Understanding How Class Warfare Fails to Solve Our U.S. Debt Problems

Looking at 2008 IRS report of income taxes:

The top 1% of individual tax payers earned roughly 20% of all reported AGI (adjusted gross income).  Let’s break that down shall we?  The implication is that if you are lucky enough to be in the top 1% of earners of taxable AGI, that means you should be able to afford to pay more taxes to help out the less fortunate right?

There’s one problem… when you take a number like that, you’re hiding behind a percentage.

The top 1% of tax payers is roughly 1.4 million people.  To qualify for the “top 1%” group, you’d have to earn roughly $385,000 AGI annually.

What You Should Know is that the top 1% of income earners paid a total of 38% of all individual federal income tax revenue ($410,898,035,220.00 or $411 Billion of 1.1 Trillion collected in individual federal tax revenues for 2008).

Now if you take in the top 50% of income earners (which includes both the top 1%) They paid 97.3% of all individual federal income tax revenues.  If you take out the 38% of all revenues from the top 1%, the remaining 49% of top 50% earners… pay 59% of all individual federal tax revenues.  And who are these dastardly high earners of the “above average earners”?  Why they’re the folks that earn somewhere between $384,000 and $33,000 (that’s not a typo, that’s $33,000).  If you earn $33,000 you’re part of the “above average pay” crowd.  Maybe we should be taxing you more too right?   And what of that bottom 50% that pays only 2.7% of all individual AGI tax revenues?  They(about 70 million) contribute to 12.75% of all reported taxable AGI (which is $720Billion of the 5+ Trillion of taxable AGI in 2008)

So… say we ignore the Laffer Curve all together and decide that we should tax the top 1%… at 100% of earned of AGI (adjustable gross income).  That would take us (based on 2008 revenues reported) to a total of federal income tax revenues to roughly a WHOPPING $1.85 Trillion. (The hell you say? We gain only a total of $750 Billion? Yeah, that’s what I’m saying).

So here are the real numbers: 20% of all individual taxable income is $1,130,463,019,000.00 according to the 2008 numbers IRS reported income. That’s a large number so I’ll shorten it for you… that’s $1.1 Trillion.  Another way to look at it is there is roughly $5+ Trillion in total reported individual adjusted gross income of all individual tax payers, all tax brackets of the which $5+ Trillion is taxable, 20% of that ($1.1 Trillion) is earned by individuals in the top 1%.

Here’s the problem with our hypothetical situation of taxing the top 1% at 100% of total Adjusted Gross Income, we will barely cover our annual spending deficit that bounces between $1.3 to $1.5 Trillion.

Now if we get back to reality and understand the simple concept behind the Laffer Curve… I ask are you willing to see what happens when the top 1% of earners pay 100% of adjusted gross income…?

If so… maybe I should restate the gain of doing such an inane action: That $750 Billion that we would ‘potentially’ gain… will go to paying roughly .051% of the principal of our total debt $14 Trillion (supposing we’d actually attempt to pay down the debt)…   But rather… what would likely happen is the politicians would see this new $750 Billion in revenue as an opportunity to “spread the wealth”.  They’d trumpet long and loud about a “budget surplus”.

You see… there’s but one way to reduce our debt… which is to do each of the following:  cut entitlement spending, cap non-discretionary spending, and increase revenues.

In order to cap deficit spending its going to require some honest folks to pull up their adult pants, and cut entitlement programs that will force people to stop relying on the government when its not necessary {and that doesn’t include social security or medicare}.

In addition… to grow revenues, you should attempt to grow GDP, not bleed a dry turnip (as suggested above by raising the taxes on the rich).  To do so, We’ll need some attractive business incentives to do more business in the United States, including reducing tax burdens on corporations and the top 1%. Also enacting policies that reduce the cost to do business in America.

Now I know its not the popular thing to do… well at least not with President Obama, because he’d like to point out that CEO’s with lots of money (presumably members of the top 1%) like to fly around in their private jet planes, and therefore should be able to afford more taxes.  May I ask you Mr. President, how many golf games have you played during your administration, and how many of those games required you to fly out of Washington D.C. to the location?

Now if you want to play class warfare with the top 1% of earners… be my guest… but let me just say, I think its really a lame attempt at envy… or a calculated political lie meant to create division among the people, and to galvanize political support.

{Begin sarcasm}Dang those millionaires… how dare they earn so much, they don’t earn enough for us to pay our debts, or even our deficits… but DAMN THEM TO HELL for not giving away all of their income to poor people!!!{End Sarcasm}

Invective is lame… class warfare is lame… and being asinine about facts is lame.  However, being a divisive, arrogant, hypocritical President… that’s just reckless self promotion.

[cross-posted at thestandardcandle.com]

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