Obama: Over $97,000 = Rich

“The Power to Tax

Is the Power to Destroy.”

These are the words of Chief Justice John Marshall

The Founders of this great nation were very deliberate in enunciating the powers of the Federal and State governments, and gave neither of them the power to tax the income of the people . The reason, as the Congress and State Governments have proven over the last 95 years, was they knew they couldn't be trusted with this much power.

The United States had no income tax until the 16th Amendment to the Constitution was ratified on February 3rd 1913. That meant that each dollar you earned was truly yours, and you got to keep that whole dollar. You weren't forced to surrender any part of it to whom ever the State thought you should. Since its enactment into law, politicians have used the enormous power of the tax code to wreak havoc on it's citizens and the economy, in the name of doing good deeds.

The top marginal rate of the 1913 tax code was 7% on income above $500,000 (equivalent today to approximately $10,000,000 in income). Compare that with today's lowest tax rate, which is 10% on income between $0 and $8,025. We now ask the poorest among us to pay a tax rate greater than what we expected from the wealthiest, and is in a word, disgraceful. Before we move on, it's important to also remember we currently pay 7.65% on every penny of income we earn (up to $106,800 in 2009) in Social Security and Medicare taxes (your employer also pays 7.65% for a combined total of 15.3%) . This combined tax is more than three times what the top marginal rate was when the income tax was introduced. Does anyone really believe that the cumulative effect of this enormous confiscation of wealth from the private sector has been negligible?

Congress, in it's infinite wisdom, decided early on that tax rates needed to go up. Within three years of implementing the nations first income tax, they more than doubled the lowest and highest marginal rates. Not satisfied with the additional revenue, the top rate was pushed up to an astonishing 67% on income in excess of $2,000,000 in 1917. In 1916 there were 206 people with incomes of $1,000,000 or more, and as a result of the increase this number fell to 141 in 1917.The very next year,1918, the top tax rate was raised again to 77%, and the amount of income at which the tax was applied was reduced to $1,000,000. The number of people with incomes in excess of $1,000,000 plunged to 67. By 1921, the number of people with incomes over $1,000,000 had fallen to 21.With the number of people reporting $1,000,000 or more in income rapidly disappearing, the congress did what it always does when trying to soak the rich: they lowered the income threshold where the tax began to $200,000 (the top marginal rate was lowered to 56%). The tax increases had eliminated nearly 90% of the top earners of the era. Was that really the outcome that Congress had in mind? What Congress never learned is that if you attempt to soak the rich through tax increases the rich go away, and then you have to tax those who aren't rich.

There are many examples where the government tax increase are promoted as being a restoration of fairness, but instead produces outcomes that are injurious to the very people they seek to help. The AMT tax was another example of how Congress was once again going to restore fairness to the tax code by making the rich pay their fair share. This tax law, which was passed in 1969, targeted 150 millionaires who paid no tax due to exemptions and deductions that Congress had put into the tax code. Imagine that Congress was upset that people were taking advantage of the deductions and exemptions that congress had put in the tax code. I guess incentives really do matter. What started out as a tax on the rich has now, nearly 40 years later, turned into a tax trap for the middle class. Apparently the best that Congress can do is to offer a temporary one year fix, year after year.

The Capital Gains Tax, pure and simple, is a Tax on Capitalism. Jack Kemp has been rightly saying for years that you can't have capitalism without capital. When you raise the rate on capital gains you choke off the access to capital for America's entrepreneurs (the folks who produce the bulk of the jobs in this country) and you reduce the amount of revenue the government receives in the form of capital gains taxes. Investors aren't stupid. They won't invest their money if they can't get a return. Nixon proved this again in 1969 when he raised the Capital Gains tax rate to 45%. The number of initial public offerings plummeted throughout the decade of the 70's. In 1969, 1298 companies completed initial public offerings. By 1978, that number had dropped to 18. No wonder the 70's didn't produce any new “go go” companies. They didn't produce any new companies. The Dow Jone Average, which started the decade at 744, ended the decade at 806. How much revenue do you think the capital gains tax generated?

Once again, we are hearing that tax rates on the rich need to be raised so that we can spread the wealth around. There is that fairness thing again. Get a firm grip on your wallet because it won't be any different this time! When the the top income earners are once again punished by the tax code, they and their tax revenue will disappear, just like last time and the time before that. The government will once again move further down the income ladder in search of the revenue they desire. The only difference is that this time it will happen faster, because now the rich are not folks who earn $10,000,000. They are folks who earn $250,000 or $200,000 or $150,000or $120,000. They are you and me!

of @ Nov 02, 2008 21:24:33 PM

We Get It

We get it; you don't like Democrats, or at least Omaba. How many posts are you going to have again him before Election Day? I read an article that in the world if you only make about $40K you're really well off, so, yeah $97K ain't so bad.

