WSJ shows taxing the rich won’t cover the bill

posted at 12:15 pm on April 18, 2011 by Ed Morrissey

Barack Obama told the nation last Wednesday that “improvements” in Medicare and hiking taxes on the wealthy would stabilize government spending and bring deficit spending to what can charitably be described as a dull roar.  The Wall Street Journal does some fact checking on these claims and finds them entirely false.  Even if the “rich” gets defined down to the top 10% of filers — whose average annual household income is $114,000 — the level of revenue from even a 100% tax would still not close the budget gap:

Consider the Internal Revenue Service’s income tax statistics for 2008, the latest year for which data are available. The top 1% of taxpayers—those with salaries, dividends and capital gains roughly above about $380,000—paid 38% of taxes. But assume that tax policy confiscated all the taxable income of all the “millionaires and billionaires” Mr. Obama singled out. That yields merely about $938 billion, which is sand on the beach amid the $4 trillion White House budget, a $1.65 trillion deficit, and spending at 25% as a share of the economy, a post-World War II record.

Say we take it up to the top 10%, or everyone with income over $114,000, including joint filers. That’s five times Mr. Obama’s 2% promise. The IRS data are broken down at $100,000, yet taxing all income above that level throws up only $3.4 trillion. And remember, the top 10% already pay 69% of all total income taxes, while the top 5% pay more than all of the other 95%.

Well, 2008 was a bad year, especially for those whose income relied on capital gains.  How about 2005, when the economy was expanding, a period that Obama argues showed the rich succeeding at the expense of the poor?  The news isn’t much better, and for good reason:

In 2005 the top 5% earned over $145,000. If you took all the income of people over $200,000, it would yield about $1.89 trillion, enough revenue to cover the 2012 bill for Medicare, Medicaid and Social Security—but not the same bill in 2016, as the costs of those entitlements are expected to grow rapidly. The rich, in short, aren’t nearly rich enough to finance Mr. Obama’s entitlement state ambitions—even before his health-care plan kicks in.

In other words, a soak-the-rich policy won’t work, in part because there isn’t enough rich to soak, and in part because the bill is just too high.  James Pethokouis delved into the White House’s subsequent release of generalities along which Obama’s new budget would work, and discovers a $2 trillion price tag in it:

If you’re keeping score, what Obama is actually proposing is $1 trillion in new taxes on wealthier Americans (and small businesses) and $1 trillion in higher tax revenues by reducing tax breaks and subsidies for a total of $2 trillion in new taxes over 12 years. That means total debt reduction, not counting interest, would be $4 trillion, 50 percent of which would come from higher taxes. The econ team at Goldman Sachs ran a similar analysis and found that 56 percent of Obama savings over ten years could come from higher tax revenue.

In this way, Obama relies far more on taxes than the two-parts spending/one-part taxes formula of the Obama-Bowles-Simpson debt panel that is supposedly his model. As Obama said, “It’s an approach that borrows from the recommendations of the bipartisan Fiscal Commission I appointed last year.” Not really.

Since we can’t get the money out of the rich, where do all these new tax revenues originate?  The WSJ notes that the “loopholes” mentioned by Obama in his speech are targeted to the middle class:

Keep in mind that the most expensive tax deductions, in terms of lost tax revenue, go mainly to the middle class. These include the deductions for state and local tax payments (especially property taxes), mortgage interest, employer-sponsored health insurance, 401(k) contributions and charitable donations. The irony is that even as Mr. Obama says he merely wants the rich to pay a little bit more, his proposals would make the tax code less progressive than it is today.

In the class-war battlefield, the class that takes the most casualties is always the middle class.  If that wasn’t clear, then this report from Bloomberg should remove all doubt:

More than 45 percent of U.S. households won’t owe federal income taxes for 2010. That stems from decades of tax cuts and, in the minds of some Republican lawmakers, it’s also a problem.

Policies designed to ease the tax burden of lower-income Americans and offer targeted tax incentives have pushed millions of people off the income tax rolls. That has bolstered an argument that these households don’t have enough of a stake in the political system because they don’t pay income taxes.

