Why Obama should pay more in taxes

April 20, 2011

President Barack Obama wants to increase taxes on the wealthy, and surely is correct that this must be part of any serious plan to control the national debt. Consider the case of a wealthy couple who made $1.7 million in 2010, yet paid only 26.2 percent in federal income taxes — though the top rate supposedly is 35 percent, and the president says that figure should rise to 39.6 percent. The well-off couple in question is Barack and Michelle Obama, whose tax returns, just released, show they paid substantially less than the president says others should pay.

If Obama is in earnest about wanting increased taxes on the wealthy, then he should send the United States Treasury $182,998. That’s the difference between his Form 1040 Line 60 (“This is your total tax”) and what he would have owed at the higher rate (plus limits on itemized deductions) he himself advocates.

So why doesn’t he tax himself more? The Form 1040, after all, only stipulates the minimum tax an American must pay. More is always welcome. Obama should write a check to the United States Treasury for $182,998.

Wealthy people who say the rich should pay higher taxes — Bill Gates and Warren Buffett have joined Obama in declaring this — are free to tax themselves. If you believe the top rate should rise to 39.6 percent (Obama) or 50 percent (Buffett), then calculate the difference and send a check for that amount to the Treasury. Of course no one individual doing this, even a billionaire, would have much impact on the deficit. But if rich people who say they believe in higher taxes were willing to practice what they preach, this would prove their sincerity, making legislation on the point more likely.

“The most fortunate among us can afford to pay a little more,” President Obama said last week about debt and taxes. So why didn’t he? The president is covered by his own definition of “fortunate,” since his proposal calls for higher taxes on individuals earning more than $200,000 or couples earning more than $250,000.

Compared to the tax returns of the rich generally, the president and First Lady look good. They gave $245,000 to charity in 2010, or 14 percent of their income — admirable generosity, and a better number than posted by most recent presidents and vice-presidents.

Figures from the Internal Revenue Service show that in 2008, the most recent year for which statistics are available, the wealthy paid only about 17 percent of their income in federal taxes — less than the president’s 26 percent in 2010, and much less than the official top rate of 35 percent for the bulk of a well-off filer’s income.

That the wealthy as a group are paying 17 percent of their income as federal income taxes, down from 26 percent from the wealthy as a group in 1992, is a result of the tax cuts enacted under George W. Bush in 2001 and 2003, and extended under Obama last year.

The slashing of taxes for the wealthy is well-known — but Bush’s cut reduced taxes for typical people, too. The lower part of the rate structure is now so low that in 2008, 45 percent of American households paid no federal income taxes at all, according to the Tax Policy Center. Americans as a whole paid an average of just 9.2 percent of their income as federal income taxes.

Both figures are postwar lows. The Tea Party claim that federal taxes are rising is, simply, factually untrue.

Falling taxes for average people have played as much a role in the ballooning federal debt as have falling taxes for the rich. In turn, soaking the rich cannot, alone, tame the national-debt monster.

Calculations based on IRS figures suggest — only rough estimates are possible, as tax laws can change economic behavior — that raising the amount of income actually paid as taxes by the rich from the current 17 percent to 26 percent, what the Obamas paid, would bring in about $200 billion a year in fresh federal revenues. Increasing the figure to about 30 percent (likely actual result of the tax changes Obama advocates) would raise the new-revenue total to about $300 billion annually.

Such amounts would ease the deficit, but hardly represent a cure — government red ink is projected to hit $1.6 trillion this fiscal year. There simply isn’t a long-term deficit solution based only on taxing the rich. Social Security benefit cuts, and more taxes on the middle class, will be needed too.

Sustained 5-to-6 percent GDP growth would solve the deficit problem painlessly, by raising revenue without tax increases or Social Security cuts. While such growth, roughly double the current number, is possible, it seems unlikely.

Though tax increases alone cannot put the country’s fiscal house in order, the president should set a better example on his own tax returns.

That $245,000 the Obamas gave to charity, for example — deducting it on their Schedule A reduced their federal tax bill by roughly $85,000, and cut their Illinois state tax bill too. But you’re not required to deduct charitable giving, or to claim any tax favor. Deductions and tax credits are options. If you think the government deserves more of your income, don’t claim them.

