that matter).

Dave

September 21st, 2010
1:52 pm

I say we raise the tax on the “rich” to 100%. Just think about how much of the deficit we could pay down…and it’s not like the “rich” need the money or anything. :rolleyes:

Jefferson

September 21st, 2010
1:57 pm

Rates b/4 Reagan — good for the USA, Rates before Bush 2 — good for the USA. “Its not what you pay, its what you have left that matters”

Eat well, pay your taxes and enjoy what life has to offer.

EattheRich

September 21st, 2010
1:57 pm

The only hope for saving this country is a revolution. We need to roll the guillotines into Wall Street and K Street and drag out the evil rich and their government lackies.

md

September 21st, 2010
1:57 pm

Always interesting to see folks lump other folks into 2 groups – the “rich” and everybody else. (classic class warfare by the way)

And then policy is supposed to be set for the 2 groups.

Effort, choices, environment, etc never come into play – the good ole group mentality of they have it and I want it………………….

Linda

September 21st, 2010
2:00 pm

The Tea Party movement began when the Dems. (& a couple of RINOs) passed the Economic Stimulus Bill, the largest spending bill in the history of our country! It cost about the same as BOTH the wars in Afghanistan & Iraq put together for 14 years! It cost about the same as the entire debt to
China at the time! It passed 3 weeks after the inauguration! Our national debt was over $12 T at the time & another $106 T was owed to the social security & Medicare funds, which congress had also depleted!

Americans with common sense were so angry that they marched in the streets. We knew they were spending money we did not have for junk & that tax hikes would be in store for generations. We’ve listened for 20 months at how absurd 90% of the garbage was in the bill. We watched the money go to blue states & blue districts in red states.

We listened to their promises that unemployment would not go up, as unemployment went up & vast numbers of Americans lost their homes & were added to entitlement programs.

And now we have Americans, even some on this blog today, who approve of giving them even more tax money & asking or assuming it will go toward the deficit. Let us pray.

Jefferson

September 21st, 2010
2:02 pm

md, there has never just been 2 rate for US Federal income tax.

Nothing wrong with the system, it has been around a long time, you pay based on your ability to pay. More problems arise from those who don’t want to pay what they should, ie greed.

Bob

September 21st, 2010
2:02 pm

Keep it real, what do you mean you have seen someone get back more than what they paid out ? You mean that they pre paid more than their tax bill added up to and they got a refund ? I think you need to explain how someone that makes 6 figures gets treated like someone getting the earned income tax credit, that’s not real at all.

Bob

September 21st, 2010
2:04 pm

Jefferson, great way to put it, some in the past just said ” from those according to their ability, to those according to their needs”.

AmVet

September 21st, 2010
2:05 pm

A much more prudent solution (to your mental pollution?) is not to focus on the tax rates for the wealthy.

Simply end their welfare.

The savings by ending the needless giveaways, subsidies, handouts, tax “benefits/loop holes” etc to the wealthy, the speculators/paper shufflers and to the corporations would come to hundred of billions of dollars every single year…

JDW

September 21st, 2010
2:08 pm

“After four years of jacking up federal spending,”

Darn those pesky facts…during the tenure of that paragon of conservative values Duhbya, federal spending increased about 67%. Current projections are that under the Obama Administration federal spending will increase by a total of 25% over four years and a total of 47% over eight years.

Now while I don’t like any of those numbers, to be correct one would have to acknowledge that spending growth has actually slowed when compared to the last era of Republican rule.

Please feel free to check the numbers yourself.

http://www.taxpolicycenter.org/taxfacts/displayafact.cfm?Docid=200

Linda

September 21st, 2010
2:15 pm

Hate & envy all you want, but the fact is that among those 2% of the highest earners are at least 750,000 small businesses. That’s about 13,000 average per state. They create 70% of the new jobs & are responsible for almost 1/2 of the employment in the US right now. Take their capital away & see unemployment to remain the same or increase.

md

September 21st, 2010
2:17 pm

“you pay based on your ability to pay”

Thanks for proving my point. The haves vs the have nots. And just how many of those have nots made the choices to become have nots??

