The President is calling for $1.6 trillion in tax hikes over the next decade, or $160 billion per year. Assuming this affects people with incomes over $250,000, that’s 3.9% of the country’s 118 million households, or 4.6 million households.
[disclaimer: these are estimations and I’m not a professional economist]
Here’s the math:
$250k income cut
— avg. $280k income in cohort
— Bottom 2.9% of Top 3.9% of HI
— 3,422,000 households in total
— Average increased tax burden: $23,000 per year
— Share of gross income: 8.2%
$350k income cut
— avg. $450k income in cohort
— Bottom 0.9% of Top 1.0% of HI
— 1,062,000 households in cohort
— Average incr. tax burden: $40,000 per year
— Share of gross income: 8.4%
$2000k income cut
— avg. $4000k income in cohort
— Top 0.1% of HI
— 118,000 households in cohort
— Average incr. tax burden: $340,000 per year
— Share of gross income: 8.5%
These together would equal $160 billion in revenue per year.
The deficit in October was $120 billion. So this tax increase would finance about 6 weeks of the deficit. Who finances the other 46 weeks?
Here’s the problem: the US fiscal situation is so untenable that the government fails to collect enough tax revenue to cover mandatory spending (sans discretionary) and debt interest. In Fiscal Year 2011, for example, the US government spent $176 billion MORE on debt interest and mandatory spending than they generated in tax revenue.
In Fiscal Year 2012, which just ended 6 weeks ago, that shortfall increased to $251 billion. This means that they could cut the ENTIRE discretionary budget and still be in the hole by $251 billion.
The automatic cuts that are going to take place don’t even begin to address the actual problem; they’re cutting $110 billion from the discretionary budget… yet only $16.9 billion from the mandatory budget.