Obama said last year that itemized deductions for the wealthy should be phased out — then on his own tax return, claimed a huge itemized deduction. Until those who advocate higher taxes for the well-off practice what they preach, the national debt situation may only get worse.

39 comments

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I agree with your thoughts Mr Easterbrook, however your well written article focused more on why Obama/other wealthy folks should pay more WILLINGLY, and less on actions we should for this serious issue. This is a serious issue, needs rigorous intelluctual discourse and then we take action to move ahead. Not all will be happy, but need to work together on this issue. This is about natin re-building.
Unfortunately, as a nation we are getting deeper in deficit which we all know this is unsustainable for long term. We are seeing the symptoms and well know the problems associated with this “deficit disease”, however none of us wants to take the medicine (it impacts us!). Perhaps we are waiting for gangerene to set in, and then only action would left be amputation or debridement.

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I guess in some cases, being stupid is voluntary.

Posted by Woltmann | Report as abusive

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“Sustained 5-to-6 percent GDP growth would solve the deficit problem painlessly, by raising revenue without tax increases or Social Security cuts. While such growth, roughly double the current number, is possible, it seems unlikely.”
And why is it unlikely? Well, it would mean a booming economy and that is not going to happen under the current regime’s policies of central planning and extreme regulatory bodies. Most clear-thinking individuals know that if you get the government out of the way, the economy will grow. That is historical fact. If you don’t believe it, do some research and if you’re objective in your reasoning, you’ll see it’s undeniable. So what if GDP growth doesn’t reach the 6% mark. If GDP comes close to 5% and we make significant budget cuts, the problem is likely solved in a relatively painless way.

Posted by djs1138 | Report as abusive

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Actually, in more cases than we would like to think. As far as the deficit is concerned, I would propose a 20% pay cut for all federal employees who gross more than $120,000.00 per year. I think it’s time our government was held accountable for their performance, or lack thereof.

Posted by LazLong | Report as abusive

If the average taxpayer pays 9.2 percent of their income, and 45% pay nothing, then we should be able to have a flat rate tax of 10% of all income by all people, no deductions and no exceptions. It is unfair for someone making money in this country and voting in this country to not pay anything for the wonderful services our governmnet provides. It would be simple, relatively easy to collect and when the government inevitably wanted to raise taxes again, all voters would have to decide weather the new project was really worth the extra tax they would ALL pay.

Posted by zotdoc | Report as abusive

Mr. Easterbrook, people may make contributions to the U.S. Treasury, but Form 1040 does not yield a “minimum.” Form 1040 yields a fully calculated tax burden, the amount due to the government. As the Supreme Court has long held, paying taxes is a civic duty and not a voluntary act. That is why tax avoidance — the reduction or restructuring of income within the tax code — is ethical, while tax evasion is a crime. Gimmicky commentary like yours here may be appealing to your anti-tax friends, the ones who are planning to slash trillions in spending only to cover trillions in tax cuts while the national debt grows ever higher. Reasonable people, however, understand the difference between raising taxes and passing a collection plate.

Posted by JamieSamans | Report as abusive

I don’t see this as “Gimmicky commentary.”

If liberals truly believe what they say, then show it with their pocket books.

They fact is they don’t and they don’t.

It’s all grandstanding in a vain attempt a justifying their “more pious than thou” blatherings.

Their fight against a flat tax just proves the left’s belief that (to paraphrase Animal Farm) “all people are equal, some people are just more equal than others.”

Posted by bobw111 | Report as abusive

I would be willing to bet that the percentage of income that Obama paid in taxes is comparable to those of higher incomes. I would also be willing to bet that many of those in the higher tax bracket pay less with numerous loopholes that expensive accountants and lawyers are able to exploit. Furthermore, only a sucker would pay more for something than what was required. He is advocating that himself be taxed more as the title of your article suggests. At least you recognized the continuing trend of lower taxes in the post war era and the obvious mental deficiency in the Tea Party members. “Though tax increases alone cannot put the country’s fiscal house in order” I believe that Obama’s plan was a mix of budget cuts and tax increases, which is a moderate stance and one that I believe is the will of the people.

