Patterico's Pontifications


So Obama Wants to Tax Us Out of Our Deficits . . .

Filed under: Budget,General — Patterico @ 12:22 pm

It’s worth asking: can that be done?

A reader at Megan McArdle’s blog did the math a few days ago and concluded that it cannot. Even if we accept the left’s counterfactual assumptions that skyrocketing taxes will not shrink the economy, the numbers simply aren’t there:

For anyone who wants to discuss the revenue side of the budget debate knowledgably, I highly recommend spending some time with the IRS’s Statistics on Income. Table 1.1 under Individual Statistical Tables is a good place to start:…

You can see, for example, that total taxable income in 2008 was $5,488 billion. Taxable income over $100,000 was $1,582 billion, over $200,000 was $1,185 billion, over $500,000 was $820 billion, over $1 million was $616 billion, over $2 million was $460 billion, over $5 million was $302 billion, and over $10 million was $212 billion. Effective tax rates as a percentage of taxable income seem to top out around 27%.

You can estimate the effects of various proposals in the best case, which is that each percentage point increase in the marginal rate translates to an equal increase in the effective rate. Going back to 2000 (“Clinton era”) marginal rates on income over $200,000, let’s call it a 5 percentage point increase in the marginal rate, would therefore yield $59 billion on a static basis. Going from there to a 45% rate on incomes over $1 million (another 5 percentage point increase) yields an additional $31 billion. Or, instead, on top of 2000 rates over $200,000, 50%/60%/70% on $500,000/$5 million/$10 million? An extra $133 billion, or nearly 1% of GDP. That’s not accounting for the further middle class tax cuts that are usually proposed along with these “millionaires’ taxes.”

Now, compare this to deficits of $1,413 billion in 2009 and $1,293 billion in 2010, and using optimistic White House estimates, $1,645 billion in 2011 $1,101 billion in 2012, $768 billion in 2013, and continuing at over $600 billion after.

If anyone wishes to dispute this analysis with actual numbers, feel free to do so in the comments.

38 Responses to “So Obama Wants to Tax Us Out of Our Deficits . . .”

  1. It’s pretty simple to refute this: Taxable income is only income that the IRS can see. How much is being hidden? The way we’re currently set up, we’ll never know. Ever.

    And we’re looking at one year worth of revenues to ameliorate deficits that have mounted over 10. That’s either ridiculously short-sighted or deliberately manipulative.

    amadeus482000 (e47ed1)

  2. deficits that have mounted over 10.

    Are you sure about this? What are you claiming the deficit for last year was, exactly?

    Dustin (c16eca)

  3. Huh?

    Amadeus’s “refutation” is not the work of a prodigy.

    Patterico (906cfb)

  4. What was the deficit in 2008, Wolfgang? Compare that to the ones for 2009 and 2010.


    Patterico (906cfb)

  5. I think the cunning plan is for the federal government to mug the rich before the states get the same idea.

    happyfeet (a55ba0)

  6. I think Amadeus is arguing higher tax rates will expose more income. If so, that will be the first time in history that strategy has worked.

    Rick Caird (0ceb78)

  7. How ’bout that plus VAT..?

    What would the VAT have to be…20%?

    madawaskan (fd190b)

  8. Rock Me Amadeus-Falco

    (Ya-I’m embarrassed I know that-but obviously not enough.)

    madawaskan (fd190b)

  9. The way we’re currently set up, we’ll never know. Ever.

    Never. Ever. Ever. X5

    Anyway, the solution is to tax non taxable income? Or to tax revenue from corporations that didn’t make a profit? Or tax property? I dunno, maybe he means that ‘internet money‘.

    I think we need to appreciate just how much money it would take to pay off the deficit. Not the debt, Amadeus, but the deficit. In other words, how much more taxation you’re claiming we can get from this invisible income you’re referring to, just so we break even. No surplus, no deficit, but just breaking even.

    Even Clinton and Gingrich were unable to accomplish this with government spending that was drastically lower than today’s spending. They never had a year where the debt didn’t go up.

    If we tax every freaking penny earned from all individual Americans who make more than $250k, we wouldn’t even come close.

    We have a spending problem that people try to ignore. Let’s point to some secret conspiracy of hiding all this wealth America is awash with (to use Michael Moore’s argument)! Let’s point to some BS claim that the Republicans ran the debt up for a while, so we can blame them for Obama’s deficit (which is ridiculously worse than the worst the GOP did, which was itself quite bad).

    All this to divert attention from the fact we don’t need to spend this much money, and doing so is ruining our country, stealing from our kids, and f—ing evil.

    Dustin (c16eca)

  10. I miss Falco so much

    this remains the pinnacle of achievement in music video and though I click and click I fear it will remain so for the rest of my days, so transcendent it is.

    happyfeet (a55ba0)

  11. he’s just so effing cool

    happyfeet (a55ba0)

  12. 1.It’s pretty simple to refute this: Taxable income is only income that the IRS can see. How much is being hidden? The way we’re currently set up, we’ll never know. Ever.

    It’s pretty simple to refute your refutation:

    Over the past 60 years, the ratio of federal tax receipts to GDP has been relatively constant, around 15-20%. This is regardless of marginal tax rates on individual income and corporate rates. People and companies change their behavior when the tax code changes.

    So, no matter what Obama does to the tax rates, about the best he can hope for is revenues of roughly 18% of GDP. That’s roughly $2.5 trillion. So, either Obama must cut almost 1/3 of his $3.6 trillion budget to balance, or else he must find a way to expand the GDP by 50% in the next year.

