Barack Obama ran for President on a “spread the wealth around” platform, and we’re now seeing that this was no empty campaign promise. The Obama administration proposes to expand the wealth and power of the federal government beyond anything heretofore imagined. When he asked how he will finance his grandiose plans, Obama’s only non-magical answer is that he will increase taxes on “the rich.”
This is a common Democratic Party mantra, of course. In truth, however, there are very few people who are actually rich, and those who are prosperous (what the Democrats mean by “rich”) are already overtaxed. In today’s Wall Street Journal, the editors do the math: even if Obama were to steal every penny, the people he calls “rich” don’t make enough money to finance the federal government:
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Even the most basic inspection of the IRS income tax statistics shows that raising taxes on the salaries, dividends and capital gains of those making more than $250,000 can’t possibly raise enough revenue to fund Mr. Obama’s new spending ambitions.
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.
This is why I say that the prosperous are already overtaxed, and have been for a long time.
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.
It’s also not enough to make up for the $1.75 trillion deficit Obama expects to run this year. So the Democrats’ fantasy that they can pay the bills on the backs of the “rich” is just one more stop on Obama’s magical mystery tour.