Why does President Obama insist on increasing tax rates on “millionaires and billionaires?” Apparently to punish people who work hard to be successful. Many of these people own small businesses and report income on their personal income tax forms.
Obama’s proposed tax increase would produce an estimated $82 Billion per year to be applied against his latest $1,089 Billion deficit. However, it is likely that tax increase would hurt the economy and generate considerably less.
The following was excerpted from the November 11, 2012, issue of The Wall Street Journal and shows the current massive deficits are caused by massive spending increases, not lack of tax revenue. In fact, current revenue is almost the same as it was before the “great recession” started:
The Hard Fiscal Facts
The Congressional Budget Office released the final budget totals for fiscal 2012. They illuminate the real fiscal choices that confront the country, as opposed to the posturing you’ll be hearing over the next few weeks.
The nearby table lays out the ugly details. The feds rolled up another $1.1 trillion deficit for the year that ended September 30. President Obama can now proudly claim the four largest deficits in modern history. As a share of GDP, the deficit fell to 7% last year, which was still above any single year of the Reagan Presidency, or any other year since Truman worked in the Oval Office.
This healthy revenue increase comes despite measly economic growth of between 1% and 2%. Imagine the gusher of revenue the feds could get if government got out of the way and let the economy grow faster.Tax revenue kept climbing, up 6.4% for the year overall, and at $2.45 trillion it is now close to the historic high it reached in fiscal 2007 before the recession hit. Mr. Obama won’t want you to know this, but this revenue increase is occurring under the Bush tax rates that he so desperately wants to raise in the name of getting what he says is merely “a little more in taxes.” Individual income tax payments are now up $233 billion over the last two years, or 26%.
Now let’s look at outlays, which declined a bit in 2012. That small miracle was achieved thanks to a 4% fall in defense spending, a 24% fall in jobless benefits, and an 8.9% decline in Medicaid spending.
Note, however, that federal spending remains at a new plateau of about $3.54 trillion, or some $800 billion more than the last pre-recession year of 2007. One way to think about this is that most of the $830 billion stimulus of 2009 has now become part of the federal
budget baseline. The “emergency” spending of the stimulus has now become permanent.
When Beltway politicians claim they want a “balanced” approach to reducing the deficit, what they really mean is raising taxes to finance this new higher spending level. And the still-higher level that is coming with ObamaCare.
The reality is that the fastest way to raise revenue is with faster economic growth. To the extent that raising tax rates will reduce the rate of growth, it will slow the flow of tax revenue and increase the deficit.
Even if Mr. Obama were to bludgeon Republicans into giving him all of the tax-rate increases he wants, the Joint Tax Committee estimates this would yield only $82 billion a year in extra revenue. But if growth is slower as a result of the higher tax rates, then the revenue will be lower too. So after Mr. Obama has humiliated House Republicans and punished the affluent for the sheer joy of it, he would still have a deficit of $1 trillion.