Sunday, August 29, 2010
Congress's Joint Committee on Taxation recently dropped a study claiming that millionaires will pay $31 billion of the $36 billion in revenue that it expects will be raised next year if tax rates rise as scheduled on January 1. Naturally, Democrats are saying this proves the tax hike is a free lunch for everybody except the rich. Yada, yada, yada.
If you believe that, you probably also believed Joint Tax when it predicted that the rich would gain a huge tax windfall when tax rates were cut in 2003. Let's go to the videotape.
According to the most recent IRS data on actual tax payments, total revenues collected over the period 2003-07 were about $350 billion higher than Joint Tax and the Congressional Budget Office predicted when the 2003 tax cuts were enacted. Moreover, the wealthiest taxpayers paid a larger share of all income taxes from the beginning to the end of this period. The IRS data show that in 2003 those with incomes above $200,000 paid $313 billion in income tax. By 2007 they paid $610 billion.
When the recession hit, the payments fell to $537 billion in 2008. But even accounting for that decline, payments by the rich were still 65% higher five years after the rate cut that was supposedly a giveaway to the rich. The share of federal income taxes paid by the $200,000-a-year club was 42% in 2003 but 52% in 2008. (The IRS doesn't adjust these annual numbers for inflation.)
The IRS data are a useful reminder of how dependent Uncle Sam is on the rich to pay the government's bills. Those who earn more than $200,000 a year in adjustable gross income, the group that Mr. Obama and the Democrats want to tax more, accounted for 3% of all taxpayers in 2008 but paid more than the bottom 97% of all taxpayers....
If Democrats want to raise more revenue and have a better chance to hold the House and Senate in November, they'll extend all of the 2001 and 2003 tax rates.