Dropped out of school???

Spent on frivolous material purchases??

Drug and Alcohol dependent??

Sorry, choices should and do have consequences, just because someone bought 2 boats, 5 lcd tv’s, a house they couldn’t afford, etc, and has no money, does not qualify them to be supplemented by those that made better choices.

Jefferson

September 21st, 2010
2:21 pm

md, there are no supplements.

Linda

September 21st, 2010
2:26 pm

In addition to my 2:15 comment, this is the reason 31 Dem. congress people wrote a letter to Pelosi opposing tax hikes & at least 5 Dem. senators are against tax hikes. Spending our way out of a recession has never worked. The only gimmick worse than spending money is raising taxes during a recession. Obama is on course to do both. Obama is considered by many to be the most anti-business president in our history.

JDW

September 21st, 2010
2:28 pm

“among those 2% of the highest earners are at least 750,000 small businesses. That’s about 13,000 average per state. They create 70% of the new jobs”

Again darn those pesky facts. From Daniel Indiviglio of The Atlantic and Forbes.

Once we add controls for firm age, we find no systematic relationship between net growth rates and firm size. A key role for firm age is associated with firm births. We find that firm births contribute substantially to both gross and net job creation. Importantly, because new firms tend to be small, the finding of a systematic inverse relationship between firm size and net growth rates in prior analyses is entirely attributable to most new firms being classified in small size classes.*

http://www.theatlantic.com/business/archive/2010/09/young-not-small-businesses-drive-job-growth/62896/

Bottom line is those high earners are putting that money in thier pocket. If adding an employee is profitable a small business owner will do it at the higher tax just as quickly as at the lower one.

If you want to drive job creation you need to drive STARTUPS not pad the pockets of the already rich.

Linda

September 21st, 2010
2:30 pm

Obama’s former WH budget dir., Peter Orszag, said in the NYTs 9/16, “The answer is that over the medium term, the tax cuts are simply not affordable, yet no one wants to make an already stagnating jobs market worse over the next year or 2, which is exactly what would happen if tax cuts expire an planned.”

vince

September 21st, 2010
2:35 pm

So if the theory is that you lower taxes on the ultra-rich and they then somehow produce jobs is true… how come we are in such a mess now after the Bush era tax cuts? Where is the “trickle down”?

Kyle Wingfield

September 21st, 2010
2:41 pm

AmVet: For once, we agree.

JDW: The “four years” I referenced of course date back to the Bush-Pelosi-Reid era. And the only people who consider Bush a “paragon of [fiscal] conservative values” are his critics on the left.

In any case, here’s what I meant: Inflation-adjusted spending in 2010, according to the link you provided, was $750 billion higher than it was in 2007 — or more than the total increase between 1990 and 2007.

So, to be fair, I guess I should have said, “three years of jacking up federal spending.”

Left wing management

September 21st, 2010
2:41 pm

Guilty as charged, Kyle. I was calling you a name. I called you “fair and balanced”, and that was just terrible of me. :)

But seriously. Your citing the Economist article doesn’t do justice to how, ahem, “balanced” that piece actually is towards the predicament Obama is in. Which is to say how even-handed it is.

It says this for ex: “Around 2015, spending will start a multi-year climb. To attribute that entirely to Mr Obama would be disingenuous. His health-care plan does contribute to it, but rising interest on the national debt and built-in health and demographic pressures are more important.”

Ain’t gonna hear reason like that from Sean Hannity, I can guarantee you that. But maybe I shouldn’t lump you in with him, I realize.

But actually the real interesting point in the piece is this: “Indeed, the problem with the tax debate is not that Democrats and Republicans disagree, but that they mostly agree. Democrats think 98% of Americans should not pay higher taxes; the Republicans say 100% should not.”

But actually, this is not right. It’s not just a matter of a 1% difference in who the parties think should pay more (leaving aside the fact that today 1% of that pie is probably 50 to 100 times the size it was just 40 years ago, which changes the moral calculus of the argument somewhat), it’s the fact that there’s a confusion of time frames here. Democrats (and economists like Krugman) agree that 98% should continue getting a break FOR NOW, but not permanently, which is what the Republicans want. And as we know, how these things get defined and scheduled, that’s where much of the key battle is waged (witness George Bush’s decision to phase them out on Dec. 31 of this year for ex.). I don’t think anyone can reasonably argue that taxes shouldn’t eventually be raised for most groups in the long run.

