Obama and the Continuing Assault on the “Top 2%”

Those who expected President Obama to drop the class warfare rhetoric after the election were wrong.

Barack Obama’s campaign repeatedly called for tax rates to go up on the “wealthiest” two percent. 

Not coincidentally, Mitt Romney is a long time member of that select category so the Democrats’ call for a tax increase on the rich had the political benefit of highlighting the claim that the GOP nominee wasn’t “like the rest of us”. 

But for the President, it was more than politics.  He is truly a man of the Left who believes that the rich have too much (remember, “you didn’t build that”?).

How else could one claim that it is “unfair” to the rest that the top tax rate is only 36% and, therefore the top level should rise to 39.6%?  It’s not as though we don’t already have a steep progressive tax system ranging from 0-36%.  But for Obama “fairness” compels that it be steeper still!

What exactly does fairness mean if the top 1% income earners currently pay 37% of the nation’s income tax while sharing only 17% of the nation’s total income.  Maybe, to Obama, being rich itself is unfair.  So, if people are wealthy, such thinking goes, they should pay proportionally more than others not only because they can, but more importantly because it’s the right thing to do.

The Administration tries to obscure this motivation by cloaking the tax rise argument with the insistence that it’s an essential element of a deficit reduction package.

That is ridiculous.

Raising the tax rate 4% on the top 1%, would generate $88 billion* in additional revenue if high earner income did not decline from 2011 levels.  (A rate increase might very well be a strong disincentive to earn such income.)

That amount is not even 8% of the projected 2012 deficit of $1.1 trillion.  So how is the 92% of the remaining deficit to be treated? 

Reducing spending by $1 trillion by 2013 would get us there.  But, of course, President Obama has nothing of the sort in mind.  In fact, his “fiscal cliff” avoidance proposal calls for $50 billion more in stimulus money. 

No, the reality is that he will do one of the following:  increase taxes across the board (which means the other 98% - half of whom do pay some income tax) and/or continue to increase the deficit by spending money we don’t have by borrowing it from the Chinese, among others.

Neither outcome will be good for the economy.  However, that’s plainly not the President’s primary concern.  He insists that there will be no deal without the 2% paying higher taxes.

After all, isn’t fairness more important than the health of the economy?

 

 *The IRS, which is the source of the income figures recited above, does not break-out the income levels for the top 2%.  Rather, it does so for 1%, 5%, etc.  Thus, there is educated guessing involved when calculating 2% numbers.  My estimate is that the total revenue generated by a 4 point tax increase on the top 2% would equal about $150 billion, still a very small portion of the annual deficit.