None of this makes any economic and moral sense — unless one is as ideologically blind as our re-elected president.
Barack Obama says that now that he has been re-elected, that means a majority of Americans agree with him that taxes should be raised on “the rich,” so that they would pay their “fair share.” But that policy makes no sense from any reasoned perspective.
Obama’s Tax Increases, Your Unemployment
On January 1, the tax increases of Obamacare become effective, and the Bush tax cuts expire, which President Obama refuses to renew for the nation’s job creators, investors, and successful small businesses (the plain English translation of “the rich”). That means the top tax rates of nearly every major federal tax will soar.
The top two income tax rates will jump by nearly 20%, the capital gains tax rate will skyrocket by nearly 60%, the tax on dividends will triple, the Medicare payroll tax rate will skyrocket by 62% for these disfavored taxpayers, and the death tax will rise from the grave with a 57% rate increase. These are not proposals. They have already been enacted into current law.
This is all on top of the U.S. corporate income tax rate, which at nearly 40% on average, counting state corporate taxes, is already the highest in the world under Obama, except for the socialist, one party state of Cameroon. Even Communist China has a 25% corporate rate. The average in the social welfare states of the European Union is less than that now. In Canada, which has been booming since Obama became President, the federal corporate rate is 15%, compared to 35% in the U.S.
In the global economy, America’s businesses are uncompetitive with this enormous tax disadvantage. But under President Obama, there is no relief in sight. Instead, Obama spent his first four years barnstorming the country continuing to call for still more tax increases. Now Obama is already talking about a new carbon tax. So much for all his promises of no tax increase on the middle class “in any form.”
Obama says that his tax increases would not affect 97% of all small businesses. But that top 3% of small businesses earn 91% of all small business income, and employ 54% of the total private sector U.S. workforce, as reported in Investor’s Business Daily on November 9.
Obama’s economic plan as of today is to continue the policies of the first term, except to add these comprehensive tax rate increases. Obama’s policies have already produced the worst economic recovery from a recession since the Great Depression. Adding these comprehensive rate increases will only mean further downturn, sharply slashing the incentives for productive activity by reducing what producers can keep out of what they produce. The result will be less productive activity, particularly the savings and investment that are essential to creating jobs and increasing productivity and wages and incomes.
With the economy barely growing at all, the further enormous drag on the economy from all these rate increases will only tip it all back into recession. I started writing about that a year ago, especially in my short Broadside book published by Encounter, Obama and the Crash of 2013. But now even the Washington establishment is coming around to the same view, especially the Congressional Budget Office. Adding to the contractionary forces are Obama’s explosive second term regulatory costs and restrictions, which in particular will burden the economy with crippling energy costs, and the Fed’s wild monetary policies laying the groundwork for renewed inflation and recession.
Renewed recession will mean unemployment soaring back into double digits, the deficit exploding to over $2 trillion, shattering all world records, and exploding federal debt accelerating America on the expressway to Greece. This will only hurt the middle class, working people and the poor the most. The rich can live off of what they have, and liberate their money by investing it overseas.
What Is Fair About That?
But aren’t these tax increases necessary to make sure the rich pay their fair share? Shouldn’t they pay the same tax rates as everyone else?
The CBO reports the latest compiled data from the IRS. In 2009, the top 1% of income earners paid 39% of all federal income taxes, three times their share of income at 13%. In 1981 when President Reagan entered office, the top 1% paid just 17.6% of federal income taxes. So after nearly 30 years of Reagan Republican tax policies cutting income tax rates, by 2009 the share of federal income taxes paid by the top 1% had more than doubled. That resulted because at the lower rates, the rich took their money out of tax shelters and invested it, contributing to the economic boom, and reporting higher incomes earned as a result. This is why Jack Kemp always used to say, if you want to soak the rich, cut tax rates.
Also in 2009, the top 20% of income earners, those earning more than $74,000, paid 94% of federal individual income taxes, 85% more than the share of national income they earned. Yet, the middle 20% of income earners, which can be considered the true middle class, paid 2.7% of total federal individual income taxes on net that year, while earning 15% of before-tax income. And the bottom 40% of income earners, instead of paying some income taxes to support the federal government, were paid cash by the IRS equal to 10% of federal individual income taxes on net. That also was primarily the result of Reagan Republican tax policy over nearly 30 years, cutting taxes on the middle class, what the liberal/left calls the working class, and the poor.
So the only reasonable conclusion that can be drawn is that the rich actually pay far more than their fair share of federal income taxes. Is President Obama ignorant of these indisputable facts, or is he trying to deceive us to achieve his left-wing extremist goals?
President Obama is proposing increases in federal income tax rates to make the rich pay their fair share, so it is proper to look at what share of total federal income taxes are paid by different income earners. But even if we look at all federal taxes, and not just income taxes, the story is not very different.
In 2009, the top 1% paid over 22% of all federal taxes, again while earning 13% of the income, again according to official IRS data, as reported by CBO. Moreover, because of the weak economy, that is down under President Obama from the nearly 27% of all federal taxes paid by the top 1% that resulted from booming Reaganomics by 2007.