There Aren’t Enough Millionaires: The rich can’t fund our deficits.

Discussion in 'Politics' started by Mercor, Mar 14, 2011.

  1. Mercor


    This may sound like a liberal parody of conservative economic thinking, but let me put it out there: America’s problem is that the rich don’t have enough money.

    There, I said it. Let’s rumble.

    When it comes to the Scrooge McDuck set, the problem isn’t that they’re not rich enough, it’s that there aren’t enough rich — not enough to do what liberals want to do, anyway, which is to balance the budget by increasing taxes on them. Let’s deploy some always-suspect English-major math:

    There are lots of liberal definitions of “rich.” When Pres. Barack Obama talks about the rich, he’s talking about people living in households with income of more than $250,000 or more, the rarefied caviar-shoveling stratum occupied by the likes of second-tier public-broadcasting executives, Boston cops, nurses, and the city manager of Lubbock, Texas (assuming somebody in her household earns the last $25,000 to carry her over the line). Club 250K isn’t all that exclusive, and most of its members aren’t the yachts-and-expensive-mistresses types.

    Nonetheless, there aren’t that many of them. In fact, in 2006, the Census Bureau found only 2.2 million households earning more than $250,000. And most of those are closer to the Lubbock city manager than to Carlos Slim, income-wise. To jump from the 50th to the 51st percentile isn’t that tough; jumping from the 96th to the 97th takes a lot of schmundo. It’s lonely at the top.

    But say we wanted to balance the budget by jacking up taxes on Club 250K. That’s a problem: The 2012 deficit is forecast to hit $1.1 trillion under Obama’s budget. (Thanks, Mr. President!) Spread that deficit over all the households in Club 250K and you have to jack up their taxes by an average of $500,000. Which you simply can’t do, since a lot of them don’t have $500,000 in income to seize: Most of them are making $250,000 to $450,000 and paying about half in taxes already. You can squeeze that goose all day, but that’s not going to make it push out a golden egg.

    But like certain other exclusive clubs, Club 250K has an inner sanctum, a special club within the club, the champagne room of socioeconomic status. And that is Club 1: the million-dollar-a-year club. Not the millionaires’ club — lots of the people earning $1 million in any given year do not have $1 million in assets — but, still, a million a year, even in rapidly depreciating U.S. dollars, is not too shabby. But the trouble for liberals is, Club 1 is really, really exclusive: Only 0.2 percent of U.S. households have incomes that high, meaning that there’s only about 200,000 of them. And like Club 250K, Club 1 is bottom-heavy: There are a lot more $1 million men than there are $6 million men. And there are a whole heck of a lot more $6 million men than there are $60 million men.

    You want to tax Club 1 to get rid of the deficit, you have to hit each of those 200,000 households with an average tax hike — not an average tax bill, but tax increase — of $6 million. And a lot of those Club 1 households don’t have $6 million in income to start with, much less $6 million left after the taxes they’re already paying.

    Every time you raise the threshold for eating the rich, you get a much, much smaller serving of meat on the plate — but the deficit stays the same. The long division gets pretty ugly. You end up chasing a revenue will-o’-the-wisp.

    So, what about Lloyd Blankfein and Charlie Sheen and Tiger Woods? What about these people? You can tax the striped pants off of them, but you won’t get enough money to balance the budget. If you’re doing it, you’re probably mostly doing it because it feels good. (And, yes, that does make you a bad person.)

    Correction: You can try to tax the striped pants off of them. Lloyd Blankfein and Tiger Woods and Charlie Sheen have a lot of discretion about when, where, and how they get paid. Lloyd Blankfein does not look at a pay stub every two weeks and shake his head sadly, and make sad little sighing sounds; guys like that do something about it. They move to low-tax jurisdictions. They defer. They incorporate. They set up enormous trusts to keep their ne’er-do-well nephews in boat shoes and gin and political office while avoiding taxes. They lawyer up. They will play the game, and they are better at it than you are.