“As a matter of fairness, wouldn’t it make more sense if all citizens paid at least something in income taxes?” asked Orrin Hatch, the top Republican on the Senate Finance Committee, at a March 30 hearing. “I am convinced that it would help us in our fight against excessive federal spending. You get a lot of takers when you ask people if they want more of something and you tell them it’s free.”

There is only one place for the federal government to squeeze for the cash Obama needs to spend on his budget trajectory.


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Shocking! Stunning! Unexpected!

SouthernGent on April 18, 2011 at 12:17 PM

No one cares about facts, if Zero says it, it’s true.
/the way libs think.

Brat4life on April 18, 2011 at 12:18 PM

La la la , I can’t hear you
-dear leader doubling down

cmsinaz on April 18, 2011 at 12:20 PM

Tru dat brat and if they said the same thing to a gop prez, the 24/7 outrage from the lsm, why doesn’t the president see the facts at hand

cmsinaz on April 18, 2011 at 12:22 PM

Well if everyone in America paid some tax we might cover the bill. The 40%+ that doesn’t pay any tax but get money back from actual taxpayers is just horribly wrong! But that is the plan, have more and more getting the ‘stash’ from dc.
L

letget on April 18, 2011 at 12:23 PM

Of, course not. The plan is to increase taxes drastically on everyone.

Blake on April 18, 2011 at 12:23 PM

Rush talking about this now

cmsinaz on April 18, 2011 at 12:23 PM

Yeah, but it’s like golf, right? The lowest score is the best. And a negative number? That must be even better!

Oh well, at least the oceans have begun to recede. So we have that going for us, which is nice.

trubble on April 18, 2011 at 12:24 PM

Since when did ‘cover the bill’ become a goal? The mechanism of taxing the rich is about vengeance, its not about paying for a damn thing…

ted c on April 18, 2011 at 12:25 PM

Thank you sir. May I have another?

Rocks on April 18, 2011 at 12:25 PM

I am sick to death of these lying marxist thieves…. It’s on.
Video Nugget: We will not go down without a fight.

deedtrader on April 18, 2011 at 12:26 PM

Don’t confuse me with the facts

Hunt035 on April 18, 2011 at 12:26 PM

F-U libs.

MadDogF on April 18, 2011 at 12:26 PM

But they’re rich…!

catmman on April 18, 2011 at 12:27 PM

Obama’s strategy:

“We need to Tax the _________.”

Fill in the Blank.

portlandon on April 18, 2011 at 12:28 PM

Is Obama going to attack himself?

kingsjester on April 18, 2011 at 12:28 PM

trubble on April 18, 2011 at 12:24 PM

Which is a good analogy: If you hit the golf ball more often, doesn’t that mean a greater chance of a lower score?

catmman on April 18, 2011 at 12:29 PM

In the class-war battlefield, the class that takes the most casualties is always the middle class.

War is exactly what the administration is trying to achieve, the tax code isn’t supposed to be a means of punishing, redistributing, discriminating or any other means of moral equality. The IRS should look at raising revenue with a blindfold and ear protection on.

fourdeucer on April 18, 2011 at 12:30 PM

The Mendacity of Hope.

SlaveDog on April 18, 2011 at 12:30 PM

Eat the Rich.

Leave the 45% alone. What are you, a racist?

/crr6

Khun Joe on April 18, 2011 at 12:33 PM

More than 45 percent of U.S. households won’t owe federal income taxes for 2010.

This should be shouted from every rooftop today.

angryed on April 18, 2011 at 12:34 PM

““As a matter of fairness, wouldn’t it make more sense if all citizens paid at least something in income taxes? I am convinced that it would help us in our fight against excessive federal spending. You get a lot of takers when you ask people if they want more of something and you tell them it’s free.”

Exactly! When you’ve got no dog in the fight, the outcome means nothing to you. You start TAKING $100 a year from those who pay no taxes – they’re going to start asking “What’s it being used for?”

I don’t think the progressives what people asking questions like that. Who the hell do they think they are anyway?