Posted by smarcus | Report as abusive

Right! This makes perfect sense! Similarly, we should probably call for those who support higher defense spending to write checks to the Pentagon! This is the most brilliant logic I’ve ever heard!

Posted by joe20 | Report as abusive

I’m quite sure that Barack Obama realizes that he will be paying more in taxes when the new laws are passed. Isn’t that good enough for you? He’s voting for what he believes is right, not what benefits his pocket book. It would be foolish and ‘holier than thou’ (by the way, the Republicans use this too when it comes to sexual misconduct, never having had any themselves) to pay more than he owed, since it only works if everyone does it.

I think that we all will end up paying more taxes but something like the three tax rates suggested by Bowles-Simpson would be a good start. I could go for a flat tax rate too, either of them would cut my rate. Still the big fat gorilla in the room is defense spending, billions of dollars a day, and the cost of healthcare has just gotten too high. We can’t afford to pay hundreds of thousands of dollars for procedures which may or may not work. Insurance is not the answer, price controls on medical expenses is the only way to get that bloated system under control. If we fixed those two things, we could afford investment in education and infrastructure and research and development. Do we want to create things or do we prefer to shoot things? Do we want to promote good public health or do we want a nation of prescription drug addicts? So far the answer has been that we prefer to keep our guns and our drugs, thank you.

Posted by lhathaway | Report as abusive

Well, he could kick it down the road like his predecessor, who certainly did well under his own ‘management’. The social programs will have to be curbed obviously. The President’s rhetoric shunning cuts to entitlements is a starting point in negotiations – nothing more. If we continue the ‘chicken and egg’ philosophy, nothing will change

Posted by auger | Report as abusive

Obama payed $445,400 in federal taxes and paid $52,000 in Illinois state tax. That means they paid 28.7% of their income to taxes. (not including sales taxes, gas taxes, property taxes etc.)

They also donated 14% or $245,000 to charity in 2010.

That means that they paid at least 42.9% of their income in 2010 to taxes and charity.

Sounds pretty reasonable for a millionaire to pay that much.

If every millionaire payed that percentage to taxes and charity, it would fix a lot of problems in America.

Too bad that isn’t how the world works

Posted by darvins | Report as abusive

Sophomoric

Posted by bumticker | Report as abusive

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And, Obama could have claim a tax deduction for his charitable contribution to the Federal Government on his 2011 tax return, provided they gave him a receipt. It appears that politics really pays off. You go out and raise $1 billion to become president, your income becomes $1.7 million ……. But the best is yet to come. Bill Clinton went from making $36,000 per year as Governor of Arkansas and his income has skyrocketed to around. $20,000,000. Not bad for someone who never had a job in the public sector until he left the White House.

Posted by wfclyon | Report as abusive

no tax needed… if we do not have taxes… presidents will not start unnecessary wars or give our taxes to Libyan bandits… let them kill each other…

Posted by Ocala123456789 | Report as abusive

“why doesn’t he just pay more”
Is this author an IDIOT?
how does one rich person paying more solve the budget crisis?
EVERY one of that class needs to pay more.
50% of ppl don’t pay taxes, but the top 1% of the earners earn MORE than ALL of those people COMBINED.
That’s why.
I can’t believe progressive taxes are still being questioned. It’s the 21st century for crying out loud.
Is the education system really THIS BAD??
John Paulson made $5BILLION dollars last year and paid taxes as capital gains rather than income.
Close the loopholes, raise the top tax rate, heck, install a NEW marginal tax rate for earners over 2.5million PER YEAR.

Posted by Adam1234 | Report as abusive

We are all so upset at Obama, did you know that if we just undid the Bush tax cuts, his medicine bill, and ended one of the wars, our deficit would disappear?

All this deficit talk when all we have to do is undo all Bush did.
How many years will it take to undo those 8 years?
4? 5?
we don’t need new ideas, we just need to undo the crappy ones.

