President Obama recently proclaimed, “This is not class warfare – it’s math.” But the math behind a “millionaires’ tax” tells a different story.
Let’s be clear; I agree that the wealthy should pay their “fair share.” That’s never been the issue. And certainly we all can agree that it’s time to thoroughly examine which tax loopholes should be closed.
As this national discussion unfolds, we owe it to the American people to be clear about the facts about what a fair share is and who really pays what in this country.
As the recent Facebook group We Are the 53 Percent suggests, a growing number of Americans think they pay their fair share and others should contribute, too. Should the 53 percent who pay federal income taxes be asked to pay more while the remaining aren’t paying anything?
Consider that just a few years ago, before the president’s stimulus package offered payroll-tax deductions and economic stimulus checks, the number of Americans paying federal income taxes was 62 percent.
The numbers of those who don’t pay have expanded, and the top earners already pay a disproportionate share under our progressive tax system. In 2009, the Tax Foundation reported that the tax burden of the top 1 percent exceeded that of the bottom 95 percent.
President Obama and Senate Democrats would like to make the system more progressive with the addition of a tax on the wealthy. This, they argue, would grow revenue and help end our deficit spending. So, is it likely?
We don’t have to speculate about the impact because the millionaires’ tax is not a new idea, and as we’ve seen throughout the country, it does little to alleviate the burdens created by our addiction to spending.
California has imposed a 1 percent surtax on incomes over $1 million. Despite this extra tax on the wealthy, California still projects a 2012 budget deficit of more than $25 billion. In fact, 10 of the 11 states with high income-tax add-ons have a projected 2012 budget deficit.
The idea that we can tax our way into fiscal order is a fallacy. A wealth tax doesn’t necessarily create greater revenue; it just gives government more excuses to further delay making the tough decisions about our spending excesses.
It’s not just the states that have tried a wealth tax; the federal government has, too. In 1960, the top federal income-tax rate was 91 percent on incomes over $1 million. By 1982, as the top rate dropped to 50 percent, federal income-tax revenue as a percentage of the nation’s gross domestic product (GDP) grew.
Today’s proponents of a millionaires’ tax aren’t focused on growing revenue to balance the budget. Even if the president took 100 percent of every millionaire’s income, that still would leave a deficit of more than a half trillion dollars, and our national debt would remain at more than $15 trillion.
Instead, proponents are interested in pitting Americans against other Americans. This classic class warfare is designed to play on people’s emotions of envy, anger and blame.
We do have a problem in this country. Our fiscal house is in disarray. The future solvency of our country is in jeopardy.
As convenient as it may be, the answer isn’t a wealth tax. As history has shown, it won’t always grow revenue, and it certainly won’t fix our debt.
We need broad tax reform to simplify the system and create certainty so private enterprises can invest again. Through meaningful reform, we can broaden the American dream to reach everyone who’s willing to work for it and in turn grow the economy and ensure that America can be competitive once again in a global economy.
Our enemies are not our neighbors or their paychecks. Our enemy is the thought that our success is limited to that which Washington allows us to keep.
Rep. Darrell Issa, California Republican, is chairman of the House Committee on Oversight and Government Reform.