Obama has promised that the bottom 98% of taxpayers will not pay a dime in higher taxes for the new spending he has planned. He has also promised to cut the deficit in half by the end of his first term.
The new deficit number for 2009 came out today: $1.75 TRILLION. To cut that in half he needs to reduce spending or raise taxes by 800 billion. As I point out in this piece, let's assume he really can find $200 billion annually in spending cuts. That leaves $600 billion in tax increases for the top 2%. The top 2% currently pay about $500 billion in taxes. There are about three million taxpayers in the top 2%. They currently pay an average of about $167,000 a year in income taxes. So to cut the deficit in half (half–still leaving a deficit of over $800 billion) he will have to raise their tax burden by another $167,000.
At those levels, I think there are going to be some incentive effects.
So either taxes are going to go up on more than just the top 2% or he's going to keep running very large deficits. I wonder if the Treasury will be able to borrow that amount of money for that long.
We sure live in interesting times.