“How long will we blame everything on Bush”
Until his failed policies, which CONTINUE to add to the deficit, and is being protected ZEALOUSLY by both his party and people making FAR less than 250,000 a year, STOPS HURTING THIS COUNTRY.

Posted by Adam1234 | Report as abusive

One issue is that 45% of people pay no federal income taxes at all, but get government services. Some of them may view those services as free — “who cares how much other peoples’ taxes go up, I want what I want and I don’t have to pay for it anyway.” But an even larger issue is a logical shortcoming in “progressive” thinking–failing to account for elasticity when people make free choices. If someone is working overtime hours to make more money and is doing so when taxed at a certain rate, it is not a certainty that if you raise that rate the following year they will continue to make the same choice. They may decide what they’ll keep is not worth the sacrifice in whatever else they could be doing with their time such as spending more time with family. Ditto for corporations. Ireland’s corporate rate is way lower than the US rate. Many corporations, in full compliance with our laws, choose to realize income in their Irish subsidiaries for this reason. Raise the US rates higher and you’ll see more income realized in Ireland and other countries and less in the US. The US treasury may actually have less total revenue to show for it, despite a higher tax rate.

Posted by Realist99 | Report as abusive

That’s funny.

Because every time I’ve seen Obama speak I’ve heard him using this very subject as a rhetorical device. ‘You don’t want to lower MY taxes!’, and so on. I’m pretty sure he did that in his recent deficit speech, in fact.

He’s literally begging you to raise his taxes, but it’s somehow not honest enough because he “should write a check to the United States Treasury” instead?

Posted by bsl555 | Report as abusive

Author presents a logical construct. Most of the comments are illogical and biased. Read, learn and stop showing your ignorance.

Posted by joe_jag | Report as abusive

Right. And anyone who voices support for clean air shouldn’t drive a car, and anyone who wants to do something about global warming shouldn’t use electricity. the author’s selective reasoning tacitly supports those who just keep their mouths shut, who are apparently free to do whatever they please. We’re all in this together, whether the author likes it or not. Obama voluntarily taxing himself wouldn’t convince anyone of anything, but it would make quite a few people chuckle to themselves and think, “sucker!”

Posted by homejak | Report as abusive

Mr: Easterbrook, you recently called for Congress to enact a carbon tax. Should we now expect to see your recent voluntary payments for any CO2 generated directly or indirectly, proving your sincerity and thus making legislation on the point more likely, or do you plan to wait until a few other people are on board with the plan?

Posted by mr99 | Report as abusive

Lies damn lies and statistics. There is so much information missing from the statistics. What is the Min what is the Max what is the average and what is the standard deviation. No one ever quotes this when they try to use statistics to prove their point. Until people start showing these figures don’t believe them.

Posted by IDONTGETIT | Report as abusive

Excellent logic. The pro-life and anti-gay marriage movement should take note.

Posted by herb01 | Report as abusive

This is fine, as long as you apply the same principle in reverse to all those conservatives who are opposed to government spending on social welfare programs. Every one of them should voluntarily give up his or her right to receive benefits from any of those programs.

Posted by lacich | Report as abusive

The problem with the post is that it misconstrues, I believe, what the wealthy millionaires and billionaires are suggesting when they suggest that they would be willing to pay more in taxes. No one likes paying taxes, but they agree to it as part of the social bargain for government services from defense to social services for the most needy. The Obamas and Buffetts of the world are willing to pay more to assist in the debt reduction (which should help everybody if it helps the economy) and/or maintain certain programs or government services. I doubt they are suggesting take more from me so Donald Trump can keep his taxes low. There is no point of them giving more to the US Treasury if it is not part of a deal that advances the goals for which they are suggesting their taxes be raised. Under those circumstances, they may prefer to give more to charity where they can direct where it is being used. Now, of course, congress can change the law in the future, keep taxes higher, and squander the funds, but that requires legislation and the political process which requires some consideration. I am not suggesting that tax payers get to earmark their taxes, only that willingness to support legislation that negatively effects you usually is linked to the view there is a greater good that comes from it. Giving more to the US Treasury so the other wealthy individuals can maintain their tax rate is probably not the common good that either Obama of Buffet had in mind. To that end, this “putting their money where their mouth is” post is a bit gimmicky. It is consistent with the debates over public education with the argument that wealthy liberals do not send their children to certain public school districts but try to limit vouchers etc. It is a cute debating tactic, but does not really further the public debate on the public policy issues (how to best achieve better education for everyone or reducing the debt).

