Sunday, November 2, 2008

I'm No Economist, But I Can Do Math

I'm going to warn you at the outset. There are a lot of numbers in this post, but I'm going to try to keep this simple. When I first heard about Obama's plan to give a tax cut to 95 percent of Americans and raise taxes to "fair" levels on everyone else I couldn't see how the numbers would pan out. So here they are. I have taken these numbers from the United States Census, National Taxpayers Union Foundation, and the Federal Government. I'll state at the outset that these are numbers from 2006 and will admittedly be a little off from 2008, but they are the most recent available when all needed information is considered. Please read this post as it is important to Barack Obama's plan for your taxes, health care, and the economic future of our country.

2006 Revenue $1,397,800,000,000 just from income tax.
Total Income is $2,407,000,000,000
2006 Expenditures $2,655,400,000,000
Top 1% AGI is $389,000 and pays 40% of all taxes.
Top 5% AGI is $153,000 and pays 60% of all taxes.
Bottom 50% make less than $32,000 and pay less than 3%
2006 population estimate 298,754,819..... 25% under 18

So let me break this down for you. There are 224,066,114 adults in the United States. 1% of that is 2,240,661 people. That means the average person in the top 1 percent pays roughly $250,000 in taxes. Remember the top 1 percent starts at only $389,000. Seems a bit extreme doesn't it. That leaves just $139,000 for raising their kids, paying their student loans and maybe even creating more jobs for other Americans. And that doesn't even include state and local taxes.

What about the top 5 percent who start at only $153,000 per year. Excluding those in the top 1 percent who have already been tallied; The average person in this category pays $31,191

How high do you want to raise taxes on the top 5 percent, so that we can give a tax cut to everyone else. Remember roughly half of all Americans pay virtually NO income taxes to the federal government. If you were to raise taxes an additional 10% on the top 5% of wage earners it would raise an additional $83,868,000,000 that is a heap of money. No question about it. But how much is that for the 95% of Americans who will get that money. That is right after raising taxes another 10 percent on those who create jobs we could cut a check to everyone else for a cool $394.

Remember Obama has also promised to provide you with health care and a slew of other spending programs that would either increase our indebtedness or come out of your 394 dollar check.

You could elect Barack Obama. You could get the check. But is it worth the damage it would do to our economy.

These are the facts. I didn't make them up. I did the math.


Mookie said...

Wait a're asking me to follow your math class word problems here?? I vowed to never do those again after the trains between Chicago and New York at variable speeds and directions question!
But anyways, in all seriousness. Obviously neither candidate's economic plan actually adds up, however Obama's is actually so far off base that he could cut 75% of the defense spending budget and still not be able to balance a budget (ending our deficits), with all his promises included, nevermind find a way to reduce our overall debt.
Only McCain (while I disagree with his taxation of healthcare benefits idea) has the plan between the two of them that has an opportunity to help create growth amongst true capitalistic businesses, thusly increasing our taxrolls.
Obama may initially be able to post greater government take from the tax rolls, but it will actually drive value creators and producers away, having them find newer ways to shelter more income, and the government will see even less money.
History has proven this lesson time and again...

Eve said...

I appreciate your doing the math; I've been looking at these statistics also and you're right: they don't add up. One reason they don't add up is that the additional money the lower, working, and (maybe) middle class might receive back over a year amounts to so little, compared with what the folks with an AGI over $150,000 or so will suffer.

Your numbers illustrate where Biden and Obama are getting that "around $150,000" mark, too.

My husband and I own and run a small business and lived at or below the federal poverty line for many years. We never applied for or received one cent of welfare or other money available to us, and since we home schooled we paid for our kids' education too. We managed to be poor, give 10% of our income, and build our business by working our butts off for over 15 years until we succeeded.

Because we're a Subchapter S corporation, any business profit we make runs through onto our personal tax return, inflating our AGI. We have children in the double digits, most of whom are still dependent on us. Therefore we are not rich.

However, even under the current tax scheme, the way small businesses like LLCs or Subchapter S's work, we appear 'rich' until after we can take our child deductions. Therefore, if Obama decided to tax our AGI and our business made a profit, we might be hit with even more taxes.

What would we do? Well, like all of our friends who run small businesses, we would tighten our belts. We would let our least productive worker go. We would work longer hours. But we would not, under any circumstance, put our home or children at risk. The business owner is always going to find a way to watch out for his own family, because that's our job. So who is going to get screwed by this great "change" that the far left propose?

Right: the little guy. As usual it will be the working class or lower middle class fella who gets laid off because his boss can't afford to pay for all those benefits. The boss has to survive and support his family, that's job one. He is running a business, not a charity. So the additional math you can do is that if the small business has to pay an additional 5-20% in taxes, it will equal the salary of a worker and that worker will be laid off.

You can't spread the wealth from the bottom up if you're unemployed.

Shirley Buxton said...

While I am far from an economist, I am able to read history, which without any exceptions I have found, confirm that a reasonable cutting of taxes makes for a stronger economy.

Recall that during Ronald Reagan's administration his "trickle-down" policy and sweeping economic reforms resulted in the longest and deepest peacetime prosperity in American history. I believe he created more than 30 million jobs.

We have a few more hours to work; let's keep at it. :)

Anonymous said...

Good work, Jay.

Contrast the typical liberal blog post, which tends to be about what a great guy Obama is--how caring and how hopeful.

They NEVER do the math.