Obama’s Deficit Hustle (2)

Are Millionaires and Billionaires the Problem?

In his speech on government debt last week President Obama sought to exploit the complexity of the tax system to deceive The People.  Our previous post debunks his implication that President Bush caused the current debt crisis.  Further into his speech he implied that “millionaires and billionaires” were to blame:

In December, I agreed to extend the tax cuts for the wealthiest Americans because it was the only way I could prevent a tax hike on middle-class Americans.  But we cannot afford a trillion worth of tax cuts for every millionaire and billionaire in our society.  And I refuse to renew them again.

He hopes to plant the perception in the minds of people who are too busy to research the facts that  “millionaires and billionaires” are under-taxed, and are to blame for the massive debt he has accumulated since his administration began.

Here are some facts:

  • The tax rates currently in effect were enacted eight years ago.
  • The only thing that happened in December was an agreement to continue those same rates for two more years.  There were no new “tax breaks for millionaires.”
  • While Obama wants to plant in the mind of the public the perception that millionaires and billionaires are under-taxed the numbers, displayed in the pie charts tell a different story.  There aren’t very many millionaires and billionaires and they already pay an enormous share of the total tax bill.
  • Based on the latest IRS statistics 320,000 taxpayers who earn more than $1 million, will pay about $260 Billion in income tax this year at current tax rates.  Obama’s plan to raise the top two tax brackets to the pre-Bush rates would increase tax revenue from millionaires and billionaires by about $50 billion, or 3% of his yawning deficit of $1.65 trillion.

Class-envy tax hikes impose costs on everyone, not just the high income folks who directly pay the tax bill. High income people are the business owners and investors who risk the capital necessary to expand businesses and create jobs.

As the chart shows most millionaires and billionaires are small business owners.

These are the larger “small businesses” that traditionally create the most jobs.  They create new jobs by  reinvesting after-tax profits. Every dollar of increased taxation, is one less dollar available to reinvest in expansion and job creation.

The Bottom Line

  • More small business expansion is funded by reinvesting after-tax profits than by borrowing.  Since the banking crisis began in 2008 small businesses have suffered dramatically reduced access to credit.  Therefore, as these businesses recover from the recession their after-tax profits are even more critical if they are to expand and hire more people.
  • Government has no system to identify and count the jobs that won’t be created because of tax hikes on “the rich.”
  • If Obama’s tax increases become reality government will seize from the private sector some of the resources that empower free people to use their liberty to create prosperity.   Politicians will use these resources to support expanded political power and reward special interest constituencies with political connections.

5 Comments so far

  1. Thousand Flowers Blooming on April 16th, 2011

    Obama also pointed out that giving the Bush tax breaks to millionaires and billionaires costs as much as Medicare for 60,000 seniors.

    What sort of values do these Republicans have? They really do care more about millionaires who have reaped the greatest benefit from living in this Democracy than seniors who have worked all of their lives.

    If we let it be their choice they would rather deprive a 70 year old Korean war veteran of medicine to keep his blood pressure under control than see a CEO have to do without another big diamond for his wife.

  2. GoldenGirl on April 17th, 2011

    Thousand Flowers –
    You’re Absurd. Obama calls leaving the tax rates at the same level they’ve been at for 8 years a “tax cut” for the rich, but not for the middle class who are also paying the same rates they paid for the last 8 years.

    You talk about values? What are the values of Obama and the liberals who keep saying Social Security has trillions of dollars saved up when everyone knows it isn’t true?

    What are the values of a politician who tells people Medicare doesn’t have to change when everyone knows it will?

    Have you looked the size of the deficit? Did you look at the numbers in this article? Do you understand the numbers? If you did you would know Obama is making cheap political points without dealing with reality.

  3. Jack Hitten on April 17th, 2011

    You fail to deal with the fact that trickle down theory doesn’t work. Giving tax cuts to millionaires and then hoping they’ll hire more people has never worked, and it isn’t working now! Almost 10% unemployed while the rich are sitting on trillions in surplus cash or speculating in the oil market.

    When the business community refuses to step up to the plate we have to take care of our fellow citizens who can’t find work. We’re all in this together, even if some of us don’t want to help.

  4. Scout1971 on April 17th, 2011

    Mr. Blooming Flowers doesn’t understand values at all.

    American values are not waiting for politicians to take care of you with other people’s money. Our values are about self-reliance. Of course there are some unfortunate people who are unable to take care of themselves and we should help them. But Obama’s “values” say that most of us are too stupid to take care of ourselves and the rich should have to pay for government to take care of us and tell us what to do. But those values are bankrupting the country.

    Flowers doesn’t get it. Spending cuts are not optional any more. We’re broke. The credit cards are all over limit. We have no choice any more. It’s stupid for you and your President to keep talking as if there were some other choice except downsizing the government.

    The rich people I know do help others and they run businesses and invest in other businesses. But they don’t see it as trickle down, they see it as wise investment in the future.

  5. Drew on April 18th, 2011

    Here’s some facts for you:

    http://hotair.com/archives/2011/04/18/govt-handouts-exceed-taxes-as-percentage-of-average-household-income-for-first-time-since-1936/

    Look at taxes paid; look at transfers. We have runaway transfer payments that have grown by 3-4x since 1950, and soon to accelerate. Taxes have doubled.

    As some of you are growing to know, Thousand Flowers has nothing of use to say here. We have a spending problem, not a taxing problem.