The Big Lie - Obama's Class Warfare Political Deception Regarding Taxing The Rich

Before delving into today's topic, a few disclaimers from me:

• I am not Warren Buffet wealthy or anywhere close to it.
• I drive an eight year car and my wife drives a five year old car.
• We live in a typical, middle class, 2,000 square foot house and have no luxurious secondary homes in Arizona (like Warren Buffet's secretary has), in Aspen, in Europe, in the Caribbean, or any other exotic location.
• Up until the November, 2011 elections, I had never voted for a Republican for national office in my life (I am 57 years old).
• My wife and I are semi-retired living on a semi-fixed income and last year paid Federal income taxes at the 15% income bracket.
• I have an advanced degree in statistics so I think I know my way around a spreadsheet and a set of numbers.
• I am disgusted when politicians, or anyone else, misuses facts, data, and statistics. It is an affront to my discipline and the integrity of the numbers and assumes that myself and other Americans are too stupid to understand the lies that the political class puts forth.

Thus, I really have no financial stake in President Obama's desire to raise taxes on the wealthy in this country.

A review from previous documented posts in this blog:

• Estimated annual taxpayer wealth lost to waste and fraud in the Medicare program: $60 - $90 billion
• Estimated annual taxpayer wealth lost to waste and fraud in the Medicaid program: $40 - $60 billion
• Estimated annual taxpayer wealth lost to waste and fraud in the Social Security program: $70 billion
• Estimated annual taxpayer wealth lost to waste and fraud in one Federal government unemployment program: $19 billion
• Estimated annual taxpayer wealth lost to waste and fraud in one Federal food stamp program: $2 - $3 billion
• Estimated annual uncollected Federal income taxes from U.S. citizen tax evaders that is due to the Federal government: $325 billion
• Estimated annual taxpayer wealth lost to just the above Federal programs: $517 - $567 billion

Okay, now that the preliminaries are out of the way, let's look at what I consider one of the biggest lies, hoaxes, and political class deceptions I have ever come across. President Obama and other politicians in Washington would have you believe that the vast majority of higher income American earners pay a smaller percentage of their earnings in Federal income taxes than the average middle class American.

He implied such in his state of the union speech and it has been his political stump mantra over the past few months. On a local Tampa Bay morning newscast yesterday, Democratic Congresswoman Debbie Wasserman Schultz, who is also the chairwoman of the Democratic National Committee, repeated the deception by stating that the President will campaign for reelection to fix this supposed tax inequity.

Which raises a question in my mind: do these people really believe this myth and are too busy or incapable of verifying it is a valid reality? Or are they being deliberately deceptive to incite more class warfare in this country for the benefit of their political goals? In either case, incapable of doing some simple research and math or deliberately lying, they are not someone I would trust for public office.

The reason for my view is that their false assertion can be easily checked using online, official IRS data that compiles the tax returns of every American in excruciating detail. The data is available in EXCEL spreadsheets at the following link for anyone that wants to do the math themselves:

http://www.irs.gov/taxstats/indtaxstats/article/0,,id=96981,00.html#_grp1

So let's see if Obama, Wasserman Schultz, and other Democrats are accurate in their assertion that most higher earning people in this country pay less as a percentage of their earnings than middle class earners based on real data from history and the IRS:

• As you will see at the website, the latest year that taxpayer information is available is 2009 so lets base our analysis on this most recent data:
• In the 2009 spreadsheet you will see that the IRS tells us how many American tax returns out of the 140 million filed fell into each Adjusted Gross Earnings (AGI) earnings bracket, starting at $0 and going up to over $10 million earned.
• The spreadsheets also show what the total earnings were in each bracket and how much was paid in taxes in each bracket by the earners within each bracket.
• If we do the simple math calculation of dividing the total number of tax dollars paid by the amount earned in each earnings bracket, we come up with the following chart (you can double click on the graph to get a larger, more detailed picture):