Skip

September 21st, 2010
2:44 pm

I had no idea so many high income earners lived in the area, it is your taxes your so worried about, right? Or do you worry the 2% have no say in the matter?

JF McNamara

September 21st, 2010
2:48 pm

$34B is a drop in the bucket now, but $34B spent on extended unemployment benefits a few weeks ago was the worst money ever spent and a travesty against mankind if we didn’t cut somewhere else to get it. Now $34B is nothing and will hardly have an impact. Way to stay consistent with your viewpoint!

At least you didn’t say that raising taxes will lead to less revenue or that we should instead lower tax rates to raise revenue. That’s some progress I suppose. At least you quoted a realistic assumption that raising taxes actually does raise revenue.

Marilyn

September 21st, 2010
2:49 pm

You are incredible!! How many of you find yourselves in that 1%?? It’s not raising taxes; it’s bringing it back to where it was before the tax was lowered. All according to what the Repubs voted for at the time. You all seem to want to shoot yourselves in the foot – with your own gun no less!! What a country! Do you ever bother to read or listen to opposing views in other venues other than this crappy newspaper or Fox Un-News?? Filter out the lies and untruths and make up your own minds for a change.

I'm a small business owner. Are you?

September 21st, 2010
2:49 pm

I’m a small business owner who makes about $100 trillion a year. If Obama raises my taxes, I’m going to lay off all my employees and stop sharing my manifold small-business-owner gifts with the world. Now if you’ll excuse me, I have to go buy some gold.

Mr. Dithers

September 21st, 2010
2:52 pm

Yes, Linda, where are the jobs that should have been created by the Bush tax cuts up to this point? And the 750,000 number you site for “small businesses” includes hedge fund investors, billionaires, partners in a law firm with a billion dollars in revenue and President Obama, among other anomalies. Try for some facts, not just regurgitating GOP talking points.

md

September 21st, 2010
2:55 pm

“md, there are no supplements.”

Really???

So 2 identical individuals make 2 different choices in high school. One decides to drop out and work at the local quick mart, the other spends time and money pursuing a better education and lands a decent paying job. One pays tax and the other doesn’t make enough to have to pay.

You really think one is not supplementing the other???????

We choose EVERYTHING we do………….

Linda

September 21st, 2010
2:57 pm

JDW @ 2:28, I was in the home of one of these high earners the other day. I can tell you first hand that his pockets were not bulging with cash nor was it under his mattress.

The difference between paying 35% & 40% in taxes for a small business owner earning $500,000 is $25,000. That could equal a job, either one created or one lost. Even though the tax rate is 5% higher, the small business owner is paying over 14% more in actually dollars. Anyone who receives a 14% pay reduction looses capital AND incentive.

How is the fed. govt. driving STARTUPS? Do you know of a single potential new business owner who has read the 20,000 new pages of regulations & understands how to calculate a projected profit & loss statement? For that matter, do you know of a single taxpayer in the US today who knows absolutely for certain what any of his tax rates will be in 2 1/2 mts.?

md

September 21st, 2010
2:58 pm

“You are incredible!! How many of you find yourselves in that 1%?? It’s not raising taxes; it’s bringing it back to where it was before the tax was lowered.”

It isn’t about the money, it is about principles……………..

Should a student that chooses to study 24/7 and makes A’s have to share those A’s with a student that chooses to party 24/7 and makes F’s??

It is about choices……………….

Kyle Wingfield

September 21st, 2010
2:59 pm

JF: I would rather cut spending by $34 billion than raise taxes by $34 billion. I thought that was implicit in my post, but I’ll make it explicit now.

But your line about being consistent is interesting, because it’s congressional Democrats who, during that debate, acted as if it’s a small deal to increase the deficit by $34 billion…and who now say their desire to raise taxes by $34 billion proves they’re serious about the deficit.