Here’s pretty much all you need to know about Obamanomics: In 2011, the Obama White House suggested raising the top dividend tax rate to 20 percent from 15 percent. Keeping the dividend rate at a relatively low level, the White House said, “reduces the tax bias against equity investment and promotes a more efficient allocation of capital.” Makes sense, right? Basic economics.
Yet in his brand-new, 2013 budget, Obama calls for taxing dividends as ordinary income, essentially raising the top rate all the way to 39.6 percent. And then when you tack on the 3.8 percentage point Obamacare surtax—and an additional 1.2 percentage point itemized deduction phase-out for high-end taxpayers—the rate rises to 44.6 percent.
So apparently Obama is now in favor of a greater bias against equity investment (and in favor of debt) and promoting less efficient allocation of capital. And this helps create an economy “built to last” in some way?
Of course, it doesn’t. Not at all. More like “built to fail.” Then again, Obama’s new budget isn’t about economic growth or cutting debt or creating a “built to last” economy. The Obama campaign is built around the idea of reducing inequality. So in his budget, Obama takes the populist whip to the wealthy and to business:
1. The top income rate would be raised to 39.6 percent vs. 35 percent today.
2. Under the “Buffett rule,” no household making over $1 million annually would pay less than 30 percent of their income in taxes.
3. Between now and the end of a second Obama term, Obama proposes $707 billion in “net deficit reduction proposals.” Of that amount, only 16 percent is spending cuts.
4. The majority of small business profits would be taxed at 39.6 percent vs. 35 percent today.
5. The capital gains rate would rise to 25.0 percent (including the Obamacare surtax and deduction phase out) from 15 percent today.
6. The double tax on corporate profits (including dividends) would increase to 64 percent based on the statutory corporate tax rate (58 percent using the effective tax rate), easily the highest among advanced economies.
7. The double tax on corporate profits (including capital gains) would increase to 51 percent (44 percent using the effective tax rate), also among the highest among advanced economies.
All in all, Obama has proposed some $1.6 trillion in new taxes over ten years, taking tax revenue as a share of GDP to 20.1 percent in 2022 vs. a historical average of 18 percent. And despite all those new taxes, Obama’s plan would still add $6.7 trillion in new debt and make no progress in lowering the nation’s total debt levels as a share of output. The debt-to-GDP ratio is predicted to be 74.2 percent this year and 76.5 percent in 2022.
At the same time, federal spending would never fall below 22 percent of GDP. Indeed, Obama—if he serves two terms—would be the first U.S. president in history to spend 22.0 percent or more of GDP for eight straight years (and then beyond). And keep in mind that these debt and spending numbers claim about $850 billion in savings from unwinding the wars in Iraq and Afghanistan, spending about a quarter of those phony “savings” on highway funding.
And also don’t forget about the rosy growth assumptions of 3.4 percent growth in 2015, 4.1 percent in 2016, 4.1 percent in 2017, and 3.9 percent in 2018. The U.S. economy has only seen a run like that three times in the past four decades. And the Obama Boom is supposed to happen amid rising tax rates, interest rates, and debt? Good luck, Mr. President.
Higher taxes, more spending, more debt, and no long-term entitlement reform plan. Hmm, this isn’t a rosy scenario at all. It’s actually a pretty bleak one.
Jimmy P, you nailed it.
Ayers, Alynsky, Frank Marshall Davis would be proud of their Manchurian Candidate. Candidate? He’s the POTUS.
Obama blames Bush for the Obama regime failings—-I wonder which side of the family he blames his success;the side that raised him or the side that rejected him?!…I know which minority side got him into college!!
Yes, you’re right… but you still miss the forest for the trees.
It does no good to argue specifics, voters just tune out this stuff.
Obama opponents need to respond with something along the lines of “President Obama wants to raise taxes and waste a whole lot of money on silly things… neither of which will do anything for job growth… nothing to reduce high gas prices… nothing to make us safer… and nothing to stop the drop in the value of our homes”.
