Federal income taxes would need to more than double to eliminate deficit

by Richard Leonetti

The total raised from income taxes (all numbers the latest from 2008) is $1.031 trillion. To raise an additional $1.5 trillion, the current deficit, taxes would have to be increased across the board by 145%. If you do not want to cut spending, this is a big increase to sell.

But, the President only wants to raise them on the very rich. The top 1% of earners have incomes of $380,354 and up. For only the very rich to pay for the deficit, they would need to pay $1.5 million each. This will be tough for some of them–especially those not earning $1.5 million!

Even if it were spread out, the new top marginal tax rate would need to be a lot more than 100%. Alternatively, a flat tax of 87% would do it! Look what everyone can look forward to: if you can get you income up over $380,000 you will be left, after tax, with almost $50,000 to take care of your mortgage, house payments, state taxes, property taxes and the kid’s college tuition.

If this sounds like a problem, maybe we do need to look at spending, including the big entitlements, and get realistic about an ongoing, yearly deficit of $1.5 trillion.

 

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Posted by at 05:00 | Posted in President Obama, Taxes | 59 Comments |Email This Post Email This Post |Print This Post Print This Post
  • Rupert in Springfield

    When you hear the phrase “raise taxes on the rich” you know two things about the speaker – 1. They are not really interested in cutting the deficit 2. What they are interested in is class warfare.

    One wonders when it will occur to people that that our current path ensures the young will have to work until they are 80 just so people now can retire in their 50’s.

    We can start now or later but at some time we will have to tell people they have been lied to. Medicare and SS will have to be means tested. If you think Medicare and SS can remain in their current form and all this can be solved by tax increases you have removed yourself from any serious discussion.

    • valley person

      And if you think the deficit can be closed without any tax increases, where does that leave you on the serious discussion meter?

      • Ron Marquez

        How much and on who, VP ?  How about a modified flat tax, two rates, 10% on incomes up to $150,000 and 25% on $100,000 and above, no deductions period.

        Works for me.  How about you ?

        • Ron Marquez

          “$100,000 and above” should read “$150,000 and above”.

          And upon reflection, three brackets for joint filers.

          – 10% up to $150K.
          – 15% up to $350K.
          – 20% on all above $350K.

          All with no deductions of any kind.

          I’m the first to admit I haven’t done the math about how this would affect the nation’s tax revenue stream and also the first to advocate for a much simpler tax structure, as close to a flat tax as reality will allow.

          • valley person

            Then it isn’t worth discussing with respect to raising more money to help close the deficit. 

        • valley person

          How does that raise additional revenue?

          • Rupert in Springfield

            Revenue wont fix this, thats what the article is about. Again, please read before responding.

            Without doing so, all you are doing is reinforcing David Mamet’s classic stereotype of the brain dead liberal. You simply are posting reflexive knee jerk reactions without thinking about what you are saying.

          • valley dude

            Cutting spending also won’t fix this, assuming “this” is a perpetual budget deficit. 

      • Rupert in Springfield

        Please, next time read the post before posting this sort of nonsense. Thanks!

  • Bob Clark

    If we were to raise economic growth by 1 percentage point, from 2.5 to 3.5% real per year, then we could reduce the federal deficit by $500 billion (or one third) within ten years.  Raising economic growth can be done in genuine fashion by lowering regulatory barriers designed to make cleaner an already largely clean environment.  Or, economic growth (nominal) can be increased disingenously by printing new monies allowing money supply to outpace real economic growth.  Currently, it looks like the Federal Reserve and Treasury are growing the money supply by maybe 6%, which is maybe 3 to 4% above the real rate of economic growth.  Therefore, it looks like for now we are settling on stepped up inflationary growth.  Takes awhile for inflation to ramp higher but I think we are on the course of eliminating the deficit if it weren’t for our continual appetite for expanding public freebies.  Politicians generally prefer the inflation route until it can work no more because investors start fleeing to hard assets like gold and eventually even real estate.

    • 3H

      I’ve always been curious – why the fixation on gold?   The value is almost entirely psychological:  it is relatively rare, makes for pretty jewelry and other crafts.  Its utilitarian value is pretty much limited to electronics and fillings as far as I can tell. IF the entire economy was to collapse, and we were left to fend on our own, it would be useless.   Land, cows, or tools would all be vastly more valuable because of their utility (and I wouldn’t use a shovel made out of gold).  Any yet..   people horde it in case everything goes south. 

      • Steve Buckstein

        Historically, gold has best met all three major characteristics of money: a medium of exchange, a unit of account and a store of value. Of course in specific situations you would rather have a shovel, or a cow; but over thousands of years gold has been served the functions of money best.

