Tax Refunds and Obamanomics
I like the parable of the group of men who go to lunch every day. I'll try to get the math right:
This is how federal tax revenue is actually paid - here's a quick chart:
10 men go out to eat lunch at their favorite restaurant every day. The bill always comes to $100. They decided early on to divide the bill based on how much each of them earns: The investment banker earns the most money and pays $70 of the total bill. The lawyer and the doctor contribute $8 apiece. Then the architect and the small business owner pay $5 each. The next four men pay $1 each and the unemployed man pays nothing for his meal. Note that no one but the rich man pays more than his share of the bill - $10.
One day, the owner of the restaurant decides to reward his loyal customers with a discount. He offers to take $10 off of their bill: He pays out the refund as a percentage of each man's contribution. The rich man gets $7, the next two men get 80 cents, the next two 50 cents, then next four 10 cents and the last man gets nothing.
As they prepare to leave the restaurant the rich man stops off in the bathroom, leaving the other nine to their own devices. The two men who got an 80 cent refund start talking about how the rich man was "given" almost 9 times as much money as them. The two men who got 50 cents complain even louder, having received only 1/14th of the rich man's "windfall". The next four men wail even louder at the injustice of only having received 1/70th of the rich man's "payout" and the poorest of them complains the loudest of all, having received absolutely nothing.
When the rich man returns to the group, the others jump him and extract their "fair share" from the rich man: one dollar apiece. So going forward, the rich man would be paying $69, the next two $7, the next two $4, the next four nothing and the poorest man would actually be PAID $1 to eat lunch.
The rich man says screw you to his erstwhile friends and decides to stop attending their daily outing - so the next day, the nine men are forced to figure out who is going to pay the now $81 total bill.
- Top 1% = 39.89% total federal revenue
- top 5% = 60.14%
- top 10% = 70.79%
- top 25% = 86.27%
- top 50% = 97.01 %
- bottom 50% = 2.99%
So the parable is accurate, except in real life, the rich man doesn't get to "opt out" of the whole fiasco.
What Barack Obama is proposing is cutting taxes on the bottom 75% and raising taxes on the top 25%. If we take him at his word, this would translate to people who don't even pay taxes getting "refunds" and the companies who employ all those people and produce the goods and services those people consume will pay even MORE than they already do.
And keep in mind that we're not just talking about an transfer of tax liability, here - for Obama to pay for all the the new, big-government programs he's proposing, he would have to raise taxes *substantially* for the top 25%. Nationalized health care, more money being thrown at various problems and a new sort of Americorps rivalling the size and budget of the defense department don't come cheap. (Although he may have meant that last thing the other way around: shrinking the defense budget DOWN to match the funding of Americorps...)
How WILL those companies deal with the extra expense? By cutting expenses (like payroll) and raising prices. The net effect is that the poorer folks will lose jobs (or fail to find them) and find higher prices for everything. So a lowering tide strands all boats.
THAT, in turn, will do *wonders* for the economy. We could "change" from a stumbling economy that nonetheless still manages to grow to a *real* recession. Yes we can!