Did Barack Obama take Tax 1 in law school? I did, and I remember the first day of classes, when mild-mannered professor Boris Bittker asked a simple question, “What is income?”
I was pretty confident I could come up with a quick answer and so were a lot of other students. By the end of the hour, after professor Bittker had politely punched huge holes in every student’s definition, it was pretty clear that none of us could. Income is a slippery concept, especially slippery when you’re trying to tax it.
Which leads me to think that Obama may have avoided Tax 1. Or perhaps he dozed off in class. For in his April 13 speech at George Washington University, the speech to which Standard & Poor’s responded by reducing the government’s credit rating to “negative,” he seemed to think he could get all the money we need to balance the budget from higher taxes on the rich.
That’s wrong as a matter of simple arithmetic, as is clear from a chart reproduced on the Wall Street Journal editorial page showing the total amounts of taxable income of each group.
The chart showed that if the government had simply confiscated every dollar from those reporting more than $1 million taxable income in 2008, it would not have gotten the $1.3 trillion needed to close the current federal budget deficit.
What the chart doesn’t show, however, is even more important. And that is that when you reduce income tax rates, high earners have more taxable income. When you raise them, they have less.
High earners don’t sit around waiting to have their money confiscated any more than chickens sit around and let you pluck out all their feathers. They pursue other options.