"It profits me but little that a vigilant authority always protects the tranquillity of my pleasures and constantly averts all dangers from my path, without my care or concern, if this same authority is the absolute master of my liberty and my life."

--Alexis de Tocqueville, Democracy in America

Thursday, August 11, 2011

Innumeracy, the Enemy

A poll highlighted by CNN today (in a typical, "we don't report the news, we make it!" article) shows that 63% of Americans favor taxing the rich as a way to close the deficit.   The article, as is typical, fails to deal with the basic math of the situation, so the Regular Guy will once again supply it:
  • The federal government gets about $1.2 trillion a year in individual income taxes.
  • Of that, the richest 5% pay roughly $700 billion already.   The richest 5% are those who have adjusted gross incomes of greater than $160,000 or so, surely a tidy sum, but most of these people aren't "rich."
  • There's about 7,000,000 taxpayers in this category. 
  • Of the "rich," only about 8,000 people make more than $10 million a year, or less than 1/1000th of the people in this category.   (Around 240,000 make over $1 million, which is about 1/30th of the people in this category.)
  • So the vast majority of the "rich" are actually middle and upper-middle class people who work for a living.   Do they do better than average?   Yes.   Can the deficit gap be closed on their backs?   No.   Here's why.
  • The budget deficit this year is $1.6 trillion.   If you confiscated the incomes of people whose average income was $160,000 (I know:  the average for the top 5% is more than that, but play along), you'd need to do that to... wait for it... 10 million people in order to balance the budget using taxes.   (And it's really probably a much higher number, since the people in that income bracket are already paying 30% or so of their income in taxes.)   That's more than are even in the category of the top 5%, the "rich" people.   But no one is arguing that their incomes should simply be confiscated; we're not quite at the Stalinist level of class warfare, not yet anyway.
  • So what are they arguing?  For what the President calls "fair" increases in taxes.   OK, then.   How about 10%.   Shouldn't the rich pay 10% more?  Well, that would raise a whole $70 billion.   How about 20% more?   That would raise about $140 billion.   But we're not yet even to 1/10th of the annual deficit.   And that's not considering the fact that raising income taxes by that much will change people's behavior; they might shelter income; they might not start a new business with it; they might decide working so hard isn't worth it, etc.    So you probably won't raise 20% more money by raising tax rates 20%.  
There is no Democrat politician anywhere who will stand up and say that they want to raise taxes 20% or more on anybody, even the "rich."   They know that that would be a loser, and CNN knows that that would be a loser.   So there is no way that any significant budget balancing will be done by taxing the rich, and CNN ought to know it.

Funny, isn't it, how the MSM never asks a poll question like this:  "Do you think that the federal government should raise taxes on people making more than $160,000 a year by 20% (or 30% or 40%) in order to make a relatively small dent in balancing the federal budget?"   They (and their Democratic Party allies) don't want people to focus on the realities of the numbers, they just want to use the rhetoric of "fairness" as a way of manipulating voters.

You can get these budget numbers, and a lot of other neat data, here.  

No comments:

Post a Comment