GarandFan on April 18, 2011 at 12:37 PM

I don’t care. Obama is awesome.
/

xrayiiis on April 18, 2011 at 12:38 PM

top 10% of filers — whose average annual household income is $114,000 —

That’s a little misleading. $114,000 is average TAXABLE income. It’s not unusual to have someone making $200K and who pays tax on less than 1/2 amount.

Which is why the $250K threshold for higher taxes is also a little misleading. That would be $250K taxable income. Which in reality means at a minimum $300K+ gross income and could easily mean $350K+ as well.

Not that I am in favor of higher taxes. Just saying that $250K doesn’t really mean $250K.

angryed on April 18, 2011 at 12:42 PM

The other point that cannot be emphasized enough is that the effect of taxing the “rich” is not limited to the rich. Look at the effect of the luxury yacht tax from the late 1980′s. A classic case of uninteded consequences, the taxes harmed the rich not at all who simply bought their yachts overseas or bought smaller yachts or bought no yachts at all. It devasted the industry and hit the workers the hardest of all.

The act was repealed in 1993, but it seems that this is a lesson that some will never learn.

PackerBronco on April 18, 2011 at 12:44 PM

Telling us what we already knew.

DuctTapeMyBrain on April 18, 2011 at 12:45 PM

“The American Republic will endure until the day Congress discovers that it can bribe the public with the public’s money.”
— Alexis de Tocqueville (Democracy in America)

xrayiiis on April 18, 2011 at 12:46 PM

Most deductions are lifestyle deduction.

Own vs rent…tax implications.
Have kids, vs have no kids…tax implications.
Go to college vs. don’t go to college, tax implications.
But hybrid car vs. buy gas car, tax implications.
Work from home office, vs. work from a cube, tax implications.

And there are thousands of these examples. Giving preferential tax preference to one group over another distorts economic activity.

A flat tax would get rid of all these distortions and tax everyone equally regardless of their lifestyle choices. And yes some people who pay little to no tax today would pay higher taxes. Tough. The govt should not be subsidizing your lifestyle choice at my expense.

angryed on April 18, 2011 at 12:47 PM

A flat tax would get rid of all these distortions and tax everyone equally regardless of their lifestyle choices. And yes some people who pay little to no tax today would pay higher taxes. Tough. The govt should not be subsidizing your lifestyle choice at my expense.

angryed on April 18, 2011 at 12:47 PM

A flat tax is still an income tax and just as immoral as the death tax or property tax.

The Fair Tax, aka, national sales tax coupled with a repeal of the 16th amendment would go a long way in ensuring the solvency of our country.

But that’s common sense, or uncommon sense if you’re from DC.

MadDogF on April 18, 2011 at 12:51 PM

That screen cap of Obama looks like he is holding an umbrella.

portlandon on April 18, 2011 at 12:53 PM

There’s an old joke that talks about the “new 1040 EZ-est form” – it only has two lines:

1. How much did you make last year? _______
2. Send it in to the IRS.

Not quite as funny today, as it’s starting to look like Obummer is taking the joke as an actual game plan…

psrch on April 18, 2011 at 12:53 PM

MadDogF on April 18, 2011 at 12:51 PM

Yeah I agree, a sales tax in lieu of an income tax would be ideal. I doubt it will ever happen. But I think a flat tax, or a flatTER tax can some day be a reality.

I’d be fine with a muti-tier flat tax with regressive rates since otherwise it would never pass. I just want an end to the govt dictating to people how to live in order to save money on their taxes.

angryed on April 18, 2011 at 1:04 PM

MadDogF on April 18, 2011 at 12:51 PM

The flat tax has no immoral properties or moral properties it is flat, fair and equally applied. The Fair Tax does not make sense if you are not purchasing.

fourdeucer on April 18, 2011 at 1:04 PM

Posted on another blog:

The Proggies (Since Commie is the same as Communist, Proggie is short for Progressive, as they are one in the same)

Are either too Incompetent or too evil to realize their raise taxes plan will cripple the economy – but for them that’s a feature.
A slow down from higher taxes will mean a drop in revenue, so they will have to raise them some more.

