Financial Aspects of the SotU
Like all dopey ideas, the State of the Union is dealt the most devastating damage when it is taken seriously. Rather like a beached whale suffocating under its own weight — its rib cage simply wasn’t designed to withstand the force.
This is going to be some trick. Even the most basic inspection of the IRS income tax statistics shows that raising taxes on the salaries, dividends and capital gains of those making more than $250,000 can’t possibly raise enough revenue to fund Mr. Obama’s new spending ambitions.
Consider the IRS data for 2006, the most recent year that such tax data are available and a good year for the economy and “the wealthiest 2%.” Roughly 3.8 million filers had adjusted gross incomes above $200,000 in 2006. (That’s about 7% of all returns; the data aren’t broken down at the $250,000 point.) These people paid about $522 billion in income taxes, or roughly 62% of all federal individual income receipts. The richest 1% — about 1.65 million filers making above $388,806 — paid some $408 billion, or 39.9% of all income tax revenues, while earning about 22% of all reported U.S. income.
A tax policy that confiscated 100% of the taxable income of everyone in America earning over $500,000 in 2006 would only have given Congress an extra $1.3 trillion in revenue. That’s less than half the 2006 federal budget of $2.7 trillion and looks tiny compared to the more than $4 trillion Congress will spend in fiscal 2010.
The bottom line is that Mr. Obama is selling the country on a 2% illusion. Unwinding the U.S. commitment in Iraq and allowing the Bush tax cuts to expire can’t possibly pay for his agenda. Taxes on the not-so-rich will need to rise as well.
Call me nutty, but this has just the whiff of inspiration for a rather cagey sort of optimism. President Obama, clearly, has meant very little of all the things He has said up until now. Changing America, it would seem, is about the only thing His rhetoric has had in common with His deeds. If He’s just promised to spend money on all these programs He obviously can’t afford, with His track record that’s pretty much the same as not having promised anything at all.
Again: The fault does not rest with President Obama. The fault lies with the rest of us. It’s a non-partisan position that we shouldn’t pass on debt to the next generation, but it’s a blisteringly partisan position to take that we should write to our congressmen or to the White House telling ’em to stop spending so much go***mned money.
No such dichotomy can be embraced by a sane mind. But that’s the mindset of our culture right now. So what’s this little dance people are going through, pretending to be trying to make sane decisions? Who do they think they’re kiddin’?
Cross-posted at House of Eratosthenes.