Originally Posted by Imperator

Now consider how the Obama plan would affect the taxes paid by such an entrepreneur with a taxable profit from his business of $500,000. Under current law, he would pay $27,148 in Social Security and Medicare taxes, plus $142,969 in personal income taxes, for a total of $170,117. If the taxpayer did not change his behavior at all, under the Obama plan he would face a $31,000 Social Security tax hike and a $11,494 hike in his personal taxes – or a 25% tax hike. But, if the taxpayer responds as the economic models predict, his taxable profit would drop to $444,000. His Social Security and Medicare tax bill would still soar to $51,580. But his income taxes, even with a higher tax rate, would drop to $132,882 for a total of $184,462.

In other words, Sen. Obama is planning on a combined series of tax hikes to produce $42,000 in tax revenue, but consensus economic modeling suggests the government's net take would rise only $14,000.

We should also keep in mind that the economic well-being of the country is not measured by how much taxes the government can collect, or even the size of the deficit. Rather, it is measured by the country's productive capacity. Our theoretical entrepreneur's 11.2% decline in taxable income reflects both less effort on his part and a less efficient use of his income in order to avoid confiscatory tax rates. Or, to put it directly, Sen. Obama's plan would reduce an entrepreneur's after-tax profits by $70,000 – $56,000 in lost profits and $14,000 more in taxes – just to produce a net revenue gain to the government of $14,000.