The slow down from the second tax raising necessitated from the first tax raising will require a third round of the raising of taxes.

The slow down from the third round of tax increases will make it imperative that taxes are raised again to cover the budget shortfall from the first couple of tax hikes.

The slow down from the fourth round of taxation will beget a fifth round.

The slow down from the fifth round of taxation will beget a sixth round. The slow down from the sixth round of taxation will beget a seventh round. The slow down from the seventh round of taxation will beget a seventh round. The slow down from the seventh round of taxation will beget an eighth round. The slow down from the eighth seventh round of taxation will beget…………………………

Insert witty screen name here on April 18, 2011 at 1:17 PM

You are missing the point. Of course only taxing the rich will solve the problem. You just have to define “rich” differently. In Obama’s world, any person (or family), making more than $75k a year is “rich” and should pay much higher taxes.

Monkeytoe on April 18, 2011 at 1:20 PM

Speaking of improvements in medicare, two years ago the Administration told us of the rich vein of savings to be had from “rooting out waste, fraud and abuse” in Medicare. On the premise that their foolish legislation was required to mine this vein, they’ve had at least a year of such rooting out.

I have written my congressman and senators asking for a breakdown of dollar figures for savings from “rooting out” waste, fraud and abuse, and asked for a list of fraud indictments, and the dollar amount involved in each indictment.

No doubt the reply will be a long list with some large dollar figures. In the unlikely(?) event it’s not, do we think it’s a valid question to ask if these clowns can REALLY be trusted with MORE (a larger percentage, even if the absolute dollar figure drops as a consequence) of our money?

mr.blacksheep on April 18, 2011 at 1:26 PM

The flat tax has no immoral properties or moral properties it is flat, fair and equally applied. The Fair Tax does not make sense if you are not purchasing.

fourdeucer on April 18, 2011 at 1:04 PM

I used to support a flat tax. However, I learned that in 1986, Reagan got us as close to a flat tax as he could. Three brackets and only the mortgage interest deduction. Subsequent Congresses then set about amending the law until it is just as fubar as it was before.

The Fair Tax makes more sense. It is a tax everyone is already paying they just don’t know it. Repeal the 16th amendment and replace it with the national sales tax. Require a 2/3 majority of Congress to raise the rate. No more IRS, no more loopholes, no more offshore accounts, and no more corporations throwing their weight around DC trying to get a tax break.

Kafir on April 18, 2011 at 1:29 PM

Could somebody please explain how on God’s green earth another version of Marxist Wealth redistribution will solve the problem when it has never done so in the past?

Chip on April 18, 2011 at 1:29 PM

Pet peeve: Can we stop ceding the rhetorical field to the left’s verbal tactic of talking about “the rich”? There are no proposals to tax “the rich.” There are only proposals to increase taxes on high income tax filers. The differences are important.

Yes, states and localities tax “wealth” in the form of property taxes and, because many people keep a large portion of their net worth in their homes, that is akin to a tax on wealth. But no one is talking about a federal property tax. And, yes, the feds tax “wealth” through the death tax but that, at least for now, is not on the table.

As the GOP frequently points out, high income tax returns are often from small business owners, and increasing taxes on those returns will kill jobs. Good. Keep making that point.

But every time a lefty says “the rich,” we have to point out that no one, absolutely no one, is proposing to tax “the rich.” John Kerry and Terese Heinz will keep their money in tax free municipal bonds and pay less in taxes than me, because we don’t tax wealth, we tax only certain kinds of income.

The fact that someone makes > $250K in any given year doesn’t make them rich. Perhaps that’s the year they sold their house and earned a big capital gain. Perhaps that’s the year of their peak earnings for their whole life. Perhaps they are making $250K a year only after 4 years of college, 4 years of medical school, 1 year of internship and 5 years of residency and, finally, at age 32 with $200K in student loans, are geting a first significant paycheck.

This is also important because of the frequent canard about “the rich” not paying taxes. Well, of course not. You don’t pay tax on wealth, just income. Unless their wealth generates taxable income, it won’t be taxed. Duh. Again, see John Kerry’s tax returns, or Barack Obama’s.

