- In 2012, Americans reported a total of $9.2T in income.
- The largest source of that income was salaries and wages—$6.3T (or, 68.2% of the total).
- Another important source is business income paid that’s by the 95% of businesses filing as individuals. In 2012, those businesses paid $839B of personal income.
At this point, the eyes of liberals glaze over. But, this is precisely the moment it becomes possible to understand what increasing the marginal tax rate on capital gains and dividends actually accomplishes. Namely, very little.
According to a Tax Foundation analysis, capital gains and dividend income constituted $883B of personal income in 2012. Compared to the $9.2T in income, investment income is small potatoes (14%).
Thus, increasing the marginal tax on capital gains and dividend income will have a relatively minor impact upon the federal budget.
However, President Obama’s plan to raise taxes on capital gains and dividends—which brought the liberal to their feet with wild applause at the 2015 State of the Union speech—will hurt families in all tax brackets by reducing GDP and contracting wages.
Not only that, the President’s proposed tax hike won’t increase revenues to the federal government. No, a dynamic analysis of the President’s proposal estimates it will cost the federal government $12B.
In plain English: The President’s proposal to increase the marginal tax rate on capital gains and dividends will increase the nation’s budget deficit, despite what he says to the contrary.
Perhaps he understands his audience.
Let the discussion begin…
To learn about the sources of income to the federal government, click on the following link:
To read the dynamic analysis of President Obama’s proposal, click on the following link: