With the quasi-resolution of the fiscal cliff comes new taxes for everyone. Some of Obamacare’s 19 taxes are starting to kick in. The payroll tax cut expired, and some new taxes on the wealthy, such as the expiration of the Bush Tax Cuts and an additional 0.9 percent payroll tax for high earners as part of Obamacare, were allowed to take place.
The increased tax burden on the wealthy, driven entirely by the wishes of Democratic lawmakers, brings to light the contrasting views that Democrats and Republicans have about the economy, especially considering that those tax increases hardly put a dent in the federal deficit.
Imagine that the economy is comprised of 10 bakeries, each making 10 pies a year for a total of 100 pies. Those pies represent gross domestic product, or all taxable income. If the pies were distributed like income in the U.S. economy, the top 20 percent would get 50 pies and the bottom 10 percent would get only one pie, according to the U.S. Census Bureau’s 2007 Economic Survey of income data. Democrats and Republicans agree that this is a problem, yet they have two very different ways to go about solving it.