        And speaking of psychological value – ask yourself which “money” can be replicated to the point of worthlessness quicker, gold or paper money? Now, which one has time and again been reduced to worthlessness by the governments that printed it?

        I think it was Ludwig von Mises who said, “Government is the only agency
        which can take a useful commodity like paper, slap some ink on it, and
        make it totally worthless.”

        • Rupert in Springfield

          Well, for something to be “money” it is by definition mostly psychological value when used as a medium of exchange.

          When something has mostly intrinsic value and is used as a method of exchange we call that “barter”, not a “money” transaction.

        • valley dude

          The US has been in the money printing business in a big way since at least 1932. Where is the runaway inflation? Where is the worthless paper? It has never happened, here, and has rarely happened anywhere. 

          Gold is a solution in search of a problem that would create its own set of problems.

  • 3H

    When the post talks about increasing Federal income taxes – does that include the taxes that Corporations pay on profits?  Or is the article only looking at personal income taxes?

  • valley person

    Yes, by all means cut entitlements. Sell that to the geezers and you win. 

  • Frank

    Can anyone say out of his league???

  • Bob Clark

    Don’t look now but the Dems are talking about cutting employer contributions to payroll taxes, and extending the existing employee payroll tax cut; all the while refusing to significantly cut any entitlement or transfer (unproductive) federal spending.  If this goes through, I’d buy gold and silver almost immediately and run from fixed rate treasuries and other fixed rate paper bonds like the plaque.   Foreign oil producers will be more than happy to play this musical chair game.  The Federal Reserve may come down after this music set ends. 

    • valley dude

       It takes 2 to tango. Democrats have put entitlements on the table. Republicans refuse to put taxes on the table.   

       By all means buy lots of gold. I think I’ll pass on that one. You can’t eat it, live in it, drive it, or do much else other than fill your cavities or make jewelry with it. It isn’t money, and hasn’t been for a long time. You have to buy it with actual (electronic data bit) money, which is kind of ironic if you think about it.

      • Steve Buckstein

        valley, I’m surprised that you don’t recognize the investment value of gold, given that a number of liberal radio talk show hosts advertise for it on their shows (as do a number of conservative and libertarian hosts). Seems that’s the one thing they all agree on. If you think that’s because they’re being paid to promote it, then I’m surprised at how cynical you’ve become. Would Randi Rhodes and Thom Hartman really sell out for a few electronic data bits in their bank accounts?

        • 3H

          NOT Randi Rhodes and Thom Hartman!!  Oh, wait, I don’t care. LOL.  Yes, I think they would.  Ultimately they, and all those other talk show hosts, are in the business of making money.  Just because they all hawk it, doesn’t make it a good idea.  Just because you’re a talk show host doesn’t make you knowledgeable about anything else except how to form pithy little soundbites and move on before the discussion bogs down into actually discussing the complexities of an issue (I’m sure there are exceptions).  I am a cynic when it comes to talk radio.  I’m not VP either, but thought I would respond.

          For the record Steve, I think much of the Democratic Party sold out to corporate interests.  (and just because both the Democratic Party and Republican Party have that in common doesn’t make it right – I’m cynical here too)  I think they have come less and less to represent the “little” people, and are in bed with big money.   I noticed it with Bill Clinton, but that is probably when it became obvious to me and it had been happening long before that.   Maybe he just made it explicit.

          • Steve Buckstein

            3H, you may be correct that the Democratic Party sold out to corporate interests. But I don’t believe its the campaign funding they get that is the money problem in politics. The corporate types are in the game because government has grown so big and powerful that there is a lot to buy and sell there. Rather than worry about the billion or so dollars sloshing around in campaign coffers in any given election cycle, we should be worried about the $3 TRILLION plus dollars in the federal government’s coffers, and the fact that half of it now is borrowed money.  Remember, it wasn’t that long ago that Democrat President JFK’s entire yearly budget was $100 BILLION.

          • Steve Buckstein

            Before someone dismissed my statement that the federal budget has risen from $100 billion under JFK to $3 trillion plus under Obama, a quick check finds that the consumer price index has risen roughly 733 percent between 1963 and 2011. So, adjusted for inflation, JFK’s $100 billion would be $733 billion today. Obama’s budget is FOUR TIMES larger than that.

          • valley dude

            I’m glad you factored inflation in. Obamas budget includes Medicare, which did not exist for Kennedy. It includes many other programs that did not exist back then. And none of these programs were initiated by Obama except the recent health care bill.  So blaming him for the current budget and comparing it to Kennedy is not helpful.

