I assume the $250,000 means married filing joint returns or married individuals with income of $125,000 filing separate returns. According to factcheck.org this group makes up 2% of all U.S. households. They earn 24% of all income and pay 48% of all federal taxes.
Many of this group live in very expensive communities with an extremely high cost of living. For example, the average home in New York City costs $1.2 million. In San Francisco it’s $800,000 – Washington D.C. $650,000 – Boston $400,000 – ditto for Los Angeles and most other major cities. (Most small business owners are women, by the way.)
Many of this group have wildly fluctuating income from year to year. They need the high income from the good years to tide them over in the lean times. If you siphon off the gravy in the good years they’ll go belly up in bad times. Many expenses like insurance and rent and utilities and paying off student loans are fixed.
If you tax them too much it will tip the balance… One bad year and that’s it. That’s too much of a risk for most people to build a future on. Why bother?
Most of these individuals run small businesses. They already work twice as many hours as the nominal 40 hour week. That factors out the salary of a $125,000 filing single individual in this group to more like $60,000 or less (accounting for time and a half that wage earners get for overtime work).
The mortgage payment for a low interst 30 year loan on a $700,000 house is about $50,000 a year. That’s for an average house in a big city where most of these people work. State and federal taxes on a $125,000 income are 50%. That cuts your take home pay to $60,000 – barely paying the mortgage.
Clearly, this is going to put a big hurt on a lot of good people who already pay 50% in total taxes and have to pay $50,000 a year for an average home. They’re going to have to work longer hours, and they sure won’t be able to hire any new help. They may have to let people go and do their jobs themselves. Do we really want to work these people to death?
It’s disquieting to think where the extra five percent tax from these hard working individuals will go. Well, we know it’s to pay into the $1.5 trillion annual deficit the government has been running for the last 4 years; and wants to continue for the next 4 years.
A big chunk of the budget, almost $1 trillion of it, is for welfare programs. The average per person spent on welfare is $20,000 per year. That seems pretty exhorbidant, when you think about it… Who’s debating that number?
Be that as it may, it’s pretty clear that $250,000 can be a bad lower number in many situations. Maybe it should be $250,000 for single wage earners in high standard of living cities, or $500,000 for married filing jointly. That was the threshold for the law just passed in California.
Personally, I think the $1 million threshold is about as low as you can go for an across the board federal tax on high income earners, above and beyond what they pay now. Below that it gets complicated, with factors needed for state tax levels, cost of living ratios, stability of that income over say a ten year time span (probably have to use the income average over many years for this tax) and other factors to make it fair.
Then you have to consider the cost of auditing all these complicated tax returns (the IRS has just hired 15,000 new people just to enforce Obamacare), how many of these individuals even declare their income properly, how many decide to legally shelter their income from this new tax and how many figure out ways to use part of their income in other ways than taking a cash check out of their business.
The liberal media assumes a 100% compliance by 100% of these people and a zero cost in collecting the money and otherwise enforcing the law. That will bring in roughly $50 billion a year. Realistically, the Treasury will physically net something more like $10 billion, if that much. That’s only 1% of a federal budget that’s $1 trillion in the red or .05% of our $16 trillion debt.
The two parties just spent almost that much in the recent elections.
Obama has already promised to extend the Bush era tax cuts for the middle class. This new tax on the wealthy won’t even pay for that, so it won’t even help with the $1 trillion deficit one bit.
Typical Obama, spending money before it’s even collected and demanding even more in the next breath.
Image courtesy of FreeDigitalPhotos.net