Everytime someone on the left talks about taxing the rich, someone on the right shuld correct them: You’re not trying to tax the rich, you’re trying to tax the productive.

Income from salaried or hourly jobs is almost always taxable (with deductions that the middle class loves, like 401(k) plans, health savings accounts, dependent care accounts, mortgage interest, etc.). But you can’t hide it. I get a paycheck and I must send my original W2 from my employer to the IRS.

SwampYankee on April 18, 2011 at 1:38 PM

Eagerly awaiting some bayam condescension as to how the WSJ must believe in the Easter Bunny or something equally ridiculous…

Midas on April 18, 2011 at 1:41 PM

Link to a similar analysis of the Insanity of the Taxation Obamanation.

Soak Rich, Bust The Budget

Taxes: President Obama wants higher rates and fewer breaks, but only for the over-$250,000 set. That may or may not work politically, but as fiscal policy it’s likely to make a bad situation worse.

Insert witty screen name here on April 18, 2011 at 1:45 PM

Own vs rent…tax implications.
Have kids, vs have no kids…tax implications.
Go to college vs. don’t go to college, tax implications.
But hybrid car vs. buy gas car, tax implications.
Work from home office, vs. work from a cube, tax implications.

And there are thousands of these examples. Giving preferential tax preference to one group over another distorts economic activity.

A flat tax would get rid of all these distortions and tax everyone equally regardless of their lifestyle choices. And yes some people who pay little to no tax today would pay higher taxes. Tough. The govt should not be subsidizing your lifestyle choice at my expense.

angryed on April 18, 2011 at 12:47 PM

Absolutely.

Count to 10 on April 18, 2011 at 1:46 PM

Part of what disturbs me about discussions in removing itemized deductions is that *boatloads* of people have made significant financial commitments based upon those deductions. Removing them is basically breaking a contract with the taxpayer. You’d have to do something like a grandfather clause that allows people who are taking them today to continue to do so, but not allow anyone to *begin* taking them (mortgage deduction, for example) that wasn’t already.

Otherwise, you’re going to hose a bunch of people, some of whom will suddenly find themselves a lot closer to insolvency than they would’ve been otherwise. But raise their rates *and* yank the deductions? Oi.

Midas on April 18, 2011 at 1:48 PM

SwampYankee on April 18, 2011 at 1:38 PM

That, too.

Count to 10 on April 18, 2011 at 1:49 PM

Part of what disturbs me about discussions in removing itemized deductions is that *boatloads* of people have made significant financial commitments based upon those deductions. Removing them is basically breaking a contract with the taxpayer. You’d have to do something like a grandfather clause that allows people who are taking them today to continue to do so, but not allow anyone to *begin* taking them (mortgage deduction, for example) that wasn’t already.

Otherwise, you’re going to hose a bunch of people, some of whom will suddenly find themselves a lot closer to insolvency than they would’ve been otherwise. But raise their rates *and* yank the deductions? Oi.

Midas on April 18, 2011 at 1:48 PM

It’s not really a contract — you took your chances that the tax code could change when you made the purchase. You are arguing from a “to those according to need” standpoint.
Though, if we did clean out the deductions and credits, we really should lower the tax rates.

Count to 10 on April 18, 2011 at 1:53 PM

I used to support a flat tax. However, I learned that in 1986, Reagan got us as close to a flat tax as he could. Three brackets and only the mortgage interest deduction. Subsequent Congresses then set about amending the law until it is just as fubar as it was before.

The Fair Tax makes more sense. It is a tax everyone is already paying they just don’t know it. Repeal the 16th amendment and replace it with the national sales tax. Require a 2/3 majority of Congress to raise the rate. No more IRS, no more loopholes, no more offshore accounts, and no more corporations throwing their weight around DC trying to get a tax break.

Kafir on April 18, 2011 at 1:29 PM

Large sales taxes will only encourage a huge black market, and you have no idea how congress would mess around with that whole pre-bait thing. I don’t think we could implement a flat tax properly without an amendment, either.

