(Emailed to White House on 12-29-12)

President Obama c/o The White House
1600 Pennsylvania Avenue NW
Washington, DC 20500

Dear Mr. President,

I know that you receive 20,000 letters a day and that you actually read 10 of them every day. I really do respect you for trying to get a pulse on what is going on out here.

Why raise taxes when you are trying to expand the economy?

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“Common sense told us that when you put a big tax on something, the people will produce less of it. So, we cut the people’s tax rates, and the people produced more than ever before.”In Reagan’s farewell address he touted the historic tax cuts passed under his administration in 1981.

Rep Dennis Ross noted on facebook:

While we all wrestle with the best solution for fiscal restraint, here is an article addressing the impact on the top taxpayers.

(Next Rep Ross provided the link to this story below.)

Chris Conover, ContributorI explode myths that pervade health policy debates.

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The Congressional Budget Office (CBO) released its latest tax data this month. The report details who contributed how much to federal revenues in 2009. The figures raise the question: why do so many in this country seem so eager to berate the ‘one percent’ rather than thank them for their extraordinary contributions to federal coffers?

According to the report, those in the top one percent had an average pre-tax income of $1,219,700 in 2009. Of this, they paid $353,000 federal taxes. Despite having earned 13.4 percent of the nation’s income, these individuals paid 38.7 percent of federal income taxes that year. To put it more starkly, this group makes less than 16 times as much as the average household but pays more than 40 times as much in federal income taxes.

Sure, the picture looks a little different when all federal taxes are included. With payroll, corporate, and excise taxes thrown into the mix, the top one percent contribute “only” 22.3 percent of all federal taxes. But in raw dollar terms, the average one percent household pays 23 times as much in total federal taxes as the average household—a difference of $337,700. Despite this, some politicians and activists claim with a straight face that our country’s top earners don’t pay their “fair share.”

Consider a world without such individuals—a world in which we have so taxed and vilified the most prosperous Americans that they all elect to follow Denise Rich and foreswear their U.S. citizenship in search of greater economic freedom. French President François Hollande is already learning this the hard way, as many of his country’s wealthiest individuals pack up and leave as a result of his proposed tax hike on French millionaires. Indeed, the U.S. itself has seen an eightfold increase in the number of Americans abandoning their citizenship (most, apparently for tax-related reasons). Since U.S. lawmakers have yet to show any ability to curtailing their spending, Uncle Sam would be looking to the remaining 99 percent of taxpayers to make up what would be a massive gap in income tax revenues due to the sudden emigration of the top one percent.

As a matter of simple arithmetic, everyone’s federal income taxes would have to go up by at least 63 percent to compensate for this lost revenue should the top earners depart. Such a gargantuan increase in taxes would rather substantially reduce work effort among the remaining 99 percent. The best evidence suggests that the economy loses 52 cents in output (lost work effort) for every dollar increase in individual income taxes. That means Congress would need to nearly double the rates for everyone else in order to cover the revenue gap.

Moreover, there’s a major discrepancy between the one percent’s financial support of government and its consumption of the resulting services.

If our population lost the top one percent, government could theoretically shrink spending on defense, courts, etc. by one percent to account for reduced need for services. However, since most federal payments for individuals are means-tested (ie. entitlement programs such as Medicaid and food stamps), loss of America’s top earners wouldn’t translate to a proportional reduction in these areas of the budget. And those payments accounted for more than 60 percent of federal spending in 2010.

Of course, losing the top one percent would mean far more than the loss of hundreds of billions in tax revenue. According to Federal Reserve data, this group also accounts for 30 percent of philanthropic giving. Many in the top one percent are business owners who employ many workers. In fact, nearly two thirds of those making over half a million dollars a year personally bear the risks of owning a company on their own or with just a few other shareholders. And losing the top one percent would translate to the departure of nearly 200,000 physicians—something a nation facing a doctor shortage could ill afford.

Like most Americans, I do not expect to enter the ranks of the top one percent (which in 2009 included one-person households with incomes exceeding $282,900, two-person households above $400,100, etc.). Perhaps I am totally deluded, lacking in class consciousness, or simply a victim of the Stockholm syndrome. But the way I look at it, I’m eminently grateful for those who have worked to attain this lofty status. I wish the current political elite felt the same way.

Update 1:

What You Don’t Often Hear About Those ‘Greedy’ One Percenters is an excellent account of the work ethic within this group.

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President Obama c/o The White House
1600 Pennsylvania Avenue NW
Washington, DC 20500

Dear Mr. President,

I know that you receive 20,000 letters a day and that you actually read 10 of them every day. I really do respect you for trying to get a pulse on what is going on out here.

Ronald Reagan had a lot to say about taxes and he liked cutting them. Why not take a page out of his book instead of trying to harm our job creators like you are doing?

Rep Michele Bachmann shared a story that relates to all this talk we hear out of Washington about the rich not paying their “fair share.”

Unfortunately this has become a novel concept for some:(

Every evening, the same 10 friends eat dinner together, family style, at the same restaurant. The bill for all 10 comes to $100. They always pay it the way we pay taxes:
• The first four are poor and pay nothing.
• The fifth pays $1.
• The sixth pays $3.
• The seventh, $7
• The eighth, $12.
• The ninth, $18.
• The 10th, (the most well-to-do) pays $59.

