Knowledgeable observers have always known that the U.S. cannot come close to balancing its budget by increasing taxes on the rich, for the simple reason that we have nowhere near enough rich people, and our rich people have nowhere near enough money. Yet for the most part, this obvious fact has been obscured in press coverage of negotiations between President Obama and Congressional Republicans. At this late date, however, the news is beginning to leak out.
Greg Mankiw notes a burst of honesty from the New York Times:
Even if Republicans were to agree to Mr. Obama’s core demand — that the top marginal income rates return to the Clinton-era levels of 36 percent and 39.6 percent after Dec. 31, rather than stay at the Bush-era rates of 33 percent and 35 percent — the additional revenue would be only about a quarter of the $1.6 trillion that Mr. Obama wants to collect over 10 years.
So where is the other 75% of Obama’s $1.6 trillion to come from? Or perhaps we should say, from whom will it come? In raising the top two marginal rates, Obama has already gone down to households with a taxable income of $178,650, not rich people by anyone’s definition.
In a closely related phenomenon, Democrats are changing their tune on the Bush tax cuts. For 10 years, they have told us that the Bush tax cuts only benefited the rich. Now that they are about to expire, Democrats are having to execute some fancy footwork, and the American Enterprise Institute (via InstaPundit) explains:
Curiously, however, hardly anyone has noticed that today’s sentiment is a flip-flop for just about any Democrat who has run for any political office any time in the past decade — from the presidency on down. Why? First, consider the Left’s decade-long mantra deriding the Bush tax policies as “tax cuts for the rich,” then ask a simple question: how could the expiration of “tax cuts for the rich” hurt anyone but the rich?
In other words, if the Bush cuts actually were just “tax cuts for the rich,” then their expiration couldn’t hurt the middle class. On the other hand, if their expiration would hurt the middle class, then characterizing them as “tax cuts for the rich” was a false message all along.
So the Democrats have been lying for years about “tax cuts for the rich.” It would be nice if someone who reports on news for a living would point that out.