With an election right around the corner, politicians on both sides of the aisle in Washington have suddenly become deathly serious about fixing our ballooning deficit. Considering this same Congress is responsible for increasing deficit spending by 4x since the Democrats took control in January 2007, I somehow question their sincerity.
However, with public opinion swinging against such deficits, it begs the question: how can we balance the budget?
The proposal coming from many Democrats right now is to raise taxes on the wealthiest Americans by letting the Bush-era rates expire. Although opposition to this tax hike is bipartisan and won’t come to a vote until after the election, it’s worth asking whether such a measure could even solve the budget gap by making the wealthy “pay their fair share.” Currently the wealthiest Americans pay a maximum federal income tax of 35%. Obama’s plan would raise that rate to 39.6% in 2011.
So how high would the tax rate on the wealthy need to be to cover the deficit?
The Heritage Foundation analyzed data from the White House and discovered that it would take a lot more than that:
Closing the more than $1 trillion deficit Obama’s spending would produce in 2020 by taxing only the rich would require a top income tax rate of 134 percent. Of course it is impossible to tax more than 100 percent of any taxpayer’s income. More importantly, any rate even approaching such a dangerous level would destroy the economy. Period.
Obviously taxing the wealthy to fill the budget gap is impossible, unless you support spilling their blood and repossessing their property via socialist revolution––and these days even Fidel Castro says that doesn’t work. The only way seems to be significant spending cuts back to pre-recession levels, which would balance the budget by 2019.