http://www.newsweek.com/id/187933 A War on the Rich? The bogus GOP claim that Obama is bleeding the wealthy. Daniel Gross Mar 6, 2009 | Updated: 9:41 a.m. ET Mar 6, 2009 To hear conservatives tell it, you'd think mobs of shiftless welfare moms were marauding through the streets of Greenwich and Palm Springs, lynching bankers and hedge-fund managers, stringing up shopkeepers, and herding lawyers into internment camps. President Obama and his budgeteers, they say, have declared war on the rich. On Tuesday, Washington Post columnist (and former Bush speechwriter) Michael Gerson argued in an op-ed that "Obama chose a time of recession to propose a massive increase in progressivityâa 10-year, trillion-dollar haul from the rich, already being punished by the stock market collapse and the housing market decline." The plans are so radical, "there will not be enough wealthy people left to bleed." CNBC's Larry Kudlow wrote that "Obama is declaring war on investors, entrepreneurs, small businesses, large corporations, and private-equity and venture-capital funds." Other segments on the financial news network warn of a tax on the rich, a war on the wealthy. My personal favorite was a piece from ABCNews.com, which had to be rewritten and reposted because the original was so poorly done. (The revised version isn't much better.) It quotes a dentist who is contemplating reducing "her income from her current $320,000 to under $250,000 by having her dental hygienist work fewer days and by treating fewer patients. [That way, she] would avoid paying higher taxes on the $70,000 that would be subject to increased taxation if Obama's proposal is signed into law." It's hard to overstate how absurd these claims are. First, let's talk about the "massive increase in progressivity" that Gerson deplores. It consists largely (but not exclusively) of returning marginal tax rates to their levels of 2001, before Gerson and the epically incompetent Bush administration of which he was a part got their hands on the reins of power. Obama wants to let marginal rates for families with taxable income (not total income, but taxable income) of more than $250,000 revert from 33 percent to 36 percent, and to let the top rateâcurrently 35 percent on family income above $357,000ârevert to 39 percent. (Here are the current tax tables.) There's also talk of cappingânot eliminating, but cappingâdeductions on charitable giving and mortgage interest. Obama's proposals don't mean the government would steal every penny you make above the $250,000 threshold, or that making more than $250,000 would somehow subject all of your income to higher taxes. Rather, you'd pay 36 cents to the government in income taxes on every dollar over the threshold, rather than 33 cents. Second, this return to 2001's tax rates was actually part of the Bush tax plan. The Republicans who controlled the White House and the Republicans who controlled the Congress earlier this decade decreed that all the tax cuts they passed would sunset in 2010. They put in this sunset provision to hide the long-term fiscal costs of the cuts. The Bush team and congressional supporters had seven years to manage fiscal affairs in such a way that they would be able to extend the tax cuts in 2010. But they screwed it up. Instead of controlling spending and aligning tax revenues with outlays, the Bush administration and its congressional allies ramped up spending massivelyâon two wars, on a prescription drug benefit for Medicare, on earmarks, etc. Oh, and along the way, they so miserably mismanaged oversight of Wall Street and the financial sector that it required the passage of a hugely expensive bailout. Even before the passage of the TARP, the prospect of extending all the Bush tax cuts was a nonstarter. Once Bush signed the $700 billion bailout measure into law, extending tax cuts was really a nonstarter. The national debt nearly doubled during the Bush years. So if you want to blame someone for raising taxes back to where they were in 2001, don't blame Obama. Blame Bush, his feckless Office of Management and Budget directors, his economic advisers, and congressional appropriators like Trent Lott and Tom DeLay. Third, we know from recent experience that marginal tax rates of 36 percent and 39 percent aren't wealth killers. I was around in the 1990s, when tax rates were at that level, and when capital gains and dividend taxes were significantly higher than they are today. And I seem to remember that we had a stock market boom, a broad rise in incomes (with the wealthy benefitting handily), and strong economic growth. Fourth, we also know from recent experience that lower marginal rates on income taxes, and lower rates on capital gains and dividends, aren't necessarily wealth producers. The Bush years, which had lower marginal rates and capital gains taxes, were a fiasco. In fact, if you tally up the vast destruction of wealth in the late Bush yearsâcaused by foolish hedge funds, investment banks, and other financial services companies, it seems like the wealthy have in fact been waging war on one another. Finally, there has been a near total absence of discussion of what higher rates will mean in the real world. Say you're a CNBC anchor, or a Washington Post columnist with a seat at the Council on Foreign Relations, or a dentist, and you managed to cobble together $350,000 a year in income. You're doing quite well. If you subtract deductions for state and property taxes, mortgage interest and charitable deductions, and other deductions, the amount on which tax rates are calculated might total $300,000. What would happen if the marginal rate on the portion of your income above $250,000 were to rise from 33 percent to 36 percent? Under the old regime, you'd pay $16,500 in federal taxes on that amount. Under the new one, you'd pay $18,000. The difference is $1,500 per year, or $4.10 per day. Obviously, the numbers rise as you make more. But is $4.10 a day bleeding the rich, a war on the wealthy, a killer of innovation and enterprise? That dentist eager to slash her income from $320,000 to $250,000 would avoid the pain of paying an extra $2,100 in federal taxes. But she'd also deprive herself of an additional $70,000 in income! Can she, or we, really be that stupid?