• What do we learn from this simple math calculation based on official IRS data? The more you earn in AGI, the higher percentage of those earnings you pay in Federal income taxes. This seems to be in direct conflict with Obama's assertion and mimicked by others in his party that this is not the reality.
• In fact, the vast majority of Americans earning up to $100,000 a year, on an overall average perspective, pay less than 5% a year of their earnings in Federal income taxes while the vast majority of Americans earning over $100,000 a year in total pay over 20% of their earnings in Federal income taxes, four times as much on a percentage basis.
• Hardly unfair when you now consider that the wealthier earners in this country pay far more in both absolute tax dollars and four times higher on a percentage of earnings basis.
• If you do a little more math and look at those that earned over a million dollars in 2009 vs. those that earned less than a million dollars, you find that the over $1,000,000 paid on average paid about 24.4% of their earnings in Federal income taxes while those earning under $1,000,000 paid less than 10% in Federal income taxes.
• 87.6% of the 140,000,000 million tax returns filed had income under $100,000 and all of them, on average, paid less than 10% of their income in Federal income taxes.
• Those that earned over $500,000 paid about 24% of their earnings in Federal income taxes, on average.
• Those earning over a million dollars a year in AGI comprise (about 240,000 out of 140 million 2009 tax returns) only .17% of all U.S. earners in the 2009 IRS tax tables. Theoretically, if Obama got his way and taxed these earners at a full 30%, it would only add another $40.6 billion annually to the Federal government tax stream.
• To put this $40.6 billion in perspective, if it was somehow equally distributed to every American tax filer who earned less than $1,000,000 a year, each filer would get back the equivalent of $.79 a day.
• The $40.6 billion would cover only about 2.5% of the national debt that the Obama administration rang up in 2011. It would be only about 1% of the overall Federal budget in 2011.
• The amount of taxpayer wealth lost to waste and fraud in the Federal government programs listed above is about 13 to 14 times larger than the $40.6 billion that would be generated by Obama's 30% tax the rich target. Thus, if Obama and the rest of the political class were doing their jobs, they could easily recover much more than the 30% figure for their programs vs. taxing any American more.

But that is the point. If Obama was actually doing some of the mundane parts of his job, e.g. protecting taxpayer wealth and being frugal with our tax dollars, he would have a less effective political talking point. Better to divide Americans and fire up his base even if the political position he is putting forth is bogus from a math, statistical, and reality perspective.

Remember, the above numbers are not from the Republican Party, the Tea Party, Fox News, or any other adversarial political force to Obama. They are the actual, official IRS numbers from 2009. I doubt that the 2010 and 2011 numbers are any different.

In fact, if you look at the number of Americans who earned over a $1,000,000 in AGI over the past few years you will see that the number is actually going down, from just under 400,000 in 2007 to under 240,000 in 2009. Thus, the case against the President for taxing the rich is likely more viable now than when the 2009 tax numbers were compiled since there are 40% fewer millionaire earners to tax in 2009 vs. 2007.

Hey, if you think the rich should pay more in Federal income taxes in this country, that is your right and I respect that position. But please do it for the right reasons and not the fact that you believe the deceptions and lies spewing forth from the Democrats in Washington. Warren Buffet is the exception. His secretary, who reportedly earns well over $100,000 a year, is the exception.

Failing to educate yourself and blindly jumping on the Obama class warfare bandwagon contributes to the divisions within this country. Taxing the rich in this way will not solve your personal financial situation and challenges, it will not resolve our dire national debt crisis (as we see from the above analysis, we have a national debt crisis that can only be solved by drastically reducing Federal spending and not raising taxes on the rich), and it will divert attention from solving the disgrace of the Federal government wasting over half a TRILLION dollars a year.

Do not have money envy, it is an ugly trait. Most of the high earners in this country earned their money legally and ethically. They deserve to be treated fairly according to the reality of the situation and the numbers above, especially since taxing them more will not solve any crisis or issue facing the nation today. They do not deserve to be demeaned and slandered by pandering, class warfare politicians.



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