By Steve McCann, AMERICAN THINKER
The President is going to address the nation yet again. He apparently intends to unveil another revised plan to fool the American people into believing he is sincere about reducing the deficit and reign in spending after the unserious budget he presented in February was soundly rejected by the country. While his hand has been forced by the twin factors of the Republicans in the House (buoyed the effectiveness of the Tea Party movement) and the upcoming Presidential election, he will nonetheless bring up increasing taxes on the so-called wealthy and corporations as one of the primary means of solving the debt and deficit problem.
Unfortunately this approach plays well among the less enlightened and Obama’s left-wing base who are in the thrall of class warfare and the capability of that argument to enflame passions and potential violence. This argument is solely being utilized to keep the Democrats and their allies in power. The reality is raising taxes and demonizing the wealthy will not solve but will instead exacerbate the current economic woes the country is experiencing.
There are stubborn things called facts that refuse to go away. Normally the left and the media dismiss any argument coming from those on the conservative side of the spectrum as being unreliable and subject to right-wing bias. One of the favored agencies of the liberals is the IRS (except when they are being audited), so let us focus entirely on the statistics they have published.
The wealth of Americans is an obsession with the left. The last time the IRS published any statistics on that matter was in 2004, when the economy was doing far better than it is today. At that time there were 2.7 million adults in the United States with a net worth (total value of all assets less debts and liabilities) in excess of $1.5 million for a total of $10.2 Trillion. The IRS reference can be found here; Data Table: All top wealth holders by size of net worth.
If the government were to decide that no one should have a net worth above $1.5 million and would confiscate all wealth above that level, then there would be a one-time windfall of $6.1 Trillion to the Treasury. As the total national debt is nearly $14.5 Trillion, this action would result in the reduction of the debt to $8.4Trillion.
However this tactic presents a major problem; how is the government going to realize the value of the seized assets? For example within the net worth of the now confiscated assets are upwards of $2+ Trillion in real estate, but who is going to buy that at market value as no one will have the leverage or cash to do so? Or who will buy the stocks, both publicly traded and closely held, where there are nearly $3 Trillion in present value, without collapsing the markets entirely? The same is true of state and local bond issues or corporate bonds, US Treasury Bonds, mutual funds etc. etc. The government, if it could at all, might realize a quarter of the value of the seized assets (if China were really interested) which had been previously used to underwrite the national economy.
The long term devastation to the economy would be unfathomable, as who would create jobs and wealth if they knew their assets would be seized above a certain point?
If the left were to be convinced that this tactic would be counterproductive, then their argument turns to having the wealthy pay more income taxes every year as a major means of reducing the annual deficit and minimizing the amount of spending cuts necessary to balance the budget.
As a starting point lets us stipulate that the projected budget deficit for the current fiscal year is $1,665.0 Billion. Per the Obama Budget it will be $1,100.0 Billion next year. The IRS data for the following exercise is found as follows: Section: Tax Generated; subsection, Tax and size of Adjusted Gross Income (2008): Table 3.5
The tax year of 2008 was the last to date that the IRS has done this kind of analysis. In 2008 the highest marginal tax rate of 35% was applied to all AGI above $357,700.00. In that year the total amount of AGI subject to the highest rate was $662.8 Billion. The government collected in taxes $218.0 Billion (35%).
Assuming no change in behavior and a general eagerness to pay more, and if Obama and the left convince the Congress to raise taxes on the so-called rich, then the potential increase in revenue would be as follows. If the highest rate of 35% were raised by a factor of 29% to 42%, the additional revenue would be $43.5 Billion, not much of a dent in the $1,665 Billion deficit. If the rate was raised by a factor of 50% to 52.5%, the additional revenue would be $108.9 Billion. Still nowhere near enough, so let’s just tax it at a rate of 100% thus bringing in an additional $404.8 Billion. Unfortunately the country is still $1,260.0 Billion in the hole for the year.
The top 1% of all income earners now pay nearly 40% of all income taxes collected by the Government. There is a point at which the so-called rich would cease to have any incentive to earn above the highest tax threshold, particularly as the above exercise does not take into account state and local income taxes, Medicare, as well as a myriad of other “revenue enhancers.”
