Opinion

Soaking everybody won’t fix the debt

So you want to eliminate the federal deficit by taxing the rich? OK, let’s run the numbers.

Start with those making $1 million or more a year. For 2012, the Joint Committee on Taxation (Congress’ official estimator) estimates that these super-rich will make up just 0.3 percent of all tax filers and pay $269 billion in income tax (23.6 percent of the income-tax total).

Even doubling their income-tax bill would leave us $1 trillion short.

That’s the kind of Washington spending the federal income-tax machine is up against. The president’s budget estimates 2012 federal spending at $3.796 trillion and revenues $2.469 trillion, for a shortfall of $1.327 trillion (the second-highest in US history, after 2009’s.)

Yikes. Taxing away the entire estimated 2012 income of the $1-million-and-above earners only gets us $1.229 trillion; we’re still $100 billion short of balancing this year’s budget.

So let’s target the infamous “one percent.” Those making $500,000 and above make up 0.8 percent of all tax filers and pay $381.5 billion in annual income taxes (33.5 percent of the total). To close the deficit, we’d need them to pay more than three times more than that. Sorry, Occupy Wall Street.

What if we look at everyone making $200,000 or more a year? That comprises 4.3 percent of all income-tax filers, who pay $664 billion (58.3 percent of the total). We’d have to triple what we get from this group to plug this year’s deficit.

Next stop: the middle class. Let’s see how they’d fare against Washington’s spending machine.

Those making $100,000 and above comprise 19.3 percent of filers and pay $1 trillion in federal income tax (88.3 percent of the total). We’d still need to more than double what they pay now — from their $1 trillion to 2.3 trillion — to close this year’s deficit.

Finally, let’s take it down to those making $50,000 and above — 47 percent of filers, paying $1.175 trillion in income taxes. (That’s actually 103 percent of total income-tax; below them, many earners pay a negative income-tax rate.) Doubling the income-tax burden on everyone here still falls $152 billion short of balance.

OK, let’s just imagine we did it by mixing and matching multiples of higher-earning groups’ tax burdens so that we somehow only take, say, another 30 percent from those $50-grand-earning “plutocrats.”

We’ve balanced the budget — for one year. What about the next?

Washington doesn’t have a one-year deficit problem, but an annual one. It’s now racking up its fourth straight $1 trillion-plus deficit, with oceans of red ink ahead.

But how many top earners are going to keep earning the same amount next year and the year after, once we’ve raised their tax burden by “multiples?” How many will continue to work at these rates? How many millions of businesses that pay through the personal-income-tax code will shut down?

In other words, the idea that “tax fairness” is going to balance the federal budget is simply rhetoric. The real numbers tell us that excessive deficits come from excessive spending — and even excessive taxation can’t eliminate them.

It isn’t a contest. Washington can spend faster than Americans can earn. We concede; we cry “uncle” to Uncle Sam.

Raising revenue from the current income-tax system to cover current spending is “fairly” impossible. It remains so even when “fairness” is thrown to the wind and we blast the middle class with far higher tax rates.

The only realistic first step is for Washington to cut its spending and see where that leads. Because if deficit reduction depends on hiking taxes, it won’t be the rich alone who’ll pay.

J.T. Young served in the Treasury Department and the Office of Management and Budget from 2001 to 2004 and as a congressional staffer from 1987 to 2000.