Monday, July 21, 2008

Washington Needs To Trim The Fat

I generally do not write about politics, but a recent article in the Wall Street Journal was too interesting not to comment on. Barack Obama has stated he wants to raise taxes on the rich so they pay their fair share. Following is the breakdown of the taxes paid by taxpayers in 2006. Not sure how one gets more tax dollars out of the top 50% of taxpayers without shutting down the economy.
  • 1% of taxpayers, those who earn above $388,806, paid 40% of all income taxes in 2006, the highest share in at least 40 years.
  • The top 10% in income, those earning more than $108,904, paid 71% of all income taxes.
  • The top 50% paid 97.1% of all income taxes.
  • The number of Americans who declared adjusted gross income of more than $1 million from 2003 to 2006 nearly doubled to 354,000 from 181,000 in a mere three years after the tax cuts.

    This is precisely what supply-siders predicted would happen with lower tax rates on capital gains, dividends and income. The economy and earnings would grow faster, which they did; investors would declare more capital gains and companies would pay out more dividends, which they did; the rich would invest less in tax shelters at lower tax rates, so their tax payments would rise, which did happen.

  • Taxes paid by millionaire households more than doubled to $274 billion in 2006 from $136 billion in 2003. No President has ever plied more money from the rich than George W. Bush did with his 2003 tax cuts.
If Mr. Obama does succeed in raising tax rates on the rich, we'd also wager that the rich share of tax payments would fall. The last time tax rates were as high as the Senator wants them -- the Carter years -- the rich paid only 19% of all income taxes, half of the 40% share they pay today. Why? Because they either worked less, earned less, or they found ways to shelter income from taxes so it was never reported to the IRS as income.
Maybe Washington needs to look at cutting their expenses before raising taxes on their constituents. You can't get blood out of a turnip.

Their Fair Share
Opinion Journal
The Wall Street Journal
July 21, 2008

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