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Obama Fails to Lead by Example on Taxes

by Brandon Greife / /

During a speech on deficit reduction at George Washington University last week, President Obama whipped out one of his favorite new one-liners. Republicans “want to give people like me a $200,000 tax cut,” Obama said, presumably referring to the high-income earners in America.  

Fortunately, the White House released President Obama and his wife Michelle’s income tax return this week, so we can see just what he meant by “people like me.” The receipt shows that the President and his wife made more than $1.73 million and paid $453,770 in federal taxes. That means 26.2 percent of his income went to taxes, lower than the top 35 percent rate under the Bush-era tax levels, and far lower than the 39.6 percent level Obama pushed for last summer.

This leads economist Steve Landsburg to ask an interesting question, “If the President believes that people like him ought to be paying more, then why didn’t he pay more? There is absolutely no rule against sending in more money than you owe.”

Lansburg continues,

Now you might say that the Obamas believe it’s important to raise many billions more in taxes, and that sending in an extra hundred thousand or so would make essentially no progress toward that goal. But I don’t think you’d continue to say that if you thought about it. If the Obamas are one of, say, a million families in their financial position, and if the Obamas, and only the Obamas, send in some extra money, that’s only (by Mr Obama’s reckoning) one one-millionth as good as repealing the Bush tax cuts — but at the same time it’s costly to only one one-millionth as many taxpayers. Surely these things should scale.

In fact, since you’d expect the first hundred thousand to go to the most urgent use, the president’s contribution should be worth more than one one-millionth of a million contributions, while still imposing costs on only one one-millionth as many people. If repealing the Bush tax cuts is a good deal, the Obamas’ extra voluntary contribution would be an even better one.

Somehow I think it unlikely that Obama will be whipping out his check book anytime soon. Nevertheless, if his desire for philanthropy and his well-founded concern over the deficit overcome him, I’d like to remind him that federal law allows the Secretary of the Treasury to accept gifts given for the express purpose of reducing public debt. I’d encourage our President to visit the following link, which provides an easy and secure way to pay what he considers his fair share: https://www.pay.gov/paygov/forms/formInstance.html?nc=1271991815942&agencyFormId=23779454

Sadly, if the past is our guide, simply giving the government more money does more to increase rather than decrease our deficit. According to a study conducted in late 2010 by economist Richard Vedder, since World War II, each new dollar in tax revenue was associated with $1.17 in new spending.

So if the President really wanted to help he should focus on reducing government spending, not raising government revenues. After all, as recently as 2007 government spending represented only 19.6 percent of GDP, but in the three years since 2009 it has jumped to 24.4 percent, where it is scheduled to stay for the foreseeable future. There is just no escaping the fact that we have a spending problem, not a revenue problem.  That said, if our President is going to continue saying people like him should pay more, the least he could do is lead by example.