In the name of fairness, President Obama has endorsed increasing taxes on individuals making more than $200,000 by allowing the tax rate on each additional dollar of earnings to climb from 35 percent to 39.5 for these “rich” workers. Additionally, these individuals will see their taxes on dividends and capital gains advance to pre-2003 levels.
This means that in states such as Oregon, successful business owners will pay more than $500 in income taxes for each $1,000 of additional income. Recently in a ballot initiative with less than 2.5 percent of the state’s electorate participating, Oregon’s voters approved raising the top tax rate on income to 11 percent. Oregon’s experience is not unique. Across the nation, lower income individuals are shifting more and more taxes from themselves to the “rich” via the voting booth. In 2007, the top ten percent of income earners paid more than 70 percent of federal personal income taxes, while the bottom 50 percent paid less than three percent of federal income taxes paid (http://www.ntu.org/main/page.php?PageID=6 ). This disparity will increase significantly in 2011.
There are three problems with this distribution of burdens. First, politically speaking a large number of low income individuals (the 90 percent) can vote to inflict even higher taxes on the supposed rich (the 10 percent). Second, this shifts the cost of government to a small proportion of the population, thus encouraging government overspending. Third, taxing higher wage earners more punitively reduces overall economic growth by discouraging work and entrepreneurship, thus reducing the size of the economic pie for all, including the poor. Fourth, raising taxes for either high or low income wage earners in these times of economic fragility is unwise and potentially reckless.