Taxing the Middle Class?

The foundation of President Obama’s economic plans was to tax the rich and spare the middle class from tax increases. But many of the editorial pages of major newspapers seem skeptical. While they acknowledge that he merely wants to end “tax breaks for the wealthiest 2 percent of Americans,” there is growing evidence that a much higher percentage will see tax increases in the future.

Back in February, the Wall Street Journal criticized what it called the “The 2% Illusion.” At the time, they pointed out that increasing the top marginal rate from 35 percent to 39.6 percent (plus another two percentage points in hidden deduction phase-outs) would not be enough to fund the Obama spending increases. To illustrate the problem, they suggested the following thought experiment.

Let’s consider what would happen with confiscating 100 percent of “the taxable income of everyone in America earning over $500,000.” Using the latest government figures, that would only have given Congress an extra $1.3 trillion in revenue. That would certainly not be enough to fund the $4 trillion Congress would spend in fiscal 2010. They concluded that: “the only way to pay for Mr. Obama’s ambitions is to reach ever deeper into the pockets of the American middle class.”

Last week, the Washington Post essentially came to the same conclusion. They also ran the numbers and concluded that: “the super-rich can’t plug the budget gap on their own.” They begin by noting that in 2006, the top 20 percent of earners paid 70 percent of all federal taxes. By the way, I have a number of references (from Congress and the National Taxpayers Union) that say that the top 10 percent paid 70 percent of all federal taxes. Isn’t it interesting that we can’t even agree on the percentages?

Anyway, they state the obvious: “taxes will have to go up to help close the government’s gaping fiscal hole.” So they conclude that: “we will have to come to terms with the fact that the middle class will have to face higher tax burdens.”

I congratulate the editorial boards of these two newspapers for stating what many of us suspected all along. The middle class is going to pay more in taxes. I’m Kerby Anderson, and that’s my point of view.


References:
“The 2% Illusion,” Wall Street Journal, 27 February 2009.
“Who Pays Taxes,” Washington Post, 10 April 2009.