Gregg Easterbrook

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.

Bravely, international diplomats, United Nations officials and environmentalists are meeting in Cancun this week to demand that other people use less fossil fuel. Bravely they met in Copenhagen a year ago to make the same demand, after also bravely meeting in Bali, Montreal and similar resort locales in prior years.

I will skip the obvious point about the greenhouse gases emitted by the jets and limos that bring the participants to these annual confabs, where preaching-to-the-choir is the order of the day.

Most of what happens at the annual international conference on climate change has been decided on in advance, so the greenhouse emissions could be avoided by a tele-meeting. But then the delegates won’t get a paid trip to Cancun!

Elizabeth Warren, just appointed a special advisor to President Barack Obama for consumer protection, says we are witnessing the “death of the middle class.” Slate’s Timothy Noah, a terrific writer and thinker, believes the rich are running away with the country. This new Census Bureau report, showing a nearly 5 percent decline in middle-class household income, received banner-headline treatment, with news stories suggesting typical people are being clobbered.

Middle-class life is the soul of the American experiment. Are things really so bad?

All the angst is focused on pretax income — not after tax.
Stated in today’s dollars, median household income was $45,000 in 1985, peaked at $52,500 in 2000 and is $50,000 now. (Absurd precision such as the “$46,269” median for 1991 doesn’t appeal to me.) Nearly all the decline from $52,500 to $50,000 has occurred since 2007 — that is, during a recession. Most likely that loss will bounce back.

The fight over whether to let tax cuts enacted under George W. Bush expire at the end of 2010 is being waged in terms of political sloganeering — “taxes are an outrage” versus “the rich must pay.”

Here’s the uncomfortable point few want to face: even if the rich do get hit with a federal income tax increase, the middle class must bear much of the cost of fixing America’s budget-deficit mess. Taxes should rise, not just for the rich, but for most Americans.

The current fiscal year federal deficit is running at $1.4 trillion; the outlook is for year after year of very high deficits, and this is before the Baby Boomers retire. Adjusting to today’s dollars, the United States has incurred more debt in the last decade then during the entire combined previous 211 years of the republic’s existence. Unless economic growth rises to about five percent per year and stays there for some time — which is possible, but not likely — tax increases and benefit cuts are the only ways to address record debt.