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A Redistribution Primer
One of the basic tenants of Mr. Obama’s campaign was a more equitable distribution of income. The process to be used to achieve this goal was not presented in detail at that time. After almost four years I would contend we can see the outlines of his approach.
The Democrats created in Mr. Obama’s first year in office a 1 trillion a year imbalance in our annual federal national budget which continues into the foreseeable future. Many Democrats call for continued spending at that level of GDP or perhaps a further expansion to 25% of GDP. It is my contention that the only way we can pay for that is to soak the upper half of the middle class because they are the group paying the taxes now. No rationale increase on the wealthy would cover an increase so large.
It is also my contention that for the most part there is no such thing as a “Bush Tax Cut” .The current tax rates on the people who pay most of our federal taxes (upper middle class) are in excess of what they were paying pre the Reagan tax cuts. While presumably ending those cuts would also increases taxes on the rest of us, in fact the expansion of deductions since Reagan means the near 50% paying little or no federal income tax now will see no increase. Letting the “Bush Tax Cuts” expire will tax the upper middle class at a rate unique in our history (except wars), exempt about half the tax payers from federal taxes and barely nick the rich.
I further argue that the ACA is an exemplar for all future broad based entitlements (Social Security and Medicare) where they will be heavily means tested. The ACA will be and most other federal programs are already. Note that part of the rational for the $ 600 billion in cuts to Medicare is a change in the means te4sting formula. This enhanced means testing on broad based national programs will devastate the upper half of the middle class, expand entitlements significantly to the lower half and essentially hold harmless the rich.
In short through tax and entitlement policy the Obama administration is relentlessly moving toward redistributing income from the upper half of the middle class to the lower half of the middle class while avoiding most impact on their rich donor set? In fact his administration may well smother any ambition to make more than about $50K as the government in one form or another will take most of it in excess to that level. Only the already really rich (>.1M) will still have incentive to achieve.