Voters will only support higher taxes if they think they can do so without negative consequences to them. The GOP needs to convince them that this won’t be the case.
I’m wondering how much more progressive this new regime would make us. Already, the wealthiest 10% contribute 45% of all federal tax income. No doubt this will push it well above 50%.
So. They’ve captured 80%+ of the wealth. Seems only fair. If they wanna pay less, they can always get less ambitious and quit hogging up all the opportunity.
I smell the envy of one of society’s parasites…
how about you get off your lazy … and make your own opportunity, instead of coveting what your neighbors have…
One excuse is as good as another I suppose. How about you “man up” and TAKE your opportunity as opposed to whining about what the next guy is doing?
I weep for the wealthy. Life is tough. Why should they have to support the lowlife that populates their country. Quit griping, you worthless, lazy serfs. Don’t upset the apple cart.
They don’t have to; they can do less or nothing – they are rich. That’s really the point, Obama is “Detroitifying” the USA. This is lunacy, but it plays well to the masses. But Obama has spent $400,000 for every $45,000 on average job created. By comparison Reagan “spent” in terms of deficit creating tax cuts $10,000 for every on average $45,000 job created (using real dollars). This is the opposite of Reaganomics, of course. And it’s a failure. But Obama might be able to point to what paltry job creation and growth has occured and pull this charade off. This is bad for the USA, particularly the poor.
There is income redistribution in this country – via government-imposed taxes – from the middle and upper middle class (who pay 25-35% in federal income taxes + payroll tax) to the super rich (who pay only 15% taxes, even on salaries/carried-interest, and only on income that they are unable to hide in one of the numerous loopholes and tax shelters available to them).
The only way to fix this income redistribution and bring tax fairness is:
1. Tax all income at exactly the same rates. The income of the super rich (capital gains, dividents, salaries for money managers/carried interest) should be taxed at the same marginal rates as regular income – just as when federal taxes were originally introduced in the USA.
2. Close ALL tax shelters and loopholes that the super rich use to hide a large part of their income (Cayman/Swiss accounts, hundred-million-$-tax-free IRAs, etc.)
3. Eliminate the AMT, which now overwhelmingly targets the working middle and upper-middle class!
4. Introduce new tax brackets for incomes over $1M and $10M. When federal taxes were originally introduced in the USA only incomes of over $1.2M (in 2011 adjusted $) were taxed, at progressive rates, but now there is not even a separate tax bracket for incomes larger that $1M.
Here is a very simple and fair tax code without any loopholes:
All income (regardless what is the source because work should not be discouraged in favor of wall street gambling) is taxed at the same low marginal rates – 4 marginal rates:
0-$100K: 15%
$100K-$1M: 20%
$1M-$10M: 25%
$10M++++: 30%
$10K – personal exemption
No deductions whatsoever is the simplest and the best.
If you really, really need deductions – the only acceptable ones should be 1) charity and 2) home mortgage. And these deductions can only be 50% deductions.
Business tax – flat 20% or 25% with no tax preferences and incentives for anyone.
Alan,
Factors you conveniently ignore…
1) investing in your (or my) small business is not “Wall Street gambling” – how do you think most small businesses afford to hire people?
2) Business tax — I take it you mean corporate taxes, as a small business owner who files for his/her business as personal income would already pay the tax noted in one of your first four tiers. Otherwise, their effective tax rate would be more 45-55%.
3) Almost all ‘business taxes’ are passed on to consumers in the form of higher prices.
Here’s a thought – let’s re-define the Federal Government’s role in our lives, according to the Consititution, and reduce Federal spending accordingly.
Perhaps a better idea is not to tax income at all…instead, a revenue-neutral national sales tax. http://www.fairtax.org
Everyone takes home their entire paycheck and only pay taxes on what they buy. No taxes on the bare necessities of life. This would make the US the #1 tax haven in the industrialized world and represent the biggest transfer of power from politicians to the people in the history of the nation.