One night the restaurant owner announces that because they’re such good customers, he’s dropping their group dinner bill to $80. Let’s call that a tax cut. They want to continue paying their bill as we pay taxes. So the four poorest men still eat free. But if the other six split the $20 tax cut evenly, each would save $3.33. That means the fifth and sixth men would end up being paid to eat. The restaurant owner works out a plan: The fifth man eats free; the sixth pays $2; the seventh, $5; the eighth, $9; the ninth, $12; and the 10th guy pays $52. All six are better off than before, and the four poor guys still eat for nothing. The trouble starts when they leave the restaurant and begin to compare what they reaped from the $20 cut. “I only got a dollar of it,” says the sixth man, “but he (pointing at No. 10) got $7.” The fifth guy, who also saved a dollar by getting his meal free, agrees that it’s not fair for the richest to get seven times the savings as he. No. 7, grousing that the wealthy get all the breaks, points out that he only got two bucks. “Wait a minute,” the first four poor guys yell in unison. “We didn’t get anything at all. The system exploits the poor!” The nine men jump the 10th and administer a severe beating. The next night he doesn’t come for dinner. They shrug it off and eat without him. The customary $80 bill comes. Surprise! They’re $52 short.

Yes, those who pay the most taxes get the most back from tax reductions. But tax them too much — punish them for the wealth they may have — and they just might stop bringing their money to the table.

I guess this is why American businesses have about $10 trillion in offshore deposits. You can’t blame them. After all, they got tired of getting beat up to forfeit their “fair share.”

________

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(Emailed to White House on 12-21-12)

President Obama c/o The White House
1600 Pennsylvania Avenue NW
Washington, DC 20500

Dear Mr. President,

I know that you receive 20,000 letters a day and that you actually read 10 of them every day. I really do respect you for trying to get a pulse on what is going on out here.

Rep Todd Rokita of Indiana noted on facebook:

Another on-point column by John Stossel. “It’s the spending, stupid” sums up the adult conversation Hoosiers are having about government spending and the true drivers of our debt.

“People will have to see the wisdom of giving up government benefits now — in exchange for something more abstract: a future free society in which our children won’t be burdened by debt and taxes.”

It’s the Spending, Stupid!

By John Stossel – December 19, 2012

Listening to progressive media pundits, I’d think the most evil man in the universe is Grover Norquist, head of Americans for Tax Reform. His crime? He heads a movement that asks political candidates to pledge not to raise taxes.

I think Grover accomplished a lot. But I wish he’d convinced politicians to pledge not to increase spending.

President Obama says raising taxes to cut the deficit is a “balanced” approach.

Balanced …

But what’s “balanced” about raising taxes after vast increases in spending? Trillions for war, Medicare, “stimulus” and solar panels. Tax receipts rose — after tax-rate cuts — from $1.9 billion in 2003 to $2.3 billion in 2008, the year the recession started. That increase couldn’t keep up with the spending. The deficit doubled — actually, more than doubled — as politicians increased spending to nearly $4 trillion! Our debt, at more than $16 trillion, now exceeds our gross domestic product.

Ludicrous, irresponsible spending is why we’re in trouble. As columnist Ron Hart points out, Bill Clinton’s balanced budget spent $1.7 trillion. “Adjusted for inflation,” he writes, “our federal government would (have) a $200 billion surplus. But instead of increasing government spending in line with normal inflation, under Bush and Obama we are spending $3.8 trillion today. Democrats, who believe we have a ‘revenue’ problem instead of a ‘spending’ problem, must also think they have a bartender problem, not a drinking problem.”

The media obsess about tax rates, but spending is more important. As Milton Friedman taught us, spending is a far more accurate gauge of the government burden. If government spends a dollar, that dollar is taxed away from someone. If it’s borrowed, it’s removed from productive use, setting the stage for higher taxes later. If the government prints more dollars to fund spending, our purchasing power falls. Transferring purchasing power from the people to the government via inflation is a form of taxation.

If Republicans and Democrats reach a deal, the tax increases will be real — but spending “cuts” probably illusions. If they actually happen, they will only be reductions in already planned increases. The Wall Street Journal notes that when the two parties talk about cutting spending by $4 trillion over a decade, “those numbers have no real meaning because they are conjured in the wilderness of mirrors that is the federal budget process. Since 1974, Capitol Hill’s ‘baseline’ has automatically increased spending every year according to Congressional Budget Office projections … . Tax and spending changes are then measured off that inflated baseline.”

Given our growing debt, can’t they even slow the growth of government to the rate of inflation? Or inflation plus 1 percent? Or even inflation plus 2 percent? That might balance the budget within a decade.

But the spenders won’t even give me that. They want more. Always more.

Jonathan Bydlak, founder of the Coalition to Reduce Spending, has a good idea. “It’s important to do for spending what Norquist has done for taxes: create a means for voters to hold elected officials accountable when they break campaign promises of fiscal responsibility.”

Bydlak has no time for any politician who pledges not to raise taxes without pledging to cut spending. He praises Doug Collins, representative-elect from Georgia, and Ted Cruz, senator-elect from Texas, for signing the Reject the Debt pledge and thereby promising voters they would:

“ONE, not vote for any budget that is not balanced nor for any appropriations bill that increases total spending;

“and TWO, consider all spending open for reduction, and not vote to authorize or fund new programs without offsetting cuts in other programs.”

Well, sure. Good luck to him.

But people are reluctant to give up their favorite programs. Or any programs.

Let’s not fool ourselves about how dependent politicians have made people on government.

To succeed, the crusade to cut spending needs an ideological understanding of how unsustainable our current course is, not just a narrow appeal to short-term self-interest. People will have to see the wisdom of giving up government benefits now — in exchange for something more abstract: a future free society in which our children won’t be burdened by debt and taxes.