Mr Obama intends to squeeze the rich, but the scope for this may be more limited than US liberals would wish. Few Americans seem aware that the US income tax code, as a recent Organisation for Economic Co-operation and Development study showed, is already one of the most progressive.* Even before the rise in top marginal rates promised by Mr Obama, the US income tax collects 45 per cent of its revenues from the highest-income decile. Compare that with Britain at 39 per cent, Canada at 36 per cent, France at 28 per cent, Sweden at 27 per cent and an OECD average of 32 per cent.
This difference is only partly explained by the less-equal US income distribution. The fact that the US has no broadly based national sales tax – value added taxes make Europe’s overall tax codes less progressive still – only underlines the point. The US tax system raises comparatively little revenue; what little it raises already comes disproportionately, by international standards, from the rich.
Wait a second. You mean that wealthier Americans already bear a heavier tax burden than wealthier people in every other country in the world, countries that have much more extensive social safety nets? What about the Obama rhetoric of the rich "doing their fair share" and "leveling the playing field"?
The truth is that raising taxes on just the wealthiest 2% of Americans will not be sufficient revenue to cover this audacious expansion of the federal government. Health care reform alone will cost at least $2 trillion over ten years (of which only $600 billion will come from tax increases on the rich). The bottom line is, we are all going to have to pay for this American Safety Net. It won't just be the "rich". He's coming for you too, middle class. It may not come in the form of higher income taxes, but via more insidious methods; national sales tax, carbon taxes, energy taxes, etc. Just you wait....