Posted by sdn1965 | Report as abusive

How many Republicans refuse to accept Social Security and Medicare payments? How many wealthy Republicans seek out Medicaid recipients and offer to pay their medical bills? By the logic of this post, any consistent conservative should be doing those things.

Posted by FredRogers | Report as abusive

Truly this commentary never gets old. Al Gore flies on a lot of jets, he must not care about the environment.

Barak Obama does not pay extra taxes, he must not care about the deficit.

I’m sure if you ask Felix will explain why this is silly reasoning.

Posted by chuck12 | Report as abusive

The premise of this narrative is just plain silly. The real issue is an elimination of the numerous loopholes that the rich and well paid enjoy.

Posted by seattlesh | Report as abusive

[...] such data, the number will be fantastically unimpressive), but until then, let’s talk about how our Nation’s Leading Democrat files his taxes: Though tax increases alone cannot put the country’s fiscal house in order, the president should [...]

Not a big fan of the “why don’t you just pay higher taxes yourself” argument. It seems like your just tying to do a gotcha on people who are willing to make a non-self serving argument (like, “you can’t talk about the military unless you’ve been in the army” or “you can’t talk about abortion unless you’re a woman”). Being for raising taxes on your income bracket is a valid position even if you don’t do it individually, it’s the difference between sacrifice and just being taken advantage of.

Posted by ceptri | Report as abusive

45% pay nothing. the biggest piece of mythology on the right. That is a highly manipulated income tax number. These people pay payroll taxes, social security taxes, medicare taxes, excise taxes, etc. people with annual incomes under $10,000 pay some federal tax, most often payroll taxes on wages. and many low income earners end up paying more in payroll taxes than they get back from credits, like EIC.

so that argument is at best a red herring and more likely a deliberate attempt to mislead and manipulate information. not surprising from the wingnuts.

but beyond that, yet another truly terrible article from Gregg Easterbrook. truly awful.

Posted by optimatorz | Report as abusive

[...] the Dish quoted Gregg Easterbrook: Wealthy people who say the rich should pay higher taxes — Bill Gates and Warren Buffett have [...]

So many larger issues to tackle involving taxes and the budget, and Easterbrook wastes time pointing out some insignificant example of hypocrisy. The point is a few wealthy people giving a little would almost zero effect on the budget outlook. It’s like pointing out that it’s better to eat a salad than a hamburger, doesn’t make you a hypocrite if you eat a hamburger.

Posted by jme0909 | Report as abusive

[...] Obama Tax Return: President Paid Less Than He Would Tax Wealthy Posted on April 21, 2011 by Bob Fois Hello there! If you are new here, you might want to subscribe to the RSS feed for updates on this topic.Powered by WP Greet Box WordPress PluginCurious column from Reuters:  Why Obama Should Pay More In Taxes [...]

Even though 45% of people don’t pay income taxes, they still pay payroll taxes and sales taxes and a myriad of other taxes – they are not getting anything for “free.”

Posted by br_add | Report as abusive

This is a fine suggestion, but it is incomplete. If liberals in favor of tax increases can be asked to forego tax deductions that they are legally entitled to take, then conservatives in favor of spending cuts should be asked to give up federal benefits that they are legally entitled to receive.

Posted by lacich | Report as abusive

This article would have been a lot more merit had the author also propose that all GOP members of congress voluntarily give up their Medicare and Social Security benefits. I mean, if they really believe the country can’t afford them and doesn’t need them, why are they still collecting them! I guess they’re hypocrites right mister Easterbrook? And while they are at it, they really should be contributing extra amounts from their paychecks to the Pentagon

Posted by urban16 | Report as abusive

br_add: But don’t payroll taxes ostensibly go into the Al Gore “lockbox” for Social Security and Medicare? Sales taxes go to local/state coffers, not federal ones. Same for taxes on real estate and, in some states, on personal property like cars. Federal income taxes are what fund many of the remaining services like federal student loan programs, Pell grants, extended unemployment insurance, etc. Those are some of many possible examples of the federal services about which I was speaking.

seattlesh: You may benefit from some “loopholes” yourself. How about the mortgage interest deduction? That one costs many billions of foregone federal revenue and benefits by far greater numbers of middle-income taxpayers than upper-income ones.