From 1958 to 2008 the total tax revenue to the Federal Government has averaged between 16% and 20% of GDP. (The highest level in history was in 1944 when it hit 20.9 %.) This despite the fact that the top marginal rate has varied between 90 and 35% over that period. The historical lesson: there is simply no way the Government will change the way the people, particularly the wealthy, pay their taxes short of outright confiscation and permanent damage to the economy.
The left will argue that the wealthy should pay more even if it only makes a slight impact on the deficit. Why, other than out of spite? The only way to increase revenues to the Treasury, as has been proven by history, is to grow the economy, and to do that, the government cannot destroy the incentive of the producer class to do so. That requires dramatically reducing spending, regulations and the size of government at all levels.
When Obama and the Democrats, in league with the Unions and the radical left, continue their mantra of the need to tax the rich and berating the so-called wealthy, it is not because their diatribes offer a viable solution to the country’s fiscal woes or that they genuinely care about the citizenry, but because it serves their purpose to divide the people against each other and maintain their power base, as does their refusal to cut spending in order to buy votes.
Jacob Rader Marcus wrote in Early American Jewry that the sum owed to Solomon was $800,000. That amount in 1785 is equivalent in today’s purchasing power to about $40 billion (using relative share of GDP which indicates purchasing power) in 2005 US dollars.
In 1941, the writer Howard Fast wrote a book Haym Salomon, Son of Liberty.
The germans and Europeans made out like the thieves they were. Financial reparations for Jewish communal and private property only reached a fraction of heir worth and besides Germany no other European or Muslim Country has reimbursed Jews for their losses nor to their descendants.
So murdering Jews is a profitable business for the murderers. America has or had stolen Jewish gold and art that they stole from the Nazis and haven’t returned much unless under public pressure.
I want America and the Europeans to pay up. Less for the benefit to the Jews than to hurt the gentiles where is seems to hurt most: Their pockets!
Well, there’s not much we can do to honor the dead except to build memorials. Do you think it’s possible for the dead to know we are honoring them?
Just read some news about Jordan. A cemetery in Jordan is recognized as the oldest in the Middle East where burials dating to 16,500 years old have been found. I’m happy Jordon is doing so much archaeology for it combines with the ancient archaeology of Israel/Judah to give a more complete history of the Holy Land. Prehistoric people liked the Holy Land too.
Then some bad news. Islamists have gathered to form a third front in Jordan against the freedom fighters and loyalists to King Abdullah, who we can thank for these archaeology advancements. These Islamists want Sharia. I hope the Jordan government is strong enough to grind these pea brains into the dirt. All these pea brains have to do is look around. No country that has Sharia can be called a success in modern terms, including Saudi Arabia. Sharia in effect keeps them in a stone age culture. And allows the leaders and clerics to live high on the hog while everybody else suffers.
Statues? Of course Statues in place of Justice. Holocaust museums for dead Jews! Seems like a good trade-off. First insure the Jews are dead steal what can be stolen and then build a whole cottage industry of Holocaust museums, university chairs for studying dead Jews and lots of statues, lots of statues.
Thanks, 82, for filling in the details. I had no idea he had done so much. The U.S. government has a terrible record on making good with people who have been wronged. Indian tribes had to wait decades for a settlement from underpayment of their royalties and fees from mineral and oil developments on their lands. Basically men in government and related industries just stole their money for a hundred years, but now the Indians are placing ads saying if you belong to such and such a tribe, file your claim. Black farmers won a claim against the U.S. government, and I don’t know if they have been paid. There is also a case of soldiers from either WW I or II who are waiting for money awarded them. Yes, the U.S. government is remiss in much of this. Maybe more statues of Solomon should be erected. Tax the rich and erect more statues of him, without whom the bounties of this amazing country enabling people to become massively rich would never have transpired.
Ted another comment blocked.
I agree with Laura! Your spammer is the worst one I’ve seen and I’ve seen a few. get a new one.
Christians screwing the Jews: Old story. America has a bad habit of not paying their debts.