Count to 10 on April 18, 2011 at 1:58 PM

It’s not really a contract — you took your chances that the tax code could change when you made the purchase. You are arguing from a “to those according to need” standpoint.
Though, if we did clean out the deductions and credits, we really should lower the tax rates.

Count to 10 on April 18, 2011 at 1:53 PM

Well, from your perspective, you wont mind if Obama comes in and decides that you owe taxes/penalties/interest on any money you deferred taxes on by investing in your 401k/IRA’s then, I suppose? I mean, you took your chances that the tax code could change when you made that investment.

From your comments, I guess saving for retirement is a ‘lifestyle choice’; why should anyone else be subsidizing *that* ‘lifestyle choice’?

Midas on April 18, 2011 at 2:00 PM

Pet peeve: Can we stop ceding the rhetorical field to the left’s verbal tactic of talking about “the rich”? There are no proposals to tax “the rich.” There are only proposals to increase taxes on high income tax filers. The differences are important.

Everytime someone on the left talks about taxing the rich, someone on the right should correct them: You’re not trying to tax the rich, you’re trying to tax the productive.

Income from salaried or hourly jobs is almost always taxable (with deductions that the middle class loves, like 401(k) plans, health savings accounts, dependent care accounts, mortgage interest, etc.). But you can’t hide it. I get a paycheck and I must send my original W2 from my employer to the IRS.

SwampYankee on April 18, 2011 at 1:38 PM

Yes, but I’ll go you one better- can we please stop referring to wealth as though it’s ‘Collectively’ owned.

As in something like: The Top 1% control most of the world’s wealth.

[Understand, I’m not trying to imply you said this, but looking at the larger rhetorical picture]

Never the less, that ‘Wealth’ is not owned “Collectively” by the world or whatever, it is owned by many individuals, it stands for their productive activity.

What do they call it when the productive activity of certain individuals is Owned by someone else?

Chip on April 18, 2011 at 2:06 PM

I hate to break the news, but the government is a sovereign power….so this whole business about “contracts” is misleading. In 1933 fdr “reneged” on the promise of backing treasuries with gold. That was basically a repudiation of the government’s obligation. Bondholders were paid back in paper money which was, over time, worth less than the gold.

There were lawsuits and SCOTUS ruled that the government could do that.

So, forget the “contracts” that you think you have with the government.

r keller on April 18, 2011 at 2:09 PM

Assuming there are spending cuts …
do government managers know how to operate on a shrinking budgets ?
They have never had to .. what makes anybody think they can. Their MO is to make life miserable till you give them more money. That is a prescription for getting fired in the new paradigm.

J_Crater on April 18, 2011 at 2:16 PM

Obama’s strategy:

“We need to Tax the _________.”

Fill in the Blank.

portlandon on April 18, 2011 at 12:28 PM

Republicans.

Steve Z on April 18, 2011 at 2:22 PM

as we all know, zero loves crises…so I’m sure that their war room is all abuzz with how to face down the Rs and extort more money from the taxpayers.

Progs want about 22/23 percent of gdp to go to the feds…at least as a start. O will be using this to move in that direction

r keller on April 18, 2011 at 2:29 PM

You get a lot of takers when you ask people if they want more of something and you tell them it’s free.”

Sometimes I really like Orrin Hatch. This is one of those times. I’m guessing if we stopped handing out buckets of money to people, we wouldn’t need to collect as many trashcans full of money.

hawksruleva on April 18, 2011 at 2:42 PM

Assuming there are spending cuts …
do government managers know how to operate on a shrinking budgets ?
They have never had to .. what makes anybody think they can. Their MO is to make life miserable till you give them more money. That is a prescription for getting fired in the new paradigm.

J_Crater on April 18, 2011 at 2:16 PM

Government managers don’t successfully manage anything. I think if you closed some of the agencies, you wouldn’t have to worry too much about the rest of them getting all snarky with you.

hawksruleva on April 18, 2011 at 2:44 PM

Part of what disturbs me about discussions in removing itemized deductions is that *boatloads* of people have made significant financial commitments based upon those deductions. Removing them is basically breaking a contract with the taxpayer. You’d have to do something like a grandfather clause that allows people who are taking them today to continue to do so, but not allow anyone to *begin* taking them (mortgage deduction, for example) that wasn’t already.