A. of CO @ Nov 02, 2008 17:01:02 PM

No need to be sorry

Bob, you have no reason to be sorry for making more that what people want to call rich. You deserve the money you made and are the best person to determine what to do with it.

As for Sandi and the others, I make over $97,000 a year. I have also made as little as $15,000 a year. I can tell you that I watch my money just as carefully at both times in my life. The only difference is that when the government takes more from me I have less to invest in companies or care to spend at the stores.

Somehow we as a society has created this notion that people who make over a certain level do not care what they spend thier money on and will continue to do so freely. And that the government is better at spending the the money. Both are false assumptions.

So do not cloak an increase in taxes as partiotic and then expect people to continue to spend like the have in the past. You will end up with government wasting more than they give away and people spending less for goods and services therby causing fewer people to be employed.

J of GA @ Nov 02, 2008 15:06:53 PM

Sorry, I am apparently wealthy.

Do you realize what you are saying? Wealth comes from hard work and discipline, not just from income.

One year, we broke 115 thousand because we WORKED HARD.

Boy, was that a mistake. NET PAY ENDED UP $76,000

An average couple can easily make that much money. And I don't think most average couples are avoiding most taxes. Take a straight look at your paycheck and for once in your obviously young lives (I assume if you are older you have matured), look at all of the numbers. I know it hurts your brain but it get's easier over time.

Annual Gross Pay $97,000.00

Federal Withholding $13,307.50

Social Security $6,014.00

Medicare $1,406.50

401K $5,820.00

Net Pay $70,452.00

Boy, I really feel wealthy now. My wife makes 55,000 and I make 45,000. Both of us have worked very hard to achieve these minimum salaries. What are we left with? A small 401K plan? We put 21% of our income just for payroll deducted taxes. This doesn't include property tax, sales taxes, use taxes,capital gains taxes etc... Then we need shelter, food, car, education, and hopefully a little savings account.

Bob of TX @ Nov 02, 2008 09:43:20 AM

Foolish

Sandi is not right. Federal spending is predicated on the estimates of future tax "revenues". When budgets are developed and implemented there is little consideration for some of the unkown events in the future. Once a federal entitlement is passed through congress it is almost, if not impossible to eliminate that entitlement at a latter date. If you as an individual cannot not meet your obligations then you have a few choices. Get an additional job to maintain the life you have grown accustom to or eliminate expenses to balance your personal budget. If you get in trouble because of your persoanl habits every year, do you get to got to your boss and demand additional funds and then turn around and spend more so you are in the same position next year. Obama plans to spend an additional $1,000,000,000,000 during his term. If you increase taxes then STOP SPENDING AND GET YOUR HOUSE IN ORDER! More taxes will not solve the problem we currently face.

Dale of TX @ Nov 01, 2008 19:10:01 PM

wrong to raise taxes can be generated without

John Mcain wants to shrink goverment. While Obama wants enlarge goverment. Tax levels are fine if they cut some govt budgets and pork barrels and close up loopholes used by the rich to avoid taxes by reinvesting money as a loss.

nethery of NJ @ Nov 01, 2008 18:17:46 PM

That's the top quintile.

So I'd have to say that he may be actually correct. It just depends on where you draw the (arbitrary) line. If you're in the top quintile, you may not feel rich (my household certainly doesn't), but then again, you DO have to feel better off than most people.

All this bitching. I'd love to have the problem of a $250K income and worrying about paying a few more $$$s in taxes.

My attitude is that with a $10+ trillion and growing debt, we ALL need to be paying more taxes. But that won't win presidential elections, no matter what party. Shrinking the government at the same time would help, but again, that's something neither party is willing to do.

Bryan Price of FL @ Nov 01, 2008 17:29:58 PM

Sandi is right. If you make $97,000 taxable income after deductions, YOU ARE RICH by comparison to most Americans and more than most of the wider world.

Pay your darn taxes and shut up. It's the patriotic thing to do. You'll find that your tax at $97,000 ain't that bad anyway.

The only way the federal budget ever balances is when them that have it pay up.

(Because them that don't have it CAN'T.)

of @ Nov 01, 2008 16:50:22 PM