            But while we are on it, the amount of money we pay in taxes today as a percent of GDP is LOWER than it was when Kennedy was president.

          • Steve Buckstein

            I agree that the huge jump in federal spending is largely the result of new programs. I would have made the same comparison to the recent Bush budgets if the issue had been raised here during his tenure.

            And yes, federal taxes as a percentage of the GDP are somewhat lower now than in 1963, but that seems largely the result of the recent recession. In contrast, the federal debt has skyrocketed in order to keep federal spending high and rising.

          • 3H

            Business and corporate interests have always been involved in politics – and have had a profound influence on legislation going back at least 150 years.   

            In early days, they simply paid cash as bribes.  Muck-racking journalism exposed that, and I suspect that’s when they switched to campaign contributions.   Legal, and every bit as influential.  That would make an interesting study…  

            I don’t doubt that the Democrats have always been in bed with big money, as have the Republicans.   It used to be that they (the Democrats) would at least attempt to help the common citizens and try and protect their right to clean water, clean air, the right to organize, etc…   They used to keep their connections to big money circumspect. Now, not so much.   

            Corporate types are in the game because they always have been.  Because they can get legislation that directly helps their bottom line.   It has nothing to do with the size of government.   In fact, you want to increase their influence?   Minimize the size of government.  How do you enforce environmental regulations when you don’t have enough regulators?  How do you ensure that companies are towing the line on food safety if you don’t have enough inspectors?

            Want to decrease the size of government?  You need to decrease the size of business as well.   SOMETIMES the government stands up to major corporations.  They are the only ones that have the size and resources to do so.   Slash government, and who will take their place to reign in the power of the Big Boys?

            If we’re going to try and be closer to the Republic of the Founders (sans slavery, misogyny and other codified bigotries), lets keep in mind that they had a very healthy distrust of corporations and only saw them as a limited ventures.  Not self-perpetuation behemoths that have the same rights as people.

        • valley dude

          I don’t listen to AM talk radio, either left or right, so I guess I missed the “buy” notice from talk jock investment advisors.

          Gold is a great investment as long as enough other fools are rushing in behind you to bid the price up, just like housing, tulips, Amazon.com, Beanie Babies or Troll dolls. As long as you can ride the wave and jump off at near the moment the fools hesitate you win. But most people will lose, so do the math.

          Gold was around $140 an ounce in 1975, jumped to $600 an ounce in 1980 (during a historically very high inflation period), then dropped to $270 by 2000 as inflation abated. Can you imagine a worse investment over that 25 year period? Now gold has somehow gained well over $1000 an ounce in value over the last 10 years in spite of near zero inflation. If that isn’t an investment bubble based on fear of what might someday happen (another round of high inflation stoked by radio talk jocks), then I’m not a liberal Greek know-it-all.

          With due respect to Beck and Hartman, there would have to be a whole lot of inflation to justify a 5 fold increase in an otherwise worthless chunk of metal. Personally I would invest the money in solar collectors on my roof if I really feared an inflationary dollar collapse. You can lease them for around $50 a month locked into a 20 year contract. If $50 becomes worth only $5, you get essentially free electricity for 20 years, Now THAT is a good deal.

          But like I say…you guys go right ahead. If you sell at the right time (I would say this afternoon is good) then you get the last laugh.

          • Steve Buckstein

            valley, I’m not recommending people buy (or sell) gold today. I did recommend and sell it as investment broker in the 70s when it went from $40 to $800.) I’m just surprised that you can ignore centuries of monetary history and the place that gold has played in that history. Oh well…at least the Obama administration isn’t requiring you to buy gold by 2014 or face a fine (as it is trying to do with another product).

          • valley dude

            Did you also recommend people sell at that $800 peak, or did some of your clients end up with $200 gold a decade later? You don’t have to answer that. What I recall from the cobwebs of my mind is that the price of gold jumped after it was “released” from being essentially a fixed rate of exchange. It then rose during a period of monetary inflation. It then dropped once inflation was brought under control. End of story.

            Centuries of monetary history when gold was the primary medium of exchange mean about as much today as centuries of transportation history when the horse was the primary means of getting around.

            How do you explain gold being valued at $270 10 years ago now being valued at what…$1500? What has changed about its intrinsic value Steve? Answer, nothing. Its a speculators market. Good luck with that. All investors will be brillieant until the bubble pops, and make no mistake…it will pop.

          • Steve Buckstein

            I wasn’t smart enough to get everyone (not even myself) out at $800, but we were mostly out by around $600; still a nice return. I don’t profess to know if gold is properly priced now, or inflated through speculation. I will simply say that centuries of transportation by horse is not comparable to centuries of gold as money. Horses were largely replaced by more efficient forms of transportation. Fiat paper currency may serve a purpose, but it’s not as a store of value.