Haym solomon
(born 1740, Lissa, P+ol. — died Jan. 6, 1785, Philadelphia, Pa., U.S.) American patriot and financier. Forced to flee Poland for his revolutionary activities, he arrived in New York in 1772 and soon became a successful merchant and financier. A supporter of the patriot cause in the American Revolution, he was arrested and imprisoned by the British. In 1778 he escaped to Philadelphia, where he opened a brokerage office. He made loans in excess of $600,000 to help finance the new government, extended interest-free private loans to James Madison, Thomas Jefferson, James Monroe, and others, and obtained French loans to the American government.
Records show that Salomon advanced in specie over $211,000 to Morris when the latter was superintendent of finance, and entered into other transactions with the government to the tune of over $353,000. There were also several promissory notes totaling $92,000. In all, the sum that Salomon advanced to help the war cause was over $658,000, an amount which was later recognized by Congress as valid. Some of these transactions were in specie or on revolutionary paper, and as such declined considerably in value after the war. The loans that Salomon advanced to men such as future presidents James Madison and James Monroe were assumed to have been settled between the parties.
Salomon maintained his Philadelphia brokerage throughout these years, and was also a devout practitioner of his faith. He was active in the city’s Congregation Mikveh Israel, and once appeared before the Board of Censors to speak in opposition to a religious oath required of civil servants designed to keep those of the Jewish faith from such jobs. His firm began to experience financial losses after a 1783 recession, and he planned to relocate to New York City in 1785. According to one story, he petitioned the government for repayment, and was sent a sheaf of documents on a Saturday, the Jewish holy day. Salomon would not sign them because of the Sabbath laws against transacting business. On Monday he fell gravely ill. Other sources note that he had not yet tabulated the debts and presented his claim officially. What is certain is that Salomon died on January 6, 1785 in Philadelphia, a death attributed to tuberculosis.
Services Rendered, then Forgotten
When Salomon died at the age of 45, he was a bankrupt man with a wife, three children under the age of seven, and a fourth on the way. His estate was valued at $44,000, but had liabilities of $45,000. Not long after his death, his chief clerk, who could have been crucial to straightening out financial matters regarding the family debt, committed suicide. Attempts were made by his heirs over the next few years to obtain some retribution, but a series of suspect occurrences thwarted these challenges. It was alleged by the government, for instance, that papers concerning the Salomon estate claims were destroyed when government buildings in the District of Columbia were burned by the British in the War of 1812.
Salomon’s fourth child, Haym Jr., met with President John Tyler in the early 1840s and reportedly left a sheaf of documents with him for his perusal. The box of papers later disappeared. The younger Salomon then petitioned the Senate Committee on Revolutionary Claims until 1864, when he was in his late seventies. He even offered to settle the claim at a sum of just $100,000. This was quite generous considering that, with interest, the actual amount owed would have spiraled to a debt of grand proportions. At this the Committee once more approved the claim’s legitimacy and submitted it to Congress, which again failed to approve the expenditure.
A Shameful Legacy
At some point after the 1860s, a cache of Salomon papers remaining in Congressional archives was discovered to be missing. Many of them concerned financial dealings and bore the signatures of Washington, Jefferson, and other historic figures. They were likely pilfered for the value of these autographs. In 1893, Salomon’s heirs petitioned Congress to strike a commemorative medal in honor of their patriotic forebear, with a Congressional appropriation submitted in the amount of $250, but this was also rejected. Future president Woodrow Wilson sat on a committee charged with the task of founding a university in Salomon’s honor in 1911, but the project was derailed by World War I.
Salomon, who is buried in the cemetery of Mikveh Israel, was finally commemorated with a Chicago statue by famed sculptor Lorado Taft, and finished by Leonard Crunelle. The heroic memorial depicts Salomon, Morris, and Washington, and was dedicated in 1941 at the corner of Wacker Drive and Wabash Avenue. Known as the Heald Square Monument, it bears the inscription: “Symbol of American tolerance and unity and of the cooperation of people of all races and creeds in the upbuilding of the United States.”
Does not anyone get the fact that the rich pay taxes to the wealthiest entity in the nation?
