Why? Because it’s built on two fundamentally incorrect ideas: 1) that our federal debt problem is caused by not taxing rich people at high enough rates, rather than spending, and 2) that we could tax our way out of debt because rich people have enough money to cover a $16T debt (which is approximately the size of our annual GDP).
Let’s do a little math. But first, a graphic from reason.com showing spending and revenue since 1999.
The red line represents spending. The blue line, revenues.
See how the red line trends up, while the blue line stays (roughly) between two lines on the graph? That space between the red line and the blue line is a problem. Pretend it is colored with a yellow highlighter to visually call out the space. Within that gap, the vertical distance between the red and blue lines represents the annual deficit at that point in time. And the area between those two lines, as it grows larger, represents commensurate growth in the total deficit, now up to $16T.
$16,000,000,000,000. Look at all o’ them zeroes.
This is nearly $50,000 for every single man, woman, and child in the country. And growing. With interest.
And lately, it’s getting bigger by $1.2T-$1.4T every year. Which means another $4,000 for every man, woman, and child. Plus interest. Every. Single. Year.
Who do you think is going to pay for that? You can tax every single rich person in the country at 100% – hell, shoot for 200%, since the whole idea is a fantasy anyway – and you will not come close to paying that bill. There just aren’t enough rich people to fund that level of spending.
The top 2% of income earners is, what, 2-3 million people? Let’s go with 2.5 million. So to tax your way out of a $16,000,000,000,000 hole, you need 2.5M taxpayers to cover a $16T bill.
So: $16,000,000,000,000 / 2,500,000 people = $6,000,000 per person.
And that is in addition to what they already pay.
SIX MILLION DOLLARS per person.
This is just not feasible. Many of those rich people are not even worth $6M, and some would just barely cross over into that territory. And we obviously cannot tax anybody at 100%, or anywhere close to that. So: we can’t seriously propose that taking their wealth while doing nothing about spending is going to fix anything.
Tax rates on rich people are not the problem – spending is the problem. In fact, the Bush tax cuts from the early 2000s increased tax revenue for 2007 (just to pick one example). Yes, tax cuts increased tax revenue. Somebody get the president on one of those Obamaphones!
We got to a $16T deficit by spending too much. And any discussion about fixing the deficit must include real spending cuts, not the fake Washington kind, where you slow next year’s increases in spending.
No matter how many times President Obama says otherwise.