Why we can't tax ourselves out of the deficit problem. The IRS numbers prove it.

American Thinker ^ | 04/05/2011 | Steve McCann

[SeekAndFind]

Yesterday I was in the belly of the beast: Washington D.C.  At a lunch meeting, which included a number of liberal Democrats, the inevitable subject of the runaway spending and debt came up, particularly in light of Paul Ryan issuing a budget which would go a long way toward curing our financial ills.  While I and others extolled the positive economic effects of dramatically reducing government spending, those on the other side refused to come off the mantra of all we have to do is raise taxes on the rich and that will solve nearly all our problems.

Admittedly, all of those who were in that camp were, you guessed it, lifelong government bureaucrats.  I forcefully made the case that raising taxes on the rich would not generate anywhere near the revenue they thought, or even make a dent in the deficit, and would in fact end up reducing revenue and killing job creation.  The argument fell on deaf ears.  So, having done the research on the issue in the past based on numbers from their fellow bureaucrats in the IRS, I told them I would forward the details.

I am doing so through the American Thinker in a devious attempt to not only get their attention but to ruin their day by forcing them to see and hopefully read the articles and blog entries.

The data is contained on the following IRS site: Section: Tax Generated; subsection; Tax rate and size of Adjusted Gross Income (2008): Table 3.5 (The table is here) 

The tax year of 2008 was the last to date that the IRS has done this kind of analysis.  In 2008 the highest marginal tax rate of 35% applied to all AGI above $357,700.00.   In that year the total amount of AGI subject to the highest rate was $622.8 Billion.  The government collected in taxes $218.0 Billion (35%).

In 2011 the annual budget deficit will be nearly $1,665.0 Billion and in 2012: $1,100.0 Billion.  If the Liberal Democrats in league with the Socialists, the Unions and the Communists, succeed in raising the highest marginal rate, how much more would Washington D.C. receive, assuming no change in behavior and a general eagerness to pay more?

If the highest rate of 35% were raised by a factor of 20% to 42%, then the additional tax revenue would be $43.5 Billion, not much of a dent in $1,665.0 Billion.  So, let's raise the rate by a factor of 50% to 52.5%; the additional revenue would be $108.9 Billion.  Still nowhere near enough, so let's just tax it at a rate of 100%, bringing in an additional $404.8 Billion.  Unfortunately the country is still $1,260.0 Billion in the hole for the year.

Obviously by confiscating at 100% of all the income of the so-called rich above a predetermined level, there would never again be an incentive to earn above the highest tax rate threshold.  So where will the Left have to turn next: where the money is, the middle class.

The Left knows the gullible among us easily fall for centuries-old class warfare rhetoric that demonizes the wealthy, yet they persist in doing the unconscionable, as it keeps them in power despite the fact that it enflames passions and in some cases, violence.  

What the Democrats are doing is entirely based on a lie.  The United States cannot tax its way out of the present financial crisis, and from a cursory examination of Paul Ryan's proposal, his is the best plan yet presented and needs to be defended and promoted.

[screaminsunshine]

The only way out of this mess is an old reliable device...The Printing Press. That is what they will do after everything else flops. Print Free Money to pay their bills.

[Free Vulcan]

I calculated that if the govt confiscated the cumulative wealth of all the billionaires in the U.S. we might plug the budget deficit for one year or slightly longer. Include the millionaires and you might plug it for two.

That’s wealth, not income. That’s how big our deficits are.

[Crucial]

Like my Dad always told me: there’s no such thing as a free ride. Inevitably, the numbers back that up.

[circlecity]

Of course after those two years there would no more income, or wealth, left.

[sthguard]

So how long before “tax the rich” becomes “tax the whites”?

[circlecity]

Of course after those two years there would no more income, or wealth, left.

[Secret Agent Man]

No, it’s called “You’re on your own. We’re not your parents.”

Personally I would eliminate the department of education. That’s a huge chunk of the budget right there.

I’d also phase out the federal welfare programs as well.

All foreign aid, except to true friendly nations. Tired of bribing and bankrolling people that hate us. That get our money smiling with us one moment then condemning us as soon as the check is cashed.

[truthguy]

So how long before “tax the rich” becomes “tax the whites”?

It's basically that now. I've been watching the voter demographics very carefully for over 20 years. If you look at the big spenders, there is a clear racial and ethnic proponent to the voting trends. Certain groups of people will always vote in favor of spending other peoples money. These voter trends will tell you something. This is why Republicans won't spend any money trying to win California. It's a demographic impossibility given the various voting blocks. These are the people Alex De Tocqueville warned us about almost 200 years ago. These are the people who Margret Thatcher warned about when the said the following:

...the problem with socialism is that eventually you run out of other people's money.

[Joan Kerrey]

Wish this explanation were used more often. It really paints the picture well. Too often conservatives just throw out talking points that are general in nature. A lot of libs, some in my own family, truly believe that taxing the rich would solve MOST of the budget problems. They believe what the liberals are telling them without question.

The GOP really needs to change their very generalized message

[griswold3]

i wonder what the effect of seizure of property and the quick disposal would do to their value.
They talk about the ‘wealthy’ but much of that is on ‘paper’.
there is only so much ‘government’ people will pay for.

[Free Vulcan]

Yeah obviously it’s all hypothetical because the economy’s dynamic and except for the cash nothing would fetch what it’s valued. Of course the markets would crash right after that and more than likely the govt would lose twice the revenue the next year that it confiscated the previous.

And the libs will never get that.

[hosepipe]

"We contend that for a nation to try to tax itself into prosperity is like a man standing in a bucket and trying to lift himself up by the handle." -Winston Churchill (1874-1965)

“I am for doing good to the poor, but I differ in opinion of the means. I think the best way of doing good to the poor, is not making them easy in poverty, but leading or driving them out of it.” -Ben Franklin, 1766

"How do you tell a Socialist:- It's someone who reads Marx and Lenin. And how do you tell an Anti-Socialist someone who understands Marx and Lenin" -Ronald Reagan

[ataDude]

You forgot the Department of Energy... which was created in the ‘70s to eliminate our dependence on foreign oil.

They have done a simply spectacular job, don’t you think?

[Professional Engineer]

Bfl

[slowhandluke]

Bill Whittle: Eat the Rich is a good riff on this subject.