In ancient Egypt, wealthy merchants paid taxes to the Pharaoh. While raising taxes on Egytian merchants probably reduced the disparity in wealth between the merchants and the peasantry, it increased the disparity of wealth between the merchants and the Pharaoh.
Why does this principle not apply in America?
By all means, don’t let facts get in your way. Pesky little things, aren’t they?!
No thanks. I’ll stick with my own reasoning.
and:
Regarding the USA, Ted already did the googling for you.. I take it you didn’t bother watching the videos I posted above in comments #3 and #4.
Regarding Greece, apply the same concept. You’re taking one of the more relatively trivial problems and shoving it into priority #1. Nothing could be farther from the truth.
Greece was in the hole partly because it did not collect enough taxes from the wealthy. What is your proof that my $1000 example does not work? It works in my life.
You’re that thick, are you?
You don’t understand anything. Massive corruption, an unbelievably bloated government payroll with all the perks and retirement trimmings, a military spending 100s of billions of Euros above their needs, bureaucracy stifling every effort to encourage private enterprise – these are what killed Greece. You don’t get something for nothing.
What nerve! There are plenty of economic heroes throughout America’s history, both in war and at peace. As for Solomon, his sacrifice was so great, he died a pauper in debt. Nothing like government gratitude! By all means, give us every last penny you’ve got, Catarin. We deserve it.
If one has a $1000 deficit, and raising taxes on the rich brings in $1000, I’d say this was a logical result.
I understand one thing that put Greece in the hole was that it never pressured the rich to pay their share of taxes, which they must do now.
What a long way we are from the times of the Revolutionary War, when General Washington was given $35,000 from A Jew named Solomon to buy weapons and war supplies, without which we never would have won the war and become a country.
In other words, you are just jealous.
And this income disparity is mostly the result of theft and fraud?
The reason people used to make a very good living in manufacturing was because, for three decades, the U.S. was the only manufacturing power in the First World, with most of Western and Central Europe recovering from Hitler’s war.
What a load of BS, indeed!
What a load of BS. The class warfare comes from the top, not those that are struggling for survival. The “less enlightened” is composed of the majority of economists from both sides of the spectrum. When the taxes on the rich were very high we built the Interstate highway system, went to the moon, had a thriving middle class with only one worker supporting the family, lots of other good things, and the rich were still living very well.
No need to go into any details because Yamit and Bland did a pretty good job there. However, the so called “Fair Tax” is anything but fair. The really big earners would be paying practically nothing.
It’s simple. It’s not a taxation problem it is a tax code problem. Establish a flat tax rate, no add on’s, no deductions, no loop holes, just a simple flat tax rate. Corporate pays a flat tax rate of 25%, scaling down to an individual tax rate of 15% for the majority of americans. Couple that with enforcement of collection of corporate taxes owed and the problem rectifies itself. The problem all along is not the tax rate or the rich it is the “collection” of taxes, and the impossibility due to the existing tax codes – ask GE.
First of all I didn’t write the article But I did think it made strong arguments. It may be expediant to raise taxes for the rich a bit, say 20%, but that will do nothing for the deficit. It will though make some people happy that we are taxing the rich. But that is class warfare.
As for Obama’s speech, to let him execute his “plan” would be like asking the wolf to guard the henhouse. He has no credibility whatsoever. But what I did like his sarting point was a $4 trillion reduction in 15 years. It will only go up from there as the negotiations start.
Ted,
Your arguments don’t seem to hold water. First of all, you admit that 2008 was the last year that anyone was taxed at the 35% level. Before that year, we were relatively prosperous. After that year, when taxes were capped at a lower level, we have been in the economic pits. What’s more, in the 1960s, when our top tax bracket was a lucicrously high 90% (though few rich actually paid ANY taxes even then), our manufacturing sector was booming, jobs were plentiful and we were unquestionable world leaders economically. Do all the fine tuning on this that you will, but the bottom line is that our taxing policy has had, at best, NO EFFECT on the economy; and at worst, tax reductions have not brought on any sort of “trickle down” effect: Income disparity since Reagan’s bright tax cut ideas have, as Yamit points out, reached historic worldwide highs; tens of thousands of Americans with advanced degrees cannot find decent jobs, and people who used to be able to support families and earn good pensions in manufacturing are now, at best, two income families struggling to pay the bills.
