On Tuesday, President Obama once again blamed the lack of progress on the budget deficit on Republicans' refusal to raise taxes on their fat-cat friends and donors—the much-maligned 1%. Yet the top 1% of earners already pay close to 40% of all federal income taxes, a share that is almost double what it was in the 1970s.
Raising tax rates on high incomes, as Mr. Obama proposes, would only cut the deficit by about 6%, even assuming—wrongly—that those higher taxes wouldn't slow the economy.
The much bigger fiscal drain from the wealthy is on the federal expenditure side of the budget ledger: tens of billions each year in grants, loans, subsidies, guarantees and benefits pocketed each year by wealthy Americans as individuals and firms. Any campaign to downsize big government will only succeed if the needed deep cuts in spending are deemed by voters as equitable. In an era of $1 trillion-plus deficits and a $15 trillion national debt, we would like to think that a national consensus could be reached to eliminate handouts to individuals and companies with net incomes above $1 million.
We've long argued that the GOP should lead the charge.
We propose a new law: Let's call it The Millionaire Subsidy Elimination Act. It would prohibit anyone with an annual income over $1 million from receiving any government benefits. There's a big advantage to cutting benefits to millionaires rather than raising their tax rates to 40% or 50%. Slashing expenditures would help grow the economy, while raising tax rates would hurt U.S. competitiveness and job creation.