you're an idiot. if you think paying more taxes is a good idea, go for it. go post your crap on movingon.org or something you retard.
Funny that America was strongest and after tax real inflation adjusted, household income was highest when the top marginal tax rate was above 60%. Ike and Elvis never saw anything less. That said, a progressive tax code is okay but it needs some SERIOUS, Serious, serious simplification.
I think you're the retard who can't even read the article due to ADD. 2001 tax breaks on the rich are expiring. That's the bulk of the tax increases, something that was planned when it was enacted. The rest of the tax increases are insignificant.
It is interesting that the concept more spending=more tax is lost somewhere in the last 10 years. Nobody disagree that we need to spend more to simulate the economy. Yet, when bills come in the form of tax hike, everyone is like war on this and that. Eat out in restaurant - good idea Need to pay for it - bad idea. So, what happens, they push the bill to the silent majority - future generations. What a bunch of irresponsible crooks.
Prosperity in the US is not about the tax rate, it's about the innovative productivity increases. The government rides on the back of every inventor and entrepreneur yelling "gid 'em up boys". Right now, productivity is not going up dramatically, BO is raising taxes by not renewing the tax cuts and every time the cardboard cutout of a president reads off his teleprompter the markets take a huge hit. BO sees the economic crisis as a chance to fear monger and put European Socialism in place and to give tons of money to the Democrats most dearest voters. They especially have to throw tons of money at Black Voters because American Blacks are social conservatives with little to no reason to vote for Democrats other than welfare programs and public sector jobs, they sure don't work in the private sector much at all, Jessie Jackson types took care of that. Predicting what the BO administration will do is not rocket surgery at all. 1) Socialism gives them power 2) Blacks have to get lots of money 3)the crisis has to be exacerbated by fear mongering so they can capitalize on it the most.
I disagree that we need to spend more to stimulate the economy. the whole problem is that we spent too much in the first place. You cannot consume more than you produce in the long run. Credit simply changes the timing of consumption. What we need is lower taxes and less government spending to encourage people to produce more. Creating wealth is not something the government can do but providing incentive to invest is. We now must produce more to pay for the consumption we have already enjoyed. Government consumption (spending) must be paid for by private producers. Once the government begins to spend and tax to the point where the effort to produce is no longer worth it, then production will fall off and there will be nothing to tax. At the margin, this happens with every unit increase in tax rates. There is always some incentive effect and it rises with every unit increase in taxes. The problem with Obama's plan (which is just Bush on crack) is that it grows the national debt while providing massive disincentives for private producers to produce. That's banana republic governing and leads to currency crises and poverty. BTW, the article is wrong. Raising taxes again was not Bush's plan. To pass the tax bill without sunset provisions would have required a higher majority than they were able to get. The Republicans were hoping to make the cuts permanent later. Of course, Bush never lowered taxes in reality because he never bloody well stopped spending. The creation of a deficit is a defacto tax increase.
There's a reason for that. The top marginal tax rate was around 90% when JFK cut it to increase tax revenue. In the 1970's it was 78%. What you're missing is the EFFECTIVE tax rate (the rate actually paid) was only 23% for the people subject to the top marginal tax rate. Tax shelters and loopholes were created to encourage producers to produce. Who would go through the risk and effort of starting a business if 90% of earnings are confiscated by the state? So, the top marginal tax rate during that period was meaningless. Reagan traded loopholes and tax shelters for a lower top marginal tax rate. Now, there are almost no tax loopholes or shelters, meaning that the top marginal tax rate is pretty close to what is actually paid. The people in the top 1% now pays pretty close to 32% in taxes. That's a higher percentage than when the top marginal tax rate was higher. Raising the top marginal tax rate today translates directly into less government revenue.
Clearly the idiot is you. This article is quite clear on how little is actually paid in difference. Tell me oh genius, how do you think the country is going to turn without the spending taking place and where do you think this money comes from? I see you failed to make not that these changes were already in the republican plan of Bush.