Obama wants to tax the top 2% in order to balance the budget, a campaign line that Obama has used since 2007. Unfortunately, that won’t solve the problem, not even if we taxed the top 2% at a 100% rate. The Wall Street Journal researched this in 2009, using data from 2006, at the peak of the last expansion, when everyone was doing well:

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. …

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.

Needless to say, even a smaller amount of confiscation would divert capital from actual business-expanding enterprises to government bureaucracies, further slowing, stopping, or even reversing the meager level of growth we have now. That would create a decline in revenue that would probably equal or best the supposed windfall that would come from increasing the top rate to 39.5%, effectively making the deficit situation worse.

That’s the reason no one but Obama is talking about tax increases any longer — they won’t solve the problem. Only substantial reform in federal spending, including and especially entitlements, will address the fiscal catastrophe we face. Instead of showing leadership, Obama is still running his class-warfare 2008 campaign


Zoktoberfest's picture
Zoktoberfest 8 years 12 weeks ago

If the 2006 revenue @ the100% rate scenario, as you hypothesized wouldn't balance the budget by itself, that somehow proves that taxation is not a productive source of revenue?

Reducing the deficit, short of balancing it, counts for nothing?

What about the 3 to 4 $trillion in cuts offered up by Obama, in exchange for modest tax loop-hole closures, but no tactual tax bracket increase?

They won't balance the budget, by themselves, either.

Obama's budget deal, btw, has his base absolutely livid, because it modifies the the big three social programs, with no significant revenue increase in exchange AKA: giving away the store for a song.

BTW, I paid a chunk of my paycheck (FICA), each and every week for my whole working life and therefore, I feel "entitled" to this social insurance.

6.5% of my paycheck x 52 weeks x 30 years equals a serious investment in my future.

And, if I payed into a life insurance policy, like wise, I would expect it to pay off to my beneficiaries when I died.

Not some deferred, future date, completely at the discretion of the insurance company.

What is the point of this vacant argument?

Do you get a merit badge for posting such things on Lefty blogs?

Calperson's picture
Calperson 8 years 12 weeks ago

Why would you be worried about your social security. Don't you believe Thom and Bernnie when they describe every Friday how SS is going to pay out benefits for another 30 years?

The point I was making was that we have mathematical proof that taxing "millionaires and billionaires" at even 100%, does not even come close to solving our spending crisis.

We are taxing people enough, more than enough, it is spending that is out of control.

Zoktoberfest's picture
Zoktoberfest 8 years 12 weeks ago

Bernie and Thom aren't holding the US economy hostage, demanding massive concessions from SS.

The solvency of the program is another issue which you have conflated.

"WE" have mathematical proof?

Since 2006 the disparity of income in the US has grown dramatically, therefore more wealth is available to tax in the brackets you sited.

Thom makes this case more comprehensively than I can, but basically, economic growth and vitality correspond with higher taxation in the upper income bracket and vice versa.

If you know anything about Hartmann perspectives, you would know that.

But then, your just an interloper, evangelizing Neo-Con mythology like some annoying Jehovah's Witness at my door.

Alberto Ceras 8 years 12 weeks ago

Calperson and Holly A are shills for the Republicans, Tea Baggers, Wall Street, and everything bad in this country. I suggest that if you must read their posts, and if you disagree with them, that you not respond. It's impossible to have a reasoned discussion with them. By responding you keep their posts alive and perhaps help to shove other reasonable ones off the page.

Add comment

Login or register to post comments

Come Cruise with Thom Hartmann in July 2020

Join me for an exciting Bermuda getaway aboard Oceania Cruises, the world’s leading culinary and destination-focused cruise line. Set sail on the reimagined Insignia for 7 nights beginning July 25th 2020. Take advantage of Oceania Cruises’ OLife Choice promotion, where you can choose shore excursions, a beverage package, or onboard credit – Oceania Cruises also includes Wifi! You'll also receive complimentary gratuities, a $50 onboard credit and two exclusive cocktail parties. Did I mention we are planning special onboard events with yours truly? Prices start at $1199.

Reserve your stateroom today by contacting Keene Luxury Travel, and mention the Thom Hartmann Group 800.856.1155

or go to https://www.keeneluxurytravel.com/th-bermuda/default.asp

Can the Presidency Regain Its Integrity After Trump?

Thom plus logo Even those of us old enough to remember have probably forgotten that in the spring of 1979 the Attorney General of the United States appointed a special prosecutor to look into his own president's ownership of his peanut warehouse, to make sure that he wasn't, in any way, making money from his presidency.