Midas on April 18, 2011 at 1:48 PM

That is a valid point. But…

1. Laws change all the time. If you invested in a company that made incandescent light bulbs 20 years ago, your investment is worth $0 today because the govt decides not to allow those bulbs to me manufactured anymore.

2. I don’t think any of the proposals are immediate. It’s not like 2010 you get $40K of deductions, 2011, you get $0. It’ll be more like in 2011 you get $37K, in 2013 you get $32K, in 2020 you get $0…that type of gradual implementation of the changes allowing people to adjust.

3. If you grandfather in the deductions, you will see a mad rush of people doing things (like buying a house) to get in on the gravy train. It will magnify the economic distortion I mentioned even more. And then you’ll have millions of people who bought a house for the tax deduction who a) didn’t need a house or b) can’t afford the house or c) both a and b. And those millions of people will end up foreclosing and we’re right back to another “Crisis” that will mean higher taxes to solve. That’s an extreme example, but it illustrates the point. The govt will still be, in, one way or another telling people how to behave in order to pay less taxes.

angryed on April 18, 2011 at 2:52 PM

Well, from your perspective, you wont mind if Obama comes in and decides that you owe taxes/penalties/interest on any money you deferred taxes on by investing in your 401k/IRA’s then, I suppose? I mean, you took your chances that the tax code could change when you made that investment.

From your comments, I guess saving for retirement is a ‘lifestyle choice’; why should anyone else be subsidizing *that* ‘lifestyle choice’?

Midas on April 18, 2011 at 2:00 PM

People do take that chance. Some will win, some will lose. If you invest in a Roth IRA/401k, you’re betting the govt will not tax you. I wouldn’t take that bet myself since I know all that money could be taxed at some point in the future. And that’s why I take the deduction today instead of tomorrow.

And once again, another example of the govt incentivizing me to do something simply to take a tax deduction vs. allowing me to use my money as I think is best.

Also think how much easier it would be to plan long term without the tax code? If you know that every year you’ll pay X% of income in taxes, your financial planning would be easy. Now, you have to think OK, I pay this much. But if Do this I can get a $500 deduction. And if I do that I can get a $1500 credit. But what if I make too much for the credit? Should I earn less to qualify for more credits?

Real life example: the $1000 child tax credit phases out at $110K AGI. So someone making $135K with 4 kids might get it or might not get it. One year he might have enoug deductions to get to $110K. Some years me might be at $112K. So one year he gets $4k child tax credit, some years he gets $0. What if he has a $5K bonus? Should he take the bonus? If he does he may lose out on $4K of tax credits. But he’s not sure because that’s all dependent on whether or not his dividends are taxed at 15% or 20%. It’s a rat hole of decisions that would all go away with a simple flat tax rate and no deductions/credits.

angryed on April 18, 2011 at 3:01 PM

Not to mention that folks earning over 200k are mobile. They can leave and go elsewhere.

The socialists are parasites that will take every last cent they can lay their greedy hands on until the country collapses, like say the states of California and New York.

How many other states are on the verge of bankruptcy?

Yet Failbama and the goon posse demand ever more.

dogsoldier on April 18, 2011 at 3:38 PM

WSJ shows taxing the rich won’t cover the bill

Well, obviously, you’re just not taxing them enough!!

Try taking 400% of their wealth from them, and I’ll bet it would make a difference!!!

/sarc

tom on April 18, 2011 at 4:16 PM

If you took all the income of people over $200,000, it would yield about $1.89 trillion, enough revenue to cover the 2012 bill for Medicare, Medicaid and Social Security—but not the same bill in 2016

Well, it might work for 2012, but how many people would put forth the effort in 2013 to earn one dime over the threshold for 100%?

Double whammy there, going in one year from huge tax income to $0. So instead of 36% of a pretty big number, you get 100% of $0.

AZfederalist on April 18, 2011 at 10:05 PM