It’s time for everybody who wants to say anything about “Obamacare” and taxes to tell the rest of us their income class. I live in one of the 13.5 million households with a six-figure income between $100,000 and $200,000. I could afford to give back the annual $2,500 tax cut George Bush gave me in 2001 and 2003, but our current president has pledged that he won’t allow my taxes to increase by a single dime.
I thought this was foolish and unfair when candidate Obama promised it, but now I understand why he put himself in this trick box. My income class serves as a sort of buffer zone to protect the working class from being attacked with taxes on their health insurance and soda pop. The only way to ever have a discussion about what to do about our rapidly growing income inequality is to leave us, the vast majority of middle-class professionals, harmless.
In the first week of August, the national punditry declared with something like unanimity that, as the New York Times headlined, “Obama’s Pledge to Tax Only the Rich Can’t Pay for Everything, Analysts Say.” Unanimity among cable news pundits is bad for business, so their agreement on this is particularly striking. And this leads me to ask: Do the pundits and the “analysts” they cite really not know the numbers or are they consciously or semi-consciously trying to avoid an increase in their taxes? It would help to know whether they are “rich” by President Obama’s standard – above $200,000 for individuals, $250,000 for families.
One of the few national pundits who routinely admits he’s “a rich guy” is Bill O’Reilly of Fox News, but with a $10 million-a-year salary (not counting his book sales and speaking fees), he’s more like the super-rich – as is Charlie Gibson of ABC News. I’m wondering what Bill Bennett, Campbell Brown, David Gergen, Gloria Borger, and all the other talking heads who play such an important role in shaping national debates make these days.
And do they have assistants who actually check out what their “analysts” tell them? I don’t. I’m a humanities professor who cannot now and never has been able to do algebra, but I use the Statistical Abstract of the United States in teaching numeracy in undergraduate critical-thinking courses. Table 470 provides interesting information on Adjusted Gross Income (AGI) and taxes by income-class. An Internal Revenue Service spreadsheet gives more detailed AGI information on taxpayers in 2007. AGI is income after certain tax deductions(Wikipedia nicely explains what is and is not included). Using these sources, here’s what I learned in about two hours earlier this week.
Of the 143 million U.S. taxpayers (individuals and households), about 4.5 million have AGIs of more than $200,000 a year. Though only 3% of all taxpayers, this group claims 32% of all AGI – or $2.8 trillion. They already pay about $600 billion in federal income tax, or about 22% of their incomes. If this group paid a graduated average of 35% instead, that would add $400 billion to federal revenues every year. This would leave them with about $1.8 trillion after taxes, which is roughly what two-thirds of all taxpayers (with AGIs of less than $50,000) have before they pay taxes.
All that is being asked of the rich so far is an increase of $97 billion a year — $43 billion by reverting to the pre-Bush top two marginal tax rates, and $54 billion in surtaxes on incomes over $280,000 to pay for health care. Both these tax increases directly redistribute income from the rich to the working class. The $43 billion a year is slated to permanently pay for Obama’s Making-Work-Pay tax credit (introduced but not paid for in the two-year stimulus package). The $54 billion is mostly slated to help low-income workers pay for health insurance.
More will be needed for long-term government investment in green jobs, infrastructure, and education, all of which (along with health care reform) should lead to stronger, more sustained economic growth, which will do more than any other single thing to bring down government deficits and to increase working-class (and middle-class) incomes. Taxing the rich can provide all that’s needed for even the most ambitious programs proposed so far. The rich are not an inexhaustible source of government tax revenue, but they have a lot to give before the “middle class” will need to be tapped.
That’s the theory, and it deserves to be debated, but it’s hard to believe that the pundits don’t know that there has been a radical redistribution of income from the working class to the rich over the past quarter century. So in the interests of “transparency” (a middle-class professional term for fessing up), all commentary on paying for Obamacare should include full disclosure of whether the commentator is rich – possibly as a tagline at the bottom of the screen.
What’s more, since the proposed surtax on the rich is especially easy to figure, rich commentators should tell us how much the surtax will cost them. For example, as currently proposed, Bill O’Reilly will pay an additional $500,000 in income taxes and Charlie Gibson, an extra $380,000. It would be good to know how lesser pundits would fare, too, as this might help explain why they keep suggesting that President Obama must break his promise not to increase middle-class taxes.
The President won’t break that promise because he is in a trick box of his own crafting. And there are many analysts out there – all of whom can do algebra and most of whom make less than $200,000 — who would be glad to help reporters and pundits dig into the facts on income and taxes, if they should ever want to.