Tax the Rich

Taxing the rich is a catchy concept and has a certain grass roots appeal in that many envy the rich.  Beginning with Robin Hood right up to Obama’s hood the idea that snitching money from their pocket and spreading it around is probably okay. After all, they either got it from daddy or on the backs of the poor. At least that’s what John Kerry (hmmnn, isn’t John the one living off his wife’s inherited millions?) and the big public employee and teachers unions tell us. And now the oracle of Omaha is blabbing about his heroic responsibility to pay more as long as others also do so. Thank God real heroes in foxholes are more unselfishly motivated. So, let’s tax the rich. Let’s see if it will work, by the numbers; the facts.

In the tax year 2008, the most recent tax year for which stats are available, it looks like this: There were 90,660,000 returns with taxable income (TI) of $5.5 trillion and tax liability of $1,032 billion. There was an additional 51,791,000 tax returns filed with no tax due. Of the total tax liability due of $1,032 billion, $263 billion was due from taxpayers with TI of $100,000 or less (72,562,000 filers); an additional $426 billion comes from taxpayers with TI between $100 – 500,000 (17,201,000 filers) and the remainder of $343 billion comes from taxpayers with TI of $500,000+ (897,000 filers).

So, you’ve got the picture. About 52 million filers paid no tax. Then about 76 million filers paid $265 billion or 26% of the total; the next group of 13.5 million which earned between $100 – 500,000 paid $349 billion or 41% of the total and the remaining 897 thousand making over $500,000 paid $320 billion or 33% of the total. Let’s take a closer look at this last group, the so-called rich; the ones we want to nail.

In 2008, those with TI of $500,000.00 or more paid $320 billion. Their TI as reported to the IRS was $1.266 trillion so they paid about 25% to the feds. That leaves about $946 billion still to be taxed. If you wish to take it all; confiscate all their TI, you would put a big dent in the deficit. If you were to double their taxes, which no one has proposed, you would get an additional $320 billion which would have made a good dent in the old deficits under Bush II but amount to only about 20% of Obama’s deficits. If you were to add five percentage points to their tax rate (which Obama supports) that will raise about $60 billion which is helpful but sure not a solution. So take your pick. Grab all their dough and you get $946 billion to fund the deficits; double their taxes and you get $320 billion (not gonna happen) or increase the tax rate by 5% which is what the party in power wants to do and you get about $60 billion.

But here is an observation we have never heard mentioned by anyone else. As a matter of fact, we offer it up free of charge to those expensive political consulting geniuses on either side. Either the ones who claim they will solve our deficit and debt problems by taxing the rich or the others who say look to cutting spending. Obama is piling up debt (almost $4 trillion in less than three years) faster than anyone in the history of the world. And some one, someday will have to pay off the debt. Now let’s say you’re one of those 897,000 tax payers who are paying one third of all the personal income tax in this country. That means your share of Obama’s debt is also one third of $4 trillion which is a cool $1.3 trillion and there’s only 897,000 of you. That means that, on average, each of you “rich” people is on the hook for debt of $1,450,000.00. Just coming from Obama; not all the rest of the debt that is outstanding. Almost one and a half million dollars per person! Perhaps the oracle of Omaha needs to pass this analysis along to his cronies.

There are a lot of ways to tax the rich; some more obvious than others. It may be time for the party out of power to figure out what is going on if they have any hope of becoming the party in power. Federal government debt is nothing more, or less, than deferred taxation unless you plan on just printing money in the future to repay it. Either way, taxes or printing money, you still take money away from those who saved/earned it.

In a future essay we will take a close look at the two large groups that are either not paying much tax or paying nothing at all. It seems that American taxpayers are becoming an endangered species.