If gas goes to $4 all of this goes out the window. And Obama can take this budget as a parting gift.
I wonder if this budget will garner more votes in the senate than the 3 votes his last budget got.
$4??? Try $5…
Fresh from outrageously misrepresenting the last set of unemployment statistics, you come up with this. What a joke you are, and what a hack outfit the American Enterprise Institute has become.
Please list what is misrepresented in this blog post.
Unimpressed by the facts,
Typical liberal.
“Unimpressed” by the truth.
Nice example of a useful idiot.
The current U.S. Income Tax Code has been falling apart for years!
Those who can afford armies of tax attorneys and CPA’s to navigate around this tax code and lobby the government for tax breaks are the ones who don’t pay income taxes.
And those of us who can’t afford to lobby or pay for all the legal help necessary end up losing and paying.
The Income Tax code is almost 75,000 pages long and that does not even include all the thousands and thousands and thousands and thousands of pages of tax publications, instruction booklets, revenue rulings and tax court cases.
The only solution is getting rid of the current Income Tax system as it has proven to not work. The problems it has are inherent within the mind numbing code itself. Just pick it up and read it. It is obvious that it cannot be fixed by adding more and more regulations to fix the earlier regulations. The basic model just does not work. .
There are currently about 26 countries in the world who do not have an Income Tax code like the United States (no country in its right mind would set up such a system). And these countries are doing much better economically that we are.
So the solution lies in the abolishment of the current Income Tax code.
A system that makes it illegal to not do bookkeeping the way the government says, has billions of dollars in compliance costs and is constantly being added to with new regulations every single month is not a system that can sustain itself and will eventually collapse.
The solution is to get rid of the liberal spending lawmakers!ALL IT TAKES IS JUST A LITTLE TIME TO FIGURE THESE THINGS OUT BUT TRY TO CONVINCE CONGRESS !!
The U.S. Congress sets a federal budget every year in the trillions of dollars. Few people know how much money that is, so we created a breakdown of federal spending in simple terms. Let’s put the 2012 federal budget into perspective:”
“”"”• U.S. income: $2,170,000,000,000″”
“”"”• Federal budget: $3,820,000,000,000″”
“”"”• New debt: $ 1,650,000,000,000″”
“”"”• National debt: $14,271,000,000,000″”
“”"”• Recent budget cut: $ 38,500,000,000 (about 1 percent of the budget)”"
“”"” “”
“”"”It helps to think about these numbers in terms that we can relate to.”"
“”"”Therefore, let’s “”remove eight zeros from these numbers”" and pretend this is the household budget for the fictitious Jones family.”"
“”"”• Total annual income for the Jones family: $21,700″”
“”"”• Amount of money the Jones family spent: $38,200″”
“”"”• Amount of new debt added to the credit card: $16,500″”
“”"”• Outstanding balance on the credit card: $142,710″”
“”"”Amount cut from the budget: $385″
Such a tax code exists: http://www.fairtax.org
James,
You allude to the absurd growth assumptions, but it would be interesting to compare the CAGR in the 2013 budget with historical growth rates. (i.e. best case and mean)
If I were a businessman, if the proposed tax code would pass, I would move my company overseas so I am not touchable by US law.
O.M.G.= Obama Must Go
If The U.S. were a single household
The budget explained in simple English…
I love it when complex things are simplified so that we can
all understand.
United States Tax revenue: $2,170,000,000,000
Federal budget: $3,820,000,000,000
New debt: $1,650,000,000,000
National debt: $14,271,000,000,000
Recent budget cuts: $38,500,000,000
Now, remove 8 zeros and pretend it’s a household budget.
Annual family income: $21,700
Money the family spent: $38,200
New debt on the credit card: $16,500
Outstanding balance on credit card: $142,710
Total budget cuts which some polticians are proud
about: $385
Stop the insanity now. Vote them out and demand a balance
budget!
Polticians are like babies diapers,
they need to be changed often and for the same reason