Sen. Obama is promising $500 and $1,000 gift-wrapped packets of money in the form of refundable tax credits. These will shift the tax demographics to the tipping point where half of all voters will receive a cash windfall from Washington and an overwhelming majority will gain from tax hikes and more government spending.
In 2006, the latest year for which we have Census data, 220 million Americans were eligible to vote and 89 million -- 40% -- paid no income taxes. According to the Tax Policy Center (a joint venture of the Brookings Institution and the Urban Institute), this will jump to 49% when Mr. Obama's cash credits remove 18 million more voters from the tax rolls. What's more, there are an additional 24 million taxpayers (11% of the electorate) who will pay a minimal amount of income taxes -- less than 5% of their income and less than $1,000 annually.
In all, three out of every five voters will pay little or nothing in income taxes under Mr. Obama's plans and gain when taxes rise on the 40% that already pays 95% of income tax revenues.
The plunder that the Democrats plan to extract from the "very rich" -- the 5% that earn more than $250,000 and who already pay 60% of the federal income tax bill -- will never stretch to cover the expansive programs Mr. Obama promises.
What next? A core group of Obama enthusiasts -- those educated professionals who applaud the "fairness" of their candidate's tax plans -- will soon see their $100,000-$150,000 incomes targeted. As entitlements expand and a self-interested majority votes, the higher tax brackets will kick in at lower levels down the ladder, all the way to households with a $75,000 income.
After my last posting, I began to think about this exact same question, but in regards to the social security tax that Obama is proposing- the one that won't start for 10 years, but has Obama already including revenues from that tax today. Anyway, 10 years is a long time. Let's say there's an Obama supporter that is 23 years old, recent college graduate and single. Now, in 10 years, it's not outside the realms of reason to think that that person will be 33, married and have at least one child. I also don't think it's outside of reason to think that the combined income of that family is at least $150,000, if not more.
Now, as the WSJ opinion notes above, what's to keep progressives who believe in taxing the wealth from simply decreasing the floor as those above the floor are repeatedly squeezed for more and more money, to the point the government can't squeeze no more? At that point, the government must either 1) reduce taxes and cut spending or 2) lower the floor to get at those people who make just less than the floor. So, that person who today is supporting Obama may very well also be supporting his own tax increase in 4, 6 or 10 years (certainly as to Social Security); the same tax increase that today, as a new employee, making under $40,000, he or she is able to rationalize because he or she isn't rich and won't be affected; that same person who may be a beneficiary of Obama's tax credits today, but will see those credits disappear at some point in the future. It is easy to vote for a tax increase on the rich when, selfishly, you are the recipient of a government handout; the result of someone else's hard work.
In other words, the phenomenom that Obama's tax policy is, is predicated on squeezing and squeezing every last dime from those who make more than $250K in order to pay for these tax credits to everyone else, as well as his large federal spending increases. And when 40% of the people don't pay taxes, and another 11%, according to the article, will see their tax burden reduced to near zero due to tax credits, how can we expect this last 5% of rich earners to be the main funders of at least 50% of Americans and expect them to continue to create jobs and invest in this country? Those 5% will have an incentive to reduce their earnings until they fall below this floor, which means reductions in employment, reduction in investments, and reductions in production.
Or, as the WSJ article notes:
The sequence is always the same. High-tax, big-spending policies force the economy to lose momentum. Then growth in government spending outstrips revenues. Fiscal and trade deficits soar. Public debt, excessive taxation and unemployment follow. The central bank tries to solve the problem by printing money. International competitiveness is lost and the currency depreciates. The system stagnates. And then a frightened electorate returns conservatives to power.
Obama's tax policy is nothing short of robbing from the rich to give to the poor, but ask for nothing in return; government creating a tax policy to punish people for being successful, then using that money to give away to the poor. We should not be using taxes to redistribute wealth and punish success; we should be lowering taxes to encourage people to succeed, and to not have the government step in and take away people's money and simply give it away to someone else. This not a recipe for success, this is a recipe for welfare. The Federal government is not a charity organization.
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