Saying that, at some point, the rich “lose incentive” to get richer, is simply ludicrous. It’s time to get some justice and fairness into this country, before God damns us all to hell on earth.
Somewhere out there, Felix is smiling.
“Taxing the rich” is an oxymoron — it has never really happened in the US, and I doubt anywhere.
I believe that if the FairTax replaces all federal income and payroll taxes with a 23% inclusive consumption tax on all new goods and services, it would go a long way to improving fiscal America and it’s equitable. It includes a monthly prebate on spending up to the poverty level. This tax would replace all federal income and payroll taxes and dismantle the IRS. Companion legislation would call for the repeal of the 16th ammendment, which legalized the income tax.
Correction:
the 23-30% tax already exists in the current tax system as embedded taxes. Under the fairtax, those embedded taxes are eliminated, and replaced with a single consumption tax. Thus the prices are actually lower, and the end result is a stabilization of prices at or near current prices. Another factor of the fairtax, is the requirement to repeal the 16th amendment. This would eliminate those embedded taxes, and the double taxation scenario found in the current tax system.
Tax the Hell out of the Rich!!! It won’t solve Americas economic problems but it will reduce the power of a small % of Americans who really control everything for their own benefit.
1-6 is therefore all Bull S..T!!!!
Power in America
Wealth, Income, and Power
by G. William Domhoff
There is not a western democracy or even most 3rd world countries with as wide a differential of wealth and income distribution as the USA!
The Wealth Distribution
In the United States, wealth is highly concentrated in a relatively few hands. As of 2007, the top 1% of households (the upper class) owned 34.6% of all privately held wealth, and the next 19% (the managerial, professional, and small business stratum) had 50.5%, which means that just 20% of the people owned a remarkable 85%, leaving only 15% of the wealth for the bottom 80% (wage and salary workers). In terms of
financial wealth (total net worth minus the value of one’s home), the top 1% of households had an even greater share: 42.7%. If you count all of the taxes that people pay, from sales taxes to property taxes to payroll taxes (in other words, not just income taxes). And the top 1% of income earners, who average over $1 million a year, actually pay a smaller percentage of their incomes to taxes than the 9% just below them.
Here are some dramatic facts that sum up how the wealth distribution became even more concentrated between 1983 and 2004, in good part due to the tax cuts for the wealthy and the defeat of labor unions: Of all the new financial wealth created by the American economy in that 21-year-period, fully 42% of it went to the top 1%. A whopping 94% went to the top 20%, which of course means that the bottom 80% received only 6% of all the new financial wealth generated in the United States during the ’80s, ’90s, and early 2000s (Wolff, 2007).
The Relationship Between Wealth and Power
First, wealth can be seen as a “resource” that is very useful in exercising power. That’s obvious when we think of donations to political parties, payments to lobbyists, and grants to experts who are employed to think up new policies beneficial to the wealthy. Wealth also can be useful in shaping the general social environment to the benefit of the wealthy, whether through hiring public relations firms or donating money for universities, museums, music halls, and art galleries.
Second, certain kinds of wealth, such as stock ownership, can be used to control corporations, which of course have a major impact on how the society functions. Third, just as wealth can lead to power, so too can power lead to wealth. Those who control a government can use their position to feather their own nests, whether that means a favorable land deal for relatives at the local level or a huge federal government contract for a new corporation run by friends who will hire you when you leave government. If we take a larger historical sweep and look cross-nationally, we are well aware that the leaders of conquering armies often grab enormous wealth, and that some religious leaders use their positions to acquire wealth. Read all of the study
Taxes on the rich always trickle down.
Recall that the very first post-16th Amendment income tax was imposed only on the rich.
Surprise!
Not.
No! No! No! Don’t tax the rich – eat them!
WHY AREN’T THE RICH PAYING 50 PERCENT IN INCOME TAXES?
CNN: Tax the rich! OK, but then what, Mr. President?
Catarin hardest hit.