Obama's Big Budget Deficits Could Mean A Big Tax Hike For The Middle Class

President Obama doesn’t think Americans should fret about the exploding national debt.

As he told talk show host David Letterman recently, “We don’t have to worry about it short term. Right now interest rates are low because people still consider the United States the safest and greatest country on Earth, rightfully so. But it is a problem long term and even medium term.”

So, in Obama’s view, dealing with the debt is more of a tomorrow thing than a today thing. Or maybe even a day-after-tomorrow thing.

But every day that the debt grows, the burden on Americans grows, too. Servicing that debt will need to be met by either increasing taxes or decreasing spending. So who exactly bears that burden. And how much does the burden weigh in dollars?

Well, according to the Congressional Budget Office, the latest White House budget would add $7.6 trillion of debt from 2012 to 2022. In a new paper, AEI’s Aspen Gorry and Matt Jensen looks at the real annual cost of servicing the debt for households at various levels of income — including a potentially higher tax burden.

Prof. Walter Williams made an observation which I’d like to share in this thread:

This year, Congress will spend $3.7 trillion dollars. That turns out to be about $10 billion per day.

Can we prey upon the rich to cough up the money?

All told, households earning $250,000 and above account for 25%, or $1.97 trillion, of the nearly $8 trillion of total household income. If Congress imposed a 100% tax, taking all earnings above $250,000 per year, it would yield the princely sum of $1.4 trillion. That would keep the government running for 141 days, but there’s a problem because there are 224 more days left in the year.

Taking corporate profits would keep the government running for another 40 days, but that along with confiscating all income above $250,000 would only get us to the end of June. Congress must search elsewhere.

According to the Forbes 400, America has 400 billionaires with a combined net worth of $1.3 trillion.

Congress could confiscate their stocks and bonds, and force them to sell their businesses, yachts, airplanes, mansions and jewelry. The problem is that after fleecing the rich of their income and net worth, and the Fortune 500 corporations of their profits, it would only get us to mid-August.

But let’s stick with the rich and ask a few questions. Politicians, news media people and leftists in general entertain what economists call a zero-elasticity view of the world. That’s just fancy economic jargon for a view that government can impose a tax and people will behave after the tax just as they behaved before the tax, and the only change is more government revenue.

One example of that vision, at the state and local levels of government, is the disappointing results of confiscatory tobacco taxes. Confiscatory tobacco taxes have often led to less state and local revenue because those taxes encourage smuggling.

Similarly, when government taxes profits, corporations report fewer profits and greater costs. When individuals face higher income taxes, they report less income, buy tax shelters and hide their money.

It’s not just rich people who try to avoid taxes, but all of us — liberals, conservatives and libertarians.

So far as Congress’ ability to prey on the rich, we must keep in mind that rich people didn’t become rich by being stupid.

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