Tax the Rich: Play It Again, Sam…

Barack Obama

The problem with liars and obfuscators is that, over time, it becomes increasingly difficult to keep your story straight. Nowhere has that been more evident than in the Obama administration. Is it a tax or is it a penalty (Obama’s Solicitor General argued both sides on consecutive days before the Supreme Court in order to get the ObamaCare law upheld). Is marriage an institution pre-dating government which unites a man and a woman in a spiritual and legal union, or an oppressive anachronism based on antiquated definitions of morality? Obama has argued both sides. Are massive deficits “unpatriotic,” as he accused George Bush of being, or is it a way to stimulate the economy, as he now claims? If you like your health insurance plan, you can keep it under ObamaCare, right? Maybe not, as Obama now admits that nearly three quarters of current insurance plans will fail to meet new government standards. Is the Guantanamo Bay terrorist detention facility the symbol of America’s violation of basic human rights as Obama repeatedly claimed? If so, then why is it still open nearly three years after he promised the doors would shut?

In news stories this week, Obama himself has undermined the nearly decade long refrain regarding the “Bush” tax cuts passed by Republicans during George W. Bush’s first term. Since before their passage, and seemingly every waking moment since, Democrats have claimed that these tax cuts were only for “the rich,” and that they would do nothing for the poor and middle class. Yet this week, Obama challenged Republicans to vote for a one-year extension of the tax cuts for the middle class, and for an expiration of the tax cuts for the rich. So that begs the question, if, as was claimed for a decade, the Bush tax cuts only benefited the very rich, then how can Republicans now be asked to EXTEND tax cuts for the middle class? How can you extend something they claimed never existed?

When Obama made a last minute deal with Republicans in December of 2010 to extend the Bush tax cuts, he called Republicans “hostage takers” and Speaker of the House John Boehner a “bomb thrower.” He lamented that he had to succumb to Republican tyranny in order to save the American people from even more damage. It was all very melodramatic…and false.

Let’s take a look at what the Bush era tax cuts actually did and did not do:

The tax cuts did NOT increase the deficit. In 2003, the Republicans passed a bill which sped up the implementation of the tax cuts, rather than a phase in as originally planned. As a result, gross revenues to the U.S. Treasury jumped from $1.99 trillion in 2001, to $2.524 trillion in 2008, the last year of the Bush presidency. Democrats claim that this is due to the poor and middle class being forced to bear an ever greater burden of the tax load so that the rich can have their tax cuts, but that is also demonstrably false. After the tax cuts were fully implemented, the Top 1% which Obama and the Democrats so love to demonize (except for when they are hosting $40,000 per plate fundraisers for their candidates), paid more of the tax burden than ever before, both in terms of gross dollars, and as a percent of total taxes paid.

For those that would dispute that fact, one has only to look at the statistical reports published by the Treasury. In 2003, the Top 1% of income earners paid $256 billion in taxes, which amounted to 14.4% of all taxes collected. By 2007, well after the tax cuts had been implemented, the Top 1% paid $451 billion in taxes, or 17.7% of all taxes. Not only were the rich paying their fair share, they were paying considerably more than their fair share. To further clarify and douse some of the raging flames of class warfare that Obama and the Democrats are desperately stoking, in 2009, in order to qualify for the Top 1% category (those “millionaires and billionaires,” as Obama loves to describe them), one only had to have earned $344,000…not exactly Bill Gates-type money). It should also be noted that millions of those in the Top 1% are small business owners who file under individual taxpayer returns. In other words, that doesn’t reflect the amount of money that they actually keep after taxes, overhead, and expenses are paid. None of that matters to liberal Democrats though, because it doesn’t fit their hate-the-rich narrative.

What about the huge surplus under the Clinton years that Bush and the Republicans blew in order to give tax cuts to their rich friends? Once again, that was based on creative accounting and false premises. The budget surplus claim stems from a CBO report issued in January 2001. In that report, the CBO projected that tax revenues would average 20.3% of GDP throughout the next decade, a phenomenally unrealistic assumption considering that was a level attained only three times in the first two and a quarter centuries since the country’s founding. Inclusive to that projection was the assumption that the stock market would not have a major correction (which would have been an astonishing feat never before seen in our history), which means that it failed to foresee the attacks of 9/11 (understandable), the recession of 2001, the bursting of the Dot Com bubble, and the financial collapse of 2008. It also assumed that housing prices would stay on a constant upward trajectory, and federal spending would be much lower than it actually turned out to be (clearly, there is no random drug testing going on at the CBO).

As economist Brian M. Riedl, Fellow in Federal Budgetary Affairs in the Thomas A. Roe Institute for Economic Policy Studies, reported, “Because this projected $5.6 trillion surplus assumed no economic slowdowns, no bursting stock market bubble, no 9/11 attacks, and no subsequent defense buildup, it was not possible for lawmakers to preserve that entire surplus once those events occurred. Of course, lawmakers did expand the burgeoning budget deficits by steeply increasing domestic spending and adding an expensive new entitlement to Medicare.”

So once again, Obama is calling on Republicans to raise taxes on the so-called rich, despite the fact that the economy is still sluggish, job creation is anemic and has been for quite a while (which, of course, is always “shocking” and “unexpected” news for the media and the White House), and despite the fact that it contradicts his own statement in 2009, when he told NBC’s Chuck Todd, “You don’t raise taxes in a recession. We haven’t raised taxes in a recession… we have not proposed a tax hike for the wealthy that would take effect in the middle of a recession… The last thing you want to do is to raise taxes in the middle of a recession.” Then again, Obama thinks that the private sector is doing “just fine.”

So why the reversal? Because Obama is desperate. His economic policies have been stark failures, unemployment is not projected to drop to Bush-era levels for years, and he can’t do anything in the near term to improve the economy without admitting that his entire philosophy on taxes and the economy have been demonstrably wrong.

So once again, Obama and the Democrats jump on that class warfare horse, ride it until it is dead, and then beat it into glue. The facts don’t support their claims, but they figure if they repeat them often enough and loud enough and with enough confidence, enough people will believe them to get re-elected. After nearly four years of Carter-like malaise, I believe that the American people will reject this failed message.

Photo courtesy of the Associated Press

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