Obama is now advocating a janitor tax standard. He’s passionately proclaiming to large, supporting audiences that the tax code should be changed to insure that million-dollar earners pay income taxes at a rate equal to that of a janitor. It’s his latest arrow in an all-out attack on the rich – an attack that is based on the premise that the rich are not “paying their fair share.”
Everyone gets that Obama is desperate to shore up his base (unions, minorities and students) as his poll numbers continue to plummet. But a janitor standard? It’s more evidence of Obama’s growing propensity to say just about anything that will get the hurting masses whipped up and focused on those who aren’t hurting as much – the rich.
The average janitor in the United States makes $18,000 a year. A high paid janitor makes $22,000. The result, according to the Tax Policy Center, is that janitors will pay no federal income taxes in 2011. They just don’t make enough. In fact, the mean tax rate for those who make $22,000 in 2011 is a negative 2.8 percent, which means the yield from refundable credit payments exceeds any tax liability. For those making a janitor’s wage, the federal income tax is an income supplement.
But what about payroll taxes? Like all employees, janitors must pay regressive payroll taxes based on their gross income. When payroll taxes are factored into the mix, the total federal tax hit for the average janitor, inclusive of income and payroll taxes, is less than five percent.
How do these numbers compare with the tax burden on the real rich, the top one percent of all income earners who have a medium income of $852,495? This top one percent will pay over 34 percent of all income taxes in 2011. When regressive payroll and other federal taxes are included, this one percent’s share of the total federal tax burden will still be 25.6 percent. As for tax rates, the mean combined income and payroll tax rate on the top one percent is four times the rate paid by a janitor.
Is it possible that Obama just doesn’t understand these numbers? It’s hard to believe. As Obama likes to emphasize, he’s part of the real rich. In 2010, the Obamas reported an income of $1.7 million. Their federal income tax hit was $453,770, roughly 27 percent of their total income. Their tax rate, like that of the others included in the top one percent of income earners, was over 300 percent of mean federal income tax rate paid by the other 99 percent of income earners. And, of course, in that same year, the average janitor received an income supplement through the income tax.
Does this mean that none of the rich should pay more? No. As I have explained on various occasions in this blog (see video presentation “A Proposal for Taxing the Rich”), it would make sense to smartly squeeze a little more out of certain elements of the rich so long as strong, permanent, pro-growth tax incentives are given to all those (including the rich) who build businesses and employ people. But this type of strategic, pro-business, compromising solution is of no interest to Obama and will never get done with misleading class warfare rhetoric that’s designed to mislead the uninformed. And, of course, we should never fool ourselves into thinking that a higher tax bite on the rich is a real solution to our problems.
But do these blatant factual distortions by Obama really hurt much? Are they just harmless exaggerations? Should we cut Obama some slack when he goes into his full-on campaign mode? Not this kind of slack. Not when the distortions go to the core of mammoth challenges that threaten the standard of living of all Americans. When such irresponsible statements come from the President, the individual charged with the responsibility of tackling our nation’s most serious problems, they undermine the credibility of everything and ultimately destroy any capacity for real leadership.
We end up with a proposed jobs bill that generates no interest because many perceive it as an obvious political ploy that will actually hurt long-term, sustainable job creation.
We end up with a shameful, non-super Super Committee, comprised of lightweights, that is doomed to fail and create crushing problems for the primary designated fall guy – the defense department.
We end up with ongoing threats of government shutdowns because there’s no real budget, only short-term continuing resolutions that insure regular budget battles.
We end up with a hopelessly polarized Washington that is hell-bent on manufacturing and hyping disputes for political gain, as OPEC, China and others pick our pockets every day and weaken our core.
We end up with an endless list of expensive failures and lost opportunities, as our President sits in the wings, rants for others to do their jobs, and offers nothing meaningfully to cut the insane deficits, rein in future spending, or deal with our crushing entitlements.
We end up with an unthinkable, substandard credit rating that proclaims to the world that the full faith and credit of the United States is inferior to that of many other countries.
We end up with a pervasive, growing sense of hopelessness and a natural reaction to hunker down, hoard cash, close ranks, and take no risks.
We end up with a daunting list of debilitating, unprecedented, festering challenges that must await the outcome of the next big election.