Does anyone else have the concerns that I do about the programs that President Obama is proposing and how he plans to pay for them? According to the IRS we may have some challenges here. Consider their reporting 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.
Note that federal income taxes are already "progressive" with a 35% top marginal rate, and that Mr. Obama is (so far) proposing to raise it only to 39.6%, plus another two percentage points in hidden deduction phase-outs. He'd also raise capital gains and dividend rates, but those both yield far less revenue than the income tax. These combined increases won't come close to raising the hundreds of billions of dollars in revenue that Mr. Obama is going to need.
Don't get me wrong. I believe we should all pay our fair share for government programs that are needed. However, to add to the tax burdens of a very small number of people makes us all vulnerable to their success or lack thereof. What happens if they aren't as successful as they have been in the past? Isn't this the very issue that has bedeviled California? Now they are having to close their $42 billion budget gap with significant tax increases. How is that working out? In spite of having the highest income tax rates in the nation, they are going to increase them some more AND they burden the rest of their citizenry with the in increase on their already highest sales tax rate in the nation.
So while President Obama talks about a lack of tax increase to the average wage earner, he apparently is not considering the burden that states like California are placing on their citizens. Somehow, burdening the country with more taxes at a time of economic stress seems like leaning into a left hook.
What are your thoughts?