Skip to comments.The Millionaires’ Tax (Hey Mr. Buffett, How Much Taxes will It Really Raise?)
Posted on 11/28/2012 9:53:04 AM PST by SeekAndFind
The days are ticking off to a January 1 fiscal implosion, and Republicans are trying to MacGyver a fiscal fix. Three days after the election, President Obama claimed the voters had given him a mandate to raise taxes on the rich. With Pew reporting that 58 percent of Americans feel the rich pay too little in taxes, its hard for Republicans to contradict the president.
Unless Congress intervenes to prevent the Bush tax cuts from expiring, high earners will face significantly higher income taxes in 2013. For the top two brackets, the rate will rise to 36 percent (from 33 percent) and 39.6 percent (from 35 percent). And theres a good chance these taxpayers will also face deduction limits and higher taxes on capital gains and investment income.
But as Congress considers which segments of society should be funding public profligacy, definition matters. During the campaign, Obama embraced Warren Buffetts idea of a millionaires tax. But millionairedom is oddly nebulous. The Obama administration has lowered the wealth bar; by the presidents reckoning, becoming a millionaire is as easy as earning $200,000 annually for a single person, or $250,000 for a married couple. But, as many have noted, in cities like L.A. and New York, families earning $250,000 are not really rich. So Republicans are pondering a counter-offer: What if we defined millionaires as those who make $1 million or more a year, and limit the tax increases to them?
Let the math (and the groaning, and the slogging) commence. A few caveats: Calculations are inevitably complicated by the many tax-policy variables that could be factored in. And, because projections necessarily include assumptions about future taxable income, the numbers become even foggier.
Earlier this year, Congresss Joint Committee on Taxation reported that if the Bush tax cuts were allowed to expire for the rich, as defined by the president, the federal government would collect an additional $829 billion in taxes over the next ten years. However, if the tax cuts were extended for all but those who make $1 million or more a year, that additional tax revenue would drop to $463 billion. Thats $366 billion (or 44 percent) less over a decade.
Thats a projection; heres how the scenario plays out with historical data. Drawing from the most recent numbers from the Internal Revenue Service rather than projected future assumptions, such as those the JTC study used Dan Indiviglio of Reuters Breakingviews assessed the impact of raising tax rates only on those who make $1 million a year or more. He found that if the marginal tax rate for those people were raised from 35 percent to 39.6 percent for all income above $374,000, the federal government would raise only one-third (not 44 percent) less in additional taxes while sparing around 2.1 million people from hikes which is great for political and even economic impact, he tells National Review Online.
While studies disagree on the amount of tax revenue that would be raised by changing the taxpayer threshold for rate increases, they reveal something more important: Americas deficit problem cant be solved simply by taxing the rich. Regardless of which definition of millionaire is applied, the tax revenue just doesnt cut it. Furthermore, while Obama has stated that his purpose in calling for higher taxes is to reduce the deficit, its reasonable, given his history, to expect that much of any new revenue will go to spending, not deficit reduction.
But even if taxes on the rich did go directly to deficit reduction, it wouldnt be enough. Earlier this month, the Congressional Budget Office put the 2012 deficit at $1.1 trillion. It noted that this was the fourth straight year of trillion-plus deficits. This year, the deficit is 7 percent of the gross domestic product. CBO projections dont show much change in the annual deficit over the next decade. So even if the additional income taxes amounted to the $829 billion figure, the extra revenue would not eliminate the annual deficit, and it would do nothing to pay down the accumulated national debt of $16 trillion.
Furthermore, the hikes would carry significant economic ramifications. Obamas definition of millionaires certainly includes the super-rich, but it also manages to rope in a lot of small-business owners. (Unlike their corporate counterparts, many small-business owners use Schedule C of the individual 1040 form to report their business income and expenses, and a lot of them make over $200,000 a year.) An Ernst & Young study published in July reported:
"The increase in the top tax rates would reduce long-run output by 1.3% when the resulting revenue is used to finance additional government spending. Employment is found to fall by 0.5%. In todays economy, these results would translate into a reduction of gross domestic product (GDP) of $200 billion and employment by 710,000. Investment and the capital stock (net worth) would fall in the long run by 2.4% and 1.4% respectively. Real (non-inflationary) after-tax wages would fall by 1.8%, indicative of the decline in living standards relative to what would have occurred otherwise."