IDONTGETIT: Look at the Form 1040 instructions. If you make less than a certain amount (a number that depends on whether or not you’re married and how many children you have) then you owe no federal income taxes at all. That’s just a fact anyone can verify for themselves, and it’s not “lies damn lies and statistics.”

Posted by Realist99 | Report as abusive

I would say the author’s suggestion falls under the category of “unilateral disarmament”.

It is analogous to the claim that a politician who believes in term limits should, in the absence of legally-mandated term limits, voluntarily limit his or her own terms in office.

Those who volunteer to abide by rules that they feel are in the public interest to be mandatory are simply providing an advantage to those who do not share their views on what is in the public interest.

What sense does it make to take an action which serves to benefit those you believe are wrong?

Another way to put it is: For Obama to voluntarily pay more taxes than he owes makes him a first class chump.

Posted by lsjogren | Report as abusive

[...] the situation of my family’s relationship to cars with Easterbrook’s observation about President Obama which so irked [...]

[...] or, alternatively, how little some people are taxed relative to their income, etc.  Now comes Gregg Easterbrook, whose work I do not know (and now I know why, if this is a measure of his intellect).  It is [...]

[...] Income Taxes, or take less than they are entitled to claim.  Oh, what’s that?  Even our President took full deductions for things like charitable donations?  Oh, oh my, such strong Leadership from our Dear Leader In [...]

The case of Mr Obama and the 35% vs 26% tax rate proves that no one really knows what the real rate of taxation is. Any talk of raising taxes is premature until the tax code itself is overhauled. Best possible solution is a flat tax with one deductible and a single rate for everyone. Tax code: (Income-deductible)*tax rate=tax owed. That’s it! It’s very progressive, for you progressive types (the real rate doesn’t approach the nominal rate until about $250K in income). The rich can’t pay a CPA to dodge the tax man. We can all use the hours spent preparing taxes for better purposes.

Posted by mheld45 | Report as abusive

optimatorz & br_add: Your payroll tax argument is a complete canard. You know as well as I do that medicare and SS payroll taxes at best slightly defray the cost of future services consumed by that 45%-49% who do not pay federal income taxes. Of course, now you’ll make the incorrect argument that some small fraction of those don’t live long enough to recoup their contributions to SS and medicare, but on an actuarial basis that cohort not only makes their money back while freeloading on other government services, but they even make a profit on these payroll tax contributions. Excise taxes, you say? Seriously? So those in higher tax brackets are hit less by these because they *gasp* save money. Perish the thought. Surely it’s much better to encourage boundless consumption. What could possibly go wrong with subprime lending after all?

To those who want conservatives to relinquish their future SS and medicare payments, I say OK. But, you have to agree to return all of my payments to date with a rate of return equal to the S&P500 over that same period. I will gladly save for my own retirement expenses as long as you stop taking my money and spending it for me.

Finally, the fact that Obama chose to take the deduction for his charitable giving speaks volumes about his insincerity. If all of the federal budget is true and noble, then he should happily give up that deduction. It’s not a case of being a “chump.” The federal government is simply a metacharity. Instead, he clearly believes that he can spend that money better than the federal government. And if that’s true for him, then why not others?

Posted by center_right | Report as abusive

[...] to control the national debt. Consider the case of a wealthy couple who made $1.7 million in 2010, yet paid only 26.2 percent in federal income taxes — though the top rate supposedly is 35 percent, and the president says that figure should rise to [...]

[...] as an example of hypocrisy. This is the same kind of “hypocrisy” that Gregg Easterbrook seized on last week: If Obama is in earnest about wanting increased taxes on the wealthy, then he should send the [...]