After Tax Hikes On The Rich Accomplish Nothing, Then What?

By John Hawkins
TPNN Contributor

Will we have tax increases on the wealthiest Americans, either in the lame duck session or next year?

Yes, probably.

The polls show it’s a losing issue for the GOP. Fewer Republicans are signing on to Grover Norquist’s anti-tax pledge. Obama is using the issue as an excuse not to cut spending and 8 of the 10 wealthiest counties in America went for Obama in 2012.

So, Republicans may oppose tax increases on the wealthy because it’s bad policy for the country, but it’s going to be extremely tempting politically to turn a blind eye when Democrats demand higher tax rates on wealthy Americans.

If and when that happens, the problem is going to be that: tax increases on the wealthy aren’t going to make any sort of significant dent in the debt.

Raising taxes on the rich was the cornerstone of President Obama’s reelection campaign. “If we’re serious about reducing the deficit,” Obama told a rally in Columbus, Ohio, on election day, “we’ve got to ask the wealthiest Americans to go back to the tax rates they paid when Bill Clinton was in office.”

But just how much deficit reduction would Obama’s tax hikes on the rich necessarily accomplish?

Nothing, according to the Congressional Budget Office.

Letting tax rates rise to Clinton era levels for those families making over $250,000 a year would only raise $824 billion over ten years. That is not even enough revenue to undo the sequester that Obama promised “will not happen” during his final debate with Mitt Romney.

For all the talk you hear about the rich paying their “fair share,” the truth is that the United States already has the highest corporate tax rate and: the most progressive tax code in the Western world.

Since there are a relatively small number of rich Americans and they have the ability to shelter their money, move overseas, or just stop working and live off what they’ve already earned, the truth is that we’re not going to get much more blood out of that stone. In other words, as a practical matter, the rich may still have money, but they’re almost tapped out as a source of tax revenue.

Guess who’s not?

Well, here’s a hint: 47% of Americans don’t pay income taxes and a big slice of those people are in the middle class. If the government wants to rake in more dough by raising taxes, then almost by default, it will have to target the middle class.

So, when Republicans push to cut spending, they’re really protecting the middle class from having to pay higher taxes. Along the same lines, tax increases for the rich have been like a firewall for the middle class. As long as both parties are fighting over that issue, tax increases on the middle class aren’t going to come up. But, if and when that changes, those greedy eyes of the liberals in D.C. are going to focus longingly on the wallets of middle class Americans.

Don’t say you weren’t warned.

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