In Barack Obama’s ongoing battle to raise taxes on “the rich” (a struggle he pursues with comparable focus and ferocity to his recently celebrated efforts against Al Qaeda), the president employs a nasty rhetorical tactic that deliberately blurs an essential distinction. In recent public appearances, the president frequently assaults Republican fiscal policies for seeking to “balance the budget on the backs of the poor and the middle class” in order to give “lavish tax cuts to millionaires and billionaires.”
Aside from the misleading characterization of his opponents’ priorities (no, resisting tax increases isn’t the same as delivering new tax cuts) and purposes (balancing the budget is a crucial end in itself, not merely a means to lower tax rates), White House rhetoric dishonestly and repeatedly lumps together “billionaires” and “millionaires.” President Obama and his allies apparently consider billionaires and millionaires equally guilty of unwarranted success, and equally deserving of sharp hikes in their IRS obligations.
On the face of it, this equivalence is absurd and misleading: an individual with a net worth of a billion dollars is literally a thousand times richer than a citizen who’s accumulated a million dollars.
Comparing billionaires and millionaires would be the equivalent of comparing a struggling, working class citizen who’s saved, say, only $10,000 in the course of a lifetime of labor with someone who’s accumulated $10 million dollars—the wealthier guy controls a thousand times more money than the humble worker, just as the billionaire by definition holds a thousand times more money than a mere millionaire.
By lumping together billionaires and millionaires, Mr. Obama equates people who count as undeniably wealthy with some ordinary middle class folks who have made prudent provisions for their own retirement.
For instance, imagine a hardworking couple approaching the age of 65 that’s scrimped and saved in order to put aside a million dollars for their retirement. If they wanted to cover 25 years of post-retirement living (not an absurd plan given today’s rising life expectancy), they would need to survive on less than $50,000 a year to provide for all their needs (given the very modest returns on today’s secure investments). This could sustain a decent middle class life, but no one could claim that $50,000 a year provides a luxurious or lavish retirement.
Moreover, a typical couple could achieve “millionaire” status (with more than a million dollars in official net worth) with far less savings if they owned their own home for several decades and experienced typical appreciation during that period. Consider a couple that bought a house for $90,000 in 1980; that home would have typically gone up to $400,000 today (even after the recent downturn). If the homeowners managed to pay off their thirty-year mortgage (a common enough experience for older Americans), and if they saved only $600,000 from a lifetime of toil, that gives them a million dollars in net worth, but only $25,000 in yearly allowance if they hope to live till 90. Even in the (increasingly dubious) event that their Social Security benefits remain intact this hardly places them in a situation where they can easily afford additional tax burdens.
White House apologists will rush to defend presidential attempts to conflate millionaires and billionaires by insisting that when Obama describes a “millionaire” he’s not talking about a household that’s accumulated that much in the course of a life-time, but a family that earns seven figures or more in the a single year. According to this argument the idea of earning a million dollars a year (more than $83,000 per month) is so inconceivable to ordinary Americans that identifying this level of success with the similarly unimaginable billion-a-year earners (of whom precious few–if any—actually exist) might seem justified.
There’s only one problem: in calling for tax increases for “billionaires and millionaires” President Obama specifies sharp hikes for every individual earning $200,000 or more per year, and every family bringing in $250,000 or more—not just for those with seven figure incomes. By this standard, it’s highly likely that many of the taxpayers who would be slammed by Obama’s tax increases wouldn’t hold millionaire status by any standard: for instance, it’s entirely possible that a young doctor in a lucrative sub-specialty would earn more than $200,000 a year but would register a negative net worth – due to outstanding medical school loans he’s still paying down that often reach into six figures.
The sad reality of the president’s war against high income tax-payers is that even if he won every tax hike he seeks, he’d still make no real dent in the deficit. According to the Congressional Budget Office, the President’s determination to collect extra money from all tax-payers above $200K (or $250K per couple) would deliver at most $80 billion a year over the next ten years—in other words, after a decade these increases wouldn’t even cover the cost of the president’s feckless “Stimulus Package”, when calculated with the interest on the added debt. If he relied on tax increases alone (as many Democrats suggest) to close the deficit, the Obama proposals would reduce next year’s flood of projected red-ink by barely 5%.
The fundamental arguments against tax increases remain unassailable and most Americans seem to understand them. They agree that we face a deficit crisis not because the government collects too little, but because it spends too much. Big majorities also understand that taking more money out of the private sector to grow bureaucracy and regulation isn’t an effective path to recovery.
But while answering the president on the core issues, there’s still no reason to accept his attempts to jointly demonize “millionaires and billionaires.”
Neither designation of successful wealth producers (and job creators) indicates that a high-earner is blameworthy, corrupt or exploitative. And when it comes to the “millionaires” Barack Obama decries, they’re not only “not guilty”—they’re also in many cases not even rich.
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