The President will give a speech tonight on how he plans to solve America’s deficit problem by taxing the rich.
From a distributional point of view, I have nothing against taxing the rich. Further, while it true fact that taxes tend to shrink the tax base (the only question is how much), let’s ignore the Laffer-curve controversy. Let us instead accept the left’s own calculations about tax revenue.
The centerpiece of President Obama’s plan is to raise taxes on the rich (households making $250.000 or more). There is no doubt that the rich have become richer over the last few decades, and hence could afford this tax increase. If taxing them would solve the deficit crisis, I would support it in a heartbeat.
The only problem with this “solution” is that it is dishonest. President Obama likes to give the impression that his plan to tax the rich can significantly reduce the deficit, a claim which is false and which Obama knows is false.
Everybody knows that the rich have a lot of money, so it may appear reasonable to non-economists that taking some this wealth can fill the hole in the budget. What the public doesn’t know, and what President Obama will not tell them, is that there are just too few rich people in America for this plan to work.
According to the Congressional Budget Office, over the next 10 years the Obama budget will produce a deficit of $10.900 billion, or 5.3% of GDP on average.
According to the left’s own calculations and as reported by the New York Times, Obama’s plan to raise taxes on the rich will generate $700 billion in additional revenue over the next decade, or just a pathetic 0.3% of GDP.
In other words, the plan to raise taxes on the rich will only cover one out of fifteen dollars of deficit spending. Where is President Obama going to get the other fourteen out of fifteen?
To the $10.9 trillion in deficits we need to add the unfunded liabilities of Medicare and Social Security. According to the Trustees of these programs, the unfounded liabilities are a staggering $52 trillion.
Again, any honest economist who knows the facts can tell you that a measly 70 billion in revenue per year from the rich will not come close to cover Americas fiscal hole of at least 63000 billion dollars.