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Make the Rich Pay!
By Victor Davis Hanson
Last week, President Obama reversed course once again and now wants to
raise taxes on the “rich” making above $250,000 per year. Obama is in
dire need of additional revenue after proposing a $3.8 trillion 2011
budget -- containing the largest deficit in U.S. history at an
estimated $1.6 trillion. Yet his latest share-the-wealth proposals make
little sense.
Obama never distinguishes between the super-rich and the well-off. At
one point in justification, the president scoffed, “I don’t need
another tax cut, Warren Buffett doesn’t need another tax cut.”
But Warren Buffett, unlike the building contractor or family dentist,
is the world’s third-richest man, worth nearly $50 billion. And Obama
is probably the most privileged person on the planet, with all of his
expenses covered -- from a nice free mansion at 1600 Pennsylvania
Avenue to a huge private jet.
The rich and the poor are not separated across an impenetrable barrier.
The president’s $250,000 line in the sand is actually quite fluid. Most
of those who make incomes above it did not do so 10 years ago -- and
they won’t, on average, 10 years hence. The income of well-off
professionals and small-business people fluctuates widely as they
ascend, peak and descend in earnings -- given factors like health, age,
and uncertainty in employment and business. It would be more accurate
to say that raising taxes on the better-off is a sort of punishment for
those who break into the top brackets for a few short years and try to
be careful to save what they make and not spend what they don’t.
The super-rich pay in taxes a far smaller percentage of their income
than do the well-off. An array of blue-chip tax lawyers and Byzantine
write-offs -- and paying at the capital gains rates rather than the
income tax rates -- allows the Buffetts of the world to praise higher
taxes while they connive to pay at lower rates than most others. The
IRS, for example, reported that the 400 richest Americans paid only 17
percent in federal income tax. A corporation like General Electric --
run by Obama pal Jeffrey Immelt -- paid no taxes at all on its $14.2
billion in worldwide profits.
Nearly half of American households pay absolutely nothing in federal
income tax. For them, the once-dreaded April 15 tax day is more a
welcome time of tax credits, rebates and refunds. In February 2011,
American households received more than $2.3 trillion in direct
government support, more than was collected during those 28 days by the
Treasury in personal taxes. In contrast, the now-demonized top 5
percent account for almost 60 percent of all federal income tax revenue
-- a higher percentage than anywhere else in the Western world.
Until recently, falling revenue has not been the prime cause of these
serial national deficits. In fact, the Treasury took in an all-time
high of nearly $2.6 trillion in 2007. Unfortunately, wild spending has
skyrocketed well above the pace of both inflation and annual revenue
increases. Such profligacy ensures that even with a growing economy,
increased tax revenues never match out-of-control spending.
If the president wishes to raise revenue, he might first close
loopholes. That would ensure that those who owe taxes actually pay
them. He could start with his own Cabinet. Treasury Secretary Timothy
Geithner, who oversees the IRS, at one point did not pay his Social
Security and Medicare taxes and took improper writes-offs. Attorney
General Eric Holder, the nation’s top law-enforcement official, did not
pay long-overdue property taxes on a house he co-owned until recently
chided to do so by the media. The husband of Labor Secretary Hilda
Solis had overdue tax liens on property that went back 16 years.
Cabinet nominee Tom Daschle withdrew from consideration due to past
unpaid taxes.
So before raising taxes, the president might first urge the super-rich
to pay their taxes at the income tax, rather than capital gains, rate.
Next, he could remind his own Cabinet officers to pay all the taxes
they owe. Then, he should offer to pay more of the first family’s costs
when they jet to luxury spots like Martha’s Vineyard, Costa del Sol or
Vail. And finally, he might ask the nearly 50 percent of Americans who
now pay no income tax to pay at least 5 percent of their income in
federal taxes -- to ensure that they see their government as a taker as
well as a giver.
Do all that and we would have more money -- and the president would be
less likely to declare, “I don’t need another tax cut.”
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