Copyright 2012 by John T. Reed

The media reported some time ago that the total income of all those who make more than $200,000 a year was only $221 billion, so even if you confiscated 100% of it it, you still would not make a dent in the deficit, let alone the national debt. I quoted that in two of my articles.

On 4/17/11, the Wall Street Journal said,

Consider the Internal Revenue Service's income tax statistics for 2008, the latest year for which data are available. The top 1% of taxpayers—those with salaries, dividends and capital gains roughly above about $380,000—paid 38% of taxes. But assume that tax policy confiscated all the taxable income of all the "millionaires and billionaires" Mr. Obama singled out. That yields merely about $938 billion, which is sand on the beach amid the $4 trillion White House budget…

A reader sent me a table from the IRS also for 2008 which shows that the total “adjusted gross income” for those who made $200,000 or more that year was $7,662,907,509,000 or $7.66 trillion. (Table 1.1  Selected Income and Tax Items, by Size and Accumulated Size of Adjusted Gross Income, Tax Year 2008)

Confiscating that amount would pay off half the national debt.

Apparently, the Journal was using a different definition of “millionaires and billionaires” than those who make more than $200,000 a year—maybe those who make more than $1,000,000 a year in taxable income. Indeed, the words “millionaire” and “billionaire” refer to one’s net worth not income. Other than property taxes, we do not have a wealth tax in America—yet. So Obama apparently is using that phrase when talking to the ignorant (Democrat voters) as a general label for high-income people. He has variously put the cut off at $200,000 to $250,000.

Confiscating all of anyone’s income is impossible. It is unconstitutional and would only work for one year.

The amount of GDP that becomes tax revenue has been amazingly consistent at about 18% since World War II no matter which party controlled Congress and the White House or what the top tax rates were. During that period, the top tax rate ranged from 28% to 91%, but still always produced the same 18% of GDP.

The reason the tax take is always 18% no matter how how the maximum tax rate is because high tax rates create disincentives to produce taxable income and incentives to avoid the top tax both legally (e.g., buying municipal bonds) and illegally. Simply put, high income earners do not stand still while their pocket is being picked. They stop working, as they can afford to do, until a better president comes into office. They move to other countries. That does not lower their income tax liability if they are U.S. citizens and comply with the law, but I suspect many U.S. citizens who are out of the country do not pay U.S. income tax figuring they will just stay there forever or that they will wait for the next amnesty.

Many U.S. residents are not U.S. citizens so if they move to, say, Hong Kong they cut their tax rate down to whatever the rate is in the new country of residence, e.g., 15% max individual tax rate in Hong Kong; Jamaica, 3-5%; former Warsaw Pact countries, often 10-15%; Singapore, 20% (

John T. Reed