Those are the stakes. The question will be whether the marginal amount of additional tax revenue is worth the economic consequences.
Jillian Kay Melchior is a Thomas L. Rhodes Fellow for the Franklin Center for Government and Public Integrity.
If the GOP is going to cave at least add this to the tax increases: for all who are currently registered as a democrat, a 20% surcharge on earnings and 50% on net worth as of Jan 1, 2013.
Also, if you claim to be a hollywood star and democrat, pay an additional 20% on your contracted wages for what ever trash you plan to put out in 2013.
It’s a farce. Instead of raising tax rates on “millionaires” they might try removing their tax shelters and other schemes by which they keep their overall taxes low. They are able to move much of their incoming wealth into instruments that are not classified as income.
This is the lie that Buffett is harping on. Raise the rates all you want but the only ones affected will be the small business owners who end up pooling both their personal and business assets as income. This was mentioned sometime earlier this week and the dems howled because they know it would be a drastic raise in the amount of taxes their rich supporters like Buffett pay.
That said, no tax scheme will do much of anything to affect the obscene spending the democrat party has shoved up our asses.
FUBO & FAD
Liberal tax schemes against the successful have nothing to do with revenues and everything to do with their hatred of people who succeed in business.
I think he means how much revenue will it raise.
To those moving from the 10% bracket to 15%, their taxes will be increased by 50%!! Raising the 20% bracket to 25% represents what percentage of increase? (Hint: The correct answer, again, is NOT 5%)its s a full-blown 25% increase in taxes Finally, raising the 35% bracket to 39% represents what percentage of increase: (Hint: The correct answer is NOT 4%)thats roughly an 11% increase in taxes.
Make up Business cards with the Gift Contribution to the US government info and keep them in your wallet - anytime someone near you starts to crying that they should be taxed more, hand them a card . Fun AND educational!
front of the card: How do I make a contribution to the U.S. government? Citizens who wish to make a general donation to the U.S. government may send contributions to a specific account called Gifts to the United States. Money deposited into this account is for general use by the federal government and can be available for budget needs. These contributions are considered an unconditional gift to the government.
back of the business card:
Financial gifts can be made by check or money order payable to the United States Treasury and mailed to the address below. Gifts to the United States U.S. Department of the Treasury Credit Accounting Branch 3700 East-West Highway, Room 622D Hyattsville, MD 20782
A tax increase on millionaires will raise less money than leaving rates the same. Millionaires will work fewer hours, choose less risky investments with lower returns, pass their higher costs on to others so that those costs are eventually born by the middle class, or put more effort legally (or otherwise) into sheltering their income from taxation.
To the extent that “millionaires” pass the costs on to the general public, the tax increase is paid by ordinary people, but liberal voters think it is free money for government programs. Voters, and especially liberals, are a whole lot less picky about spending tax dollars wisely when they think it’s other people’s money being wasted.
To the extent that “millionaires” choose to earn less in response to higher tax rates, the tax increase will bring in less federal revenue. The resulting changes in economic activity by the wealthy will also slow economic growth and job creation. Obama doesn’t mind, because: (1) he already said in the Ted Koppel interview that what matters is fairness and not revenue, and he thinks it is more “fair” for the wealthiest Americans to pay a higher percentage of their taxable income, even if that is accompanied by a decrease in revenue, and (2) I suspect Obama would celebrate any harm to the country, even if everyone was harmed, so long as the rich were hurt the most.
From presidential primary debate on 4/16/08:
Charles Gibson: “...And in each instance, when the rate dropped, revenues from the tax increased. The government took in more money. And in the 1980s, when the tax was increased to 28%, the revenues went down. So why raise it at all, especially given the fact that 100 million people in this country own stock and would be affected”?
Obama: “Well. Charlie, what I’ve said is that I would look at raising the capital gain tax for purposes of fairness”.
Where does Mr Buffet keep his 60 odd billion? I dream of seeing that POS financially wiped out.
Give them there tax increase. We will have 2 years b4 the 2014 elections to watch them explain why the additional taxes on the rich did nothing to lower the deficit.
Put that quote alongside, "I think when you spread the wealth around, it's good for everybody," and Obama's communist leanings were obvious even before he took power.