The news you're not supposed to know...

Austrian Economics: Understand Economics, Understand the World
The Century of the Self: The Untold History of Controlling the Masses Through the Manipulation of Unconscious Desires
The Disappearing Male: From Virility to Sterility

The Obama Deception: The Mask Comes Off
Operation Gladio: The Hidden History of U.S. Sponsored False Flag Terrorism in EuropeThe New American Century: The Untold History of The Project for the New American Century
Article posted Oct 09 2011, 6:23 AM Category: Economy Source: Mises Institute Print

Wrong Medicine for a Sick Economy

by Ralph Reiland

"Middle-class families shouldn't pay higher taxes than millionaires and billionaires," repeatedly proclaims President Obama, arguing for his proposed $1.5 trillion tax increase over the next 10 years. "That's pretty straightforward. It's hard to argue against that."

In fact, Mr. Obama's statement is anything but straightforward.

Seeking to reverse his declining poll numbers, especially among his increasingly disillusioned base, Obama is attempting to give the impression that America's millionaires and billionaires are paying lower taxes than their secretaries.

IRS data for 2008, however, the latest year for which the numbers are available, show that those who earned more than $1 million in adjusted gross income paid an average federal income tax rate of 23.3 percent.

For those earning $100,000 to $200,000 in 2008, the average federal income tax rate paid was just about half as much, 12.7 percent. For those with adjusted gross incomes from $30,000 to $50,000 a millionaire's secretary, for instance the average federal income tax rate paid was 7.2 percent, less than a third of the rate paid by those earning $1 million and over.

Obama is echoing a recent column in the New York Times in which billionaire Warren Buffett wrote that the federal income tax rate he paid was lower than the rate paid by employees in his office.

"Warren Buffett's secretary shouldn't pay a higher tax rate than Warren Buffett," Obama responded. "There is no justification for it. It is wrong that in the United States of America, a teacher or a nurse or a construction worker who earns $50,000 should pay higher tax rates than somebody pulling in $50 million."

Again, the Buffett analysis is less than straightforward. For those in the top income brackets, a disproportionate share of income is from dividends, capital gains, and other investments income that is taxed at 15 percent. IRS data show that taxpayers with more than $1 million in yearly income get only 33 percent of their income from wages and salaries.

An honest portrayal would acknowledge that dividends and capital gains are double taxed, first as corporate profits at the highest corporate income tax rate in the industrialized world, 35 percent, and then again as individual income when dividends are distributed or stock is sold.

The total tax rate on capital gains is "closer to 45 percent than 15 percent" stated a Wall Street Journal editorial on September 20.

In fact, the tax hit on capital gains is higher than the Journal states because capital gains are not indexed for inflation, producing taxes that are levied on illusory gains. The stock seller is taxed not only on real gains in purchasing power, but also on phantom gains attributable to inflation.

On the overall tax burden, Obama is arguing that the rich should start paying their "fair share." He doesn't mention that the latest IRS data, for 2008, show the top 1 percent of US income earners paying 38 percent of all federal income taxes, the top 10 percent paying 70 percent, and the top half of income earners paying 97 percent of total federal income taxes.

Also unacknowledged by this White House is how President Kennedy's cut in the top marginal income tax rate produced an immediate increase in federal revenues, or how President Reagan's cut in the top marginal income tax rate was followed by a drop in the unemployment rate in the 1980s from 9.7 percent to 5.3 percent.

President Obama's prescription for revenue growth and job growth moves in exactly the opposite direction.
Ralph R. Reiland is an associate professor of economics at Robert Morris University in Pittsburgh. Send him mail. See Ralph Reiland's article archives.

Latest Economy
- Singapore: The Power of Economic Freedom
- Schiff: The Shadow Rate Casts Gloom
- Neil Cavuto Embarrasses Student Who Wants Free College and Has No Idea How to Pay For It
- Pocketbook Pain: The Rapidly Rising Cost of Living Is Absolutely Killing The Middle Class in America
- The Three Industries That Love The TPP: Hollywood, Big Pharma & Wall St.
- Sexist Markets - 77 Cents On The Dollar?
- Former Reagan Administration Official Warns That Financial Disaster Is Dead Ahead
- QE's Creeping Communism

Comments Add Comment Page 1 of 1

Posted: Oct 10 2011, 2:49 PM

98250 To Ralph Reiland, Nice article, i like the stats and percentages and what not. I especially like it at the end when it's said that these cut's to top marginal income tax rate's helped increase federal revenues and dropped the unemployment rate. What do we do now that we've seen that "trickel down" hasn't worked this time around? Put a higher tax on the poor? If you want out of this mess were going to have to raise taxes on someone and the poor ( let me define poor for you. It's any one that is not in the top 1%. Yes even columnists are not immune to finding theirself in financial distress after losing a job) have very little more to give. I'll tell you what i see, i see the ONE PERCENT taking their tax breaks as well as other cash to offshore industrializing countries before they "cast off" those who thought they could die peacefully if they give it the all american try. The one percent, the job makers, have abandoned this country and will probably never come back until we're so hungry we'll work for a dollar a day. So take a good hard look around and try to see exactly where you are in the scheme of things and you might see that a tax on the rich could be exactly what this country needs.

Add Comment


Verification *
Please Enter the Verification Code Seen Below

Please see our About Page, our Disclaimer, and our Comments Policy.

This site contains copyrighted material the use of which in some cases has not been specifically authorized by the copyright owner. Such material is made available for the purposes of news reporting, education, research, comment, and criticism, which constitutes a 'fair use' of such copyrighted material in accordance with Title 17 U.S.C. Section 107. If you wish to use copyrighted material from this site for purposes of your own that go beyond 'fair use', you must obtain permission from the copyright owner. It is our policy to respond to notices of alleged infringement that comply with the DMCA and other applicable intellectual property laws. It is our policy to remove material from public view that we believe in good faith to be copyrighted material that has been illegally copied and distributed by any of our members or users.

About Us - Disclaimer - Privacy Policy

Advanced Search


Remember Me
Forgot Password?

Good News: 27% Of Americans Say Government Is Their 'Enemy,' Not Their 'Friend' - 11/24Prosecutors Pissed Colo. Juries Keep Acquitting Marijuana DUI Suspects - 11/23Family Gets $4.9m After Cops Beat Mentally Ill Son to Death On Video and Walked Free - 11/24Undercover Cop Dressed In All Black Shot While Placing GPS Tracker On Car - 11/20Video Of Chicago Cop Murdering Teen Shows Another Shooting of Convenience - 11/25NJ Cop Says He Was Suspended After Blowing Whistle On Dept. Misconduct - 11/24WeAreChange Blocked in France Because of New Censorship Law - 11/24VIDEO: Hillary Fans Voice Support For Her 'Plan to Repeal 4th Amendment' - 11/24

Man Follows Speeding Cop, Finds Out He Was Speeding To Buy PeanutsMission Creeps: Homeland Security Agents Confiscate Women's Panties For 'Copyright Infringement'Cop Shoots Couple's Dog, Threatens Jail For Trying To Save Dog's LifeSWAT Team Shoots Teen Girl & Her Dog During Pot Raid On Wrong HomeDurham, NC Cop Testifies Faking 911 Calls To Enter Homes Is "Official Policy"Indiana Sheriff Says US A "War Zone" To Justify New MRAP Military VehicleTampa Cops Surveil Pot Dealer, Catch Him Selling Pot, Raid His Home & Kill Him"You Just Shot An Unarmed Man!": Witness Says Police Shot His Friend With His Hands Up