          • 3H

            What value is stored in Gold?   What would the effects be on a commodity that has had such wild swings of value?   And, is there enough gold to fuel economic expansion?   

            I understand the history of gold.  But simply because the obsession is thousands of years old, does not make it rational.  I see a lot of irrationality in the whole push to invest in gold.   Historically and rationally speaking which do you think is a better investment: gold or real estate?  If I own a decent plot of land, I can at least do something with it.   

          • 3H

            What would be the effects on the economy…..    NOW it makes more sense.

          • Steve Buckstein

            Particular “plots of land” may well be better “investments” at certain times than gold. But that’s not the point here. Real estate is not a medium of exchange. It’s hard to trade land for tonight’s dinner.  It’s not money.

            What’s rational? Suffice it to say that human beings act in their own self-interest, and humans throughout recorded history have valued gold as money – be it rational or irrational, it just is. Even European central banks have recently begun buying gold again. I doubt they’re doing it to make a killing in the market; more likely they’re hedging their bets against fiat paper dollar.

          • valley dude

            Steve, gold is no longer a medium of exchange in the US or anywhere else I know of. You may as well use beads or real estate for that purpose. Gold is a commodity,  but unlike the other commodities; wheat, oil, cattle, etc, you can’t do a dang thing with it other than admire your reflection in it. How can it be a “store of value” when it is in a speculative market where it can be worth $200 and ounce one day and $1500 an ounce the next? That sort of spread makes real estate look pretty solid, since it has only lost around 30% value, not hundreds of percent. The invisible money posted on your bank account is far more stable than gold no? 

            Humans have not throughout history valued gold as money. For tens of thousands of years it had no value at all to most humans. And for the past number of decades it has had no value as money anywhere. If banks are buying gold, they are simply engaging in the same speculative market as you or others. Its not to make money out of it….its to make actual money off of it. Can’t you see the difference?

            Fiat paper dollar? No. Its fiat electronic dollar any more, easily converted to paper Euros at any ATM across the pond, but not convertable to gold. In a given month, how many paper dollars pass through your hands, and how many invisible electronic dollars do so? You really believe there is any chance we would ever decide to carry gold coins around instead? That is so 19th century.

          • Steve Buckstein

            I’m not arguing that we would or should “start carrying gold coins around.” I’m saying that gold has served as a better store of value and money over time than paper (or electronic) currency.  Ancient rulers inflated their nation’s money by shaving their gold coins. Modern rulers just add zeros in computer programs to do the same thing. I hope we’ve learned not to allow that anymore, but I doubt it.

          • valley person

            What evidence do you have that gold is a better store of value than either paper or electronic money? I have shown evidence of the opposite, that gold has wildly fluctuated in value over the past 3 decades, while “fiat” money has not.  Investors put a certain percent of their assets in “cash.” Why would they do that if it is unreliable?

            Modern rulers in democratic countries have proven to be quite careful with their money supply. They increase it when needed (deflationary periods) and decrease it when needed (inflationary periods). They do this to smooth out the “natural” cycles of commerce. Take that ability away and we will go back to the days of deep, long depressions following frequent financial panics and collapses.

            If and when modern rulers over inflate their currency they are corrected by the bond market, which bids up the interest they have to pay for borrowing. 

            The system works Steve. We don’t need radical restructuring based on 19th century ideas. If you want to own gold, fine, that is your free choice. But please don’t make me do so okay? I’m happy with my debit card.

          • 3H

            Over time yes… because paper money, and most certainly electronic money, are relatively new.   You have to compare them within the same time frame.   I could make the argument that horses have made a better mode of transportation over time – been in use much longer than the car, isn’t that significant?

          • valley dude

            But paper is a way more efficient medium of exchange, and electronic money is even more efficient yet.  Gold, which is heavy and  bulky, is very inefficient to use. Its only real value as “money” is that it is rare and shiny. It is not much good as a “store” of value unless governments or enough individuals agree it should have such value.

            The reason conservatives like gold is because they are literalists. They can’t accept that money is basically energy, not matter.

          • Steve Buckstein

            “money is basically energy, not matter”???

            Remember E = mc2 ?  I think we’re veering a little too far afield on this post.

  • Lloyaosier

    giving tax breaks to the rich started with Regan.ever since the deficit has been rising till   Clinton started to lower the deficit. than bush said give the rich more tax breaks and the deficit shot back up.now Obama wants to do the same as Clinton and all the rich are crying.if you dont believe it look at the nation debt by years start in 1981 Regans first year.

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