    So, how about taxing people who make less than $250,000? That’s probably whom you want to tax, since they are the ones who have the money (Counterintuitive, I know.) The Bush “tax cuts for the rich” cost the Treasury about $800 billion in forgone revenue; the Bush tax cuts for the middle class cost trillions – 2.2 of them, to be precise.

    Repealing all of those Bush tax cuts, for rich and middle class alike, gets you about $3 trillion — over ten years. The deficit is running from a third to almost half that every year. Will not balance. Does not compute.

    Just as supply-siders are naïve to think that tax cuts are going to magically empower us to grow our way out of this mess, progressives are naïve to think that there is some magically delicious pot of Lucky Charms at the end of the IRS rainbow that is going to get us out of this in some kind of obvious or straightforward fashion. No, tax cuts do not pay for themselves, but supply-side effects are real things, and jacking up tax rates to the level necessary to sustain current levels of government spending is going to have real economic consequences, some of which could in aggregate mean that you don’t collect the taxes you thought you were going to collect. This is doubly true when you already have the second-highest business-tax rate in the developed world and other significant economic challenges, like a backward K–12 education system making the work force less competitive and public infrastructure that is being neglected in favor of gimmicky political shenanigans.

    Capital is sensitive — it just wants to be loved! — and it will go where the love is, where it can be fruitful and multiply. Setting trillions of dollars’ worth of it ablaze on the altar of Washington’s self-importance every year is not going to get it done, and there simply aren’t enough rich people for us to pillage or enough loot to make it all work. We have finally, as the lady predicted, run out of other people’s money.
  2. Ricter


    Good points, we need to get busy making stuff the world wants to buy. Sadly, the world is now largely able to make that stuff themselves. As for the sensitivity of capital, that's another good point. Look at it fly out of Japan now, where it's needed.
  3. We don't have a revenue problem, we have a spending problem. It's that simple.
  4. You do not understand the cycle of history.

    In every period and every major civilization since time immemorial, capitalism eventually leads to a widening income gap, which then provokes the class response by the lower-income group.As you might suspect, the lower income classes will always be much much more numerous than the rich. Of course this leads to a violent overthrow of the entire system, moving into socialism and eventually communism.

    Over time, when capital efficiency starts to deteriorate in a collectivized society, the incentive for private enterprise and capitalism takes hold again and capitalism is reborn. No one can stop this ebb and flow of human history, it is deeply embedded into human psychology and consciousness.
  5. As you amply, capably and repeatedly demonstrate, the political Right has an idiot problem within its fold. The rich are being taxed lower than they have been in a long time. Coincidentally, the income gap between the rich and everyone else has grown substantially during this same period. Are you naturally daft, or do you take special mercury and lead supplements?
  6. Tsing Tao

    Tsing Tao

    and as someone who falls into the top 3% of the country in terms of income, i can honestly say i have no problem paying more taxes if i must as long as spending is first properly reigned in.

    if you cannot stop spending irresponsibly, dont come to me for more tax dollars.
  7. At least you tacitly acknowledge that there is also a revenue problem.
  8. Ricter


    Ahh, a fellow Marxist, well met.

    I no longer subscribe [only] to his economic determinism--imho too much history is left unexplained.
  9. How much more lopsided do you think it should be Gayfly? Not that it matters because you're Canadian. One can only imagine how pathetic your life must be for you to obsess about us as you do.

    Top 1% Paid More in Federal Income Taxes Than Bottom 95% in ‘07

    Last year, 47% of American households paid ZERO federal income tax.

    We don't need more revenue to make the US even more of a welfare state. $2+ trillion is more than enough. As usual, your head is firmly up your ass.

  10. Tsing Tao

    Tsing Tao

    i don't do any such thing. there might be. we cannot say until we stop with the asinine spending habits and then take a look around to see what our budget looks like. if we cut government involvement in many places it shouldnt be, there is a real possibility private industry will pick up the slack and provide more revenues.

    there is no way to tell until government gets the hell out of much of what it is involved in.
    #10     Mar 14, 2011