Taxes on rich may bring revenue, but it won’t fix deficit
While taxing the rich can make an effective campaign strategy — and all signs point to that being one of Obamas main talking points for the coming election — a hefty mix of pundits, news stories and opinion pieces suggest the political reality can be compared to trying to plugging the hole in the side of the Titanic with dollar bills.
There are a number of challenges that come with tackling the national debt — which currently stands at $14.3 trillion. These include the tax code, the shrinking tax base, tax cuts for the rich, government spending and entitlements.
Opinions differ on how much an impact these factors play on the current debt, but many sources suggest addressing all or most of them to fix the problem.
Chris Edwards, who studies tax policy for the Cato Institute, tells CBS News the U.S. tax code a huge convoluted mess. This mess allows those who can afford to hire help or who know how to work the system to avoid paying as much in taxes as others.
The tax code is full of loopholes for those wealthy enough to take advantage, and wrought with individual and corporate subsidies, an American Thinker post states. It discourages work, saving, and investment through high individual rates and duplicative taxation policies such as the death tax and capital gains tax.
As Walter Williams points out in an Investors Business Daily column, the rich didnt become rich by being stupid.
While Ted Kennedys personal wealth remains estimated to be between $45 million and $150 million, the documentary Do As I Say, claims that Kennedy utilized an elaborate network of trusts and foundations to allow him to pass on his wealth tax-free.
President Obama, who paid $453,000 in taxes this year, should have paid $182,998 more if he were to pay taxes under the percentage he says he should. The Washington Times also points out the Obamas should set an example by returning their $12,000 refund or not itemizing and/or claiming deductions.
While proponents of raising taxes on the rich claim the extra money from the top tier will help the debt, critics say the tax base is already foisting much of the tax burden on the wealthiest Americans.
In an NPR analysis, while the top 1 percent of earners took home 23 percent of the nations adjusted gross income in 2007, they also paid 40 percent of the federal income taxes for that year. Relying on a narrow tax base, NPR warns, can cause state revenues to nosedive when a recession hits.
The Tax Foundation also reports that the top-earning 5 percent of taxpayers paid far more than the bottom 95 percent. The Washington Examiner says that the top 1 percent of earners — those earning more than $380,354 — paid 38.02 percent of federal income taxes while the bottom 50 percent paid just 2.7 percent.
Based on past analysis, to the American Enterprise Institute estimates one-third of taxpayers will not owe any federal income tax this year. This, the institute warns, is concerning because households that pay no federal income tax are less concerned about federal spending and the size of the government.
While increasing taxes on the rich may create some revenue — although not as much as the president may think, The Washington Times, MarketWatch, The Atlantic and The Wall Street Journal all warn — even taking larger, more drastic measures would fail to have much of an impact.
A 50 percent tax hike on income taxes across-the-board would still leave a federal deficit of $750 billion a year, The New American warns. Even following Michael Moores suggestion to take the assets of the wealthiest Americans (or, what he calls a national resource) would fail to cover the 2011 deficit alone, Mary Katharine Ham points out on The Daily Caller.
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