    Some chump (4c6c0c)

  13. Frankly, I can’t figure out what Amadeus’ point was.

    The reality is that tax compliance in the US is extraordinarily high compared to other nations.

    SPQR (26be8b)

  14. “It’s pretty simple to refute this”

    If I had a nickel for every liberal whose path I crossed who did not understand economics or taxes, I could plug the deficit myself.

    daleyrocks (bf33e9)

  15. Bill Whittle did an excellent, and quite entertaining video about this very topic just a couple weeks ago.

    Make no mistake, taxing the evil rich will be the centerpiece of every leftist scheme.

    JD (0d2ffc)

  16. Amadeus is dummerer than a sack of kmarts.

    JD (109425)

  17. Does the average human being have the ability to comprehend what a trillion and a half USD means?

    How many thousands of lifetimes of labor is that?

    We’ve crossed the threshold where the numbers are so big that there is no way to explain the problem in a way people can understand. We can make comparisons that don’t sound much different than if the deficit were a tenth what it is.

    So that invites the left to just blame Republicans instead of offer spending cuts.

    The idea of paying off the debt is completely off the table. The idea of simply putting the national credit card away if completely off the table. The idea of not maxing the credit card out again, and then changing the law to increase the debt limit, is seen as abhorrent. The recent deal to reduce the climb in debt by a fraction of a percent was called ‘draconian’. Amadeus’s refutation is easy. Just find the money somewhere! No, we can’t see it, but there you go, you can stop talking about the crazy idea of limiting spending, let alone paying off the debt before it crushes the next few generations.

    When I try to contemplate how much wealth the democrats have managed to control, even if it’s chinese wealth that I’ll be paying off for the rest of my life, it’s easy to see that this political party is probably the most powerful entity in human history, and they will not let some numbers get in the way of continued power.

    Dustin (c16eca)

  18. happyfeet

    Wow that was bad. “Thanks”. (-and I mean that in the Canadian way.)


    Right Said Fred -I’m too Sexy for My Shirt

    I think I “win”.

    madawaskan (fd190b)

  19. I dunno for some reason it reminds me of that Jeffy G. ….

    madawaskan (fd190b)

  20. This has got to be simplified for the American public. Sooner rather than later the R’s are going to need to address this idiocy head on by pulling the data together in a single simple pie chart to show the negligible effect that confiscating from the “rich” (both Dems and Repubs) would have on the debt and deficit. A second pie chart should show how very far down into the middle class income stream confiscatory taxes would need to go in order to even make a difference. Who’s rich now, kiddos? Still want to raise taxes instead of cutting government to the bone?

    elissa (5aefd1)

  21. hey now I for reals really like that song Falco is cool

    happyfeet (a55ba0)

  22. $59 billion is the big ‘get’ from taxing the rich? That barely covers the One’s green fees for the year.

    Thank goodness the owners of the printing press are Keynesians. Everybody wins except for the non-voting children!

    East Bay Jay (2fd7f7)

  23. Well lookee here. Poll: Three quarters of Independents, R’s, and Tea Partiers, and half of Dems do not want to see the debt limit raised.

    elissa (5aefd1)

  24. hey now I for reals really like that song

    Dude I think you’ve been unduly influenced by the German milk maid bouncin’ around in that vid.

    madawaskan (fd190b)

  25. she has a lot of personality

    happyfeet (a55ba0)

  26. Iowahawk posted a funny piece some time ago called “Feed your family on $10 billion a day” or something similar. he argued that if you took all income from all sources, it still wouldn’t pay off the debt, much less balance any budget, because there wouldn’t be anything left after the feds got done spending it.

    Rochf (f3fbb0)

  27. she has a lot of personality

    Oh is that what they’re calling it nowadays?

    Milhouse (ea66e3)

  28. #20,Comment by elissa — 4/11/2011 @ 1:46 pm

    I think part of the problem is so many will look at numbers like $100k and think “that is still more than I make so stick it to them” without realizing how many of their employers and and the customers their jobs depend on are being fed to the wolves. They won’t stop to wonder who is going to pay to support them after all the higher tax payers are put out of business, lose their jobs, or are forced to flee. These are the people who are told by politicians that we can tax the rich at 100% and they will continue to risk, work, earn, and be looted year after year and they believe it.

    Machinist (b6f7da)

  29. So will some liberal judge declare not increasing the debt limit unconstitutional?

    Machinist (b6f7da)

  30. What was the deficit in 2008, Wolfgang? Compare that to the ones for 2009 and 2010.


    Here is a better example.

    The Left continually blames President Ronald Reagan for deficit spending.

    Compare Reagan’s worst deficit with the current deficit.

    Michael Ejercito (64388b)

  31. Obama’s gonna tax us into solvency!

    And then I’m gonna drink myself into sobriety …

    Murgatroyd (fd5fcd)

  32. The pertinent IRS link is:

    I’m such an ornery bitch I had to go look it up.


    JD (bcdcf2)

  33. “can that be done?”

    Sure it can be done.

    But, you’re not going to do it as you borrow over $1 trillion a year…which IS what they’re doing.

    Dave Surls (fcaa5b)

  34. If anyone wishes to dispute this analysis with actual numbers, feel free to do so in the comments.

    Here’s the Official Reply from The Big 0:

    7. 22! 35! 14 and 12. 99.44, then 521.

    See?? You’re WRONG!!!


    Smock Puppet (c9dcd8)

  35. Amadeus was a joke. Right?

    JD (dd4e87)

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  37. No he will tax the right wing not the left wing.

    DohBiden (15aa57)

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