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I've posted this before, but it's good to keep this in mind when listening to Obama casually assume that there is no problem having the rich pay half again as much as they are already paying (see my post on Obama's math from earlier today). This chart shows the cumulative share of taxes paid by top income earners, according to data from 2006 (e.g., the top 1% pay 40% of all income taxes, and the top 10% of earners pay 70% of all income taxes). To be in the top 1% of taxpayers you've got to have adjusted gross income of just under $400,000. Obama defines "rich" as those making at least $250,000, and that would consist of roughly the top 2% of income earners.As a rule of thumb, the top 2% of taxpayers are probably paying close to 50% of all income taxes, which in 2006 totaled a bit over $1 trillion. Federal revenues for calendar year 2008 were $2.4 trillion, just about exactly the same as they were in 2006, so it's safe to assume that total income taxes haven't changed much since 2006. (Corporate taxes are a little over $300 billion, and payroll taxes are about $650 billion.)
It's hard to keep track of all the new spending Obama is proposing, but between the stimulus bill, universal healthcare and bank bailouts—plus his call for a general increase in the federal budget of 8.5% for the next year—it could easily add up to an extra $300 billion a year for many years to come. Do the math: the "rich" are currently paying about $500 billion per year in income taxes, and he presumably wants them to pay an additional $300 billion—a 60% increase in their tax burden. That is just about impossible in my book. Something has got to give.
9 comments:
Excellent post, thanks.
Scott,
I don't think Obama really gives a rip about the specifics. It's about "fairness," as he told Charlie Gibson when Gibson pointed out how capital gains tax revenues were dynamic.
And he doesn't really care that his budget projects a deficit this year of 1.75 trillion. It's all about growing the size of government in ways that can't be reversed for at least a generation. That will be his legacy. In the name of "fairness" we will have brought down everyone's standard of living. Tragic.
Who has 1.75 trillion to buy all those T-bills?
What happens when no one shows up at the auction?
If you think its bad now, wait until t-bills are worthless.
Red: believe it or not, the market is acting like funding a $1.75 trillion deficit won't be a problem at all. Interest rates on T-bills and T-bonds are at historically low levels. The world is essentially begging for more bills and bonds. Of course that might change in the future, but for now I would estimate that a huge budget deficit won't be difficult at all to fund. If interest rates were at double digit levels, that would be another matter entirely. Obama's proposed budget would be a complete nonstarter. He is taking advantage of the crisis atmosphere to push through a budget that would otherwise be nearly unthinkable. It's a tragedy.
Obama and the liberal democrats currently in control are a reflection of an America that lost its way. An America that got spoiled in one generation and now cannot deal with the very same adversity that past generations embraced and overcame to create the dynamics that we refer to as Americanism, i.e. individuality, responsibility, graciousness, generosity, and success.
The tragedy is not Obama et al, but the population that believes in him.
All just my humble opinion of course.
Bob
P.S. Don't post much but visit almost every day. Great job.
Thanks Bob, and you make some very good points.
Scott,
Why would any entity buy U.S. treasury notes longer than 5 years out at very low rates when it seems obvious that these will be severely devalued by the coming great inflation?
The only logical explanation for why Treasury is able to sell tons of bonds at historically low interest rates is this: buyers believe that a) the economy will be in very bad shape (thus creating lots of default risk for non-Treasury bonds) and b) inflation will remain very low or negative for a long time.
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