Here’s a big surprise: President Obama wants to raise taxes on “the wealthy.”
By some counts, this represents the 25th time the president has rolled out this proposal — something to keep in mind the next time he warns against “refighting the battles of the past” over something like repealing Obamacare. Regardless, repetition hasn’t done anything to improve either the policy or the president’s truthfulness in describing it.
First, the president’s definition of wealthy is a little shaky. It turns out that the “millionaires” he refers to in his speeches are actually individuals earning $200,000 per year and couples earning $250,000 — about 2.5 million Americans. While $250,000 is a lot of money in many areas of the country, in high-cost regions such as New York City that earning category would include a teacher with 22 years of service married to a police captain. The president’s definition of “rich” would also include some 750,000 independent and small businesses that do not pay income taxes as businesses; instead, their taxes are paid through the owners’ individual tax returns. We are not exactly talking Warren Buffett here
Moreover, many Americans earning less than $200,000 are likely to suffer collateral damage from this tax increase. For example, the president’s proposed tax hike on capital gains is likely to reduce the value of 401(k) funds that millions of middle-income Americans rely on for retirement. And the business taxes will drive up the prices of goods and services, not to mention costing jobs. Given current unemployment rates, it seems especially hard to think of any reason why raising taxes on small businesses would be a good policy.
All this would come, of course, on top of the Obamacare tax increases, which will start hitting in the next two years. A large part of those tax hikes will also fall directly or indirectly on the middle class.
The president’s argument that this tax hike is about fairness is also more than a bit specious. Wealthy Americans already pay a disproportionate share of federal income taxes. The top 1 percent earn 16 percent of all income in the United States, but pay 36.7 percent of all federal income taxes. In fact, the 400 richest Americans together pay nearly as much in federal income taxes as do the 50 percent of taxpayers at the low end of the scale.