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Obama Fails to Lead by Example on Taxes



April 22, 2011

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.


 

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Submitted by Kent at: April 25, 2011
This is an excellent illustration, not only of what is wrong with our tax laws, but also of drawing conclusions from only one set of facts. I would not guess what the combined payroll of these ten corporations is, but I guess it is a fair chunk of our total payroll. With the exception of the banks, whom I believe we should never have bailed out (Let them reorganize under chapter 11 thereby causing the shareholders (the rich? to lose their investment). There are other truths to consider before shooting the goose who lays the golden egg: 1. These corporations have huge government incentives for everything from research, equipment write offs, depreciation, government contracts, and other costs of investing in future profit producing infrastructure that gets deducted from the “net operating profit” before the taxable income is shown. Do you believe that the “profit” shown in this chart is the “taxable income of these corporations? I think not. 2. The USA taxes our domestic corporations at a higher rate than any other country in the world. This gives the large corporations a huge incentive to move as much of their operations offshore as possible, thereby also moving payroll with it. Let’s face it, like it or not, we are in a global economy that is highly competitive. Survival is the basic goal. 3. Do the above two truths scream for tax reform?? YES! Do they scream for higher US corporate taxes?? NO! Let us not redouble our efforts after loosing sight of the goal. Let us not cook the golden goose. If our corporate system fails, do we think that the government can provide productive jobs that actually generate taxable income greater than that spent on creating and maintaining the jobs??? I think not. What then is the fix?? Tax reform to start with. For the corporations, start with elimination of many of their “deductions” and adjust their tax rates lower to a point where we encourage their offshore jobs to come back to the USA. Get rid of the idea that “taxing the rich” will solve or even start to solve our budget problems. The present definition of “rich now includes almost all of the small businesses in this country owned by families and individuals. Here is where a majority of our payroll resides. As a small business owner of over 50 years, I can tell you that I was very sensitive to the bottom line, and when it disappeared, I quit! (payroll and all). The problem lies in the fact that over 90% of our personal tax revenue comes from less that 10% of the persons with income. A ‘Flat Tax, VAT Tax, or a national Sales Tax REPLACING our present system would solve a lot if not all of the problem. It would, however put millions of accountants out of work and take a huge bite out of the IRS budget. Radical ideas like these seem arcane but I believe we are at the point where we need major surgery. Our old ideas have resulted in our present state. We should not comfort ourselves in spreading the blame. Both political parties, our deterorating moral structure, lack of personal responsibility, and our belief that we are due free money from the government are to blame. Kent From: Janine Carbon [mailto:jcarbon@cfl.rr.com] Sent: Sunday, April 24, 2011 6:51 PM To: Carole; Eilene; Barbara; George-Ann; Janet; Kent; Marc'-Ann; Paul Subject: FW: Oh those poor poor corporations A few weeks ago, Senator Bernie Sanders released a list of the 10 companies worst at paying their fair share in taxes. We liked it, and our designer Gabe quickly put it into chart form and put it up on our website. What happened next was exciting: Tens of thousands of people started sharing the chart on Facebook. Blogs started posting links to it. It began to really blow up—and that gave us an idea: What if we could get this popular chart in front of millions of people today as they're finishing their taxes? So here we go: We're going to try to saturate Facebook with the chart below, so that everyone sees the shameful behavior of these 10 companies. Can you join in? All you have to do is click this button to share it: