The President’s plan is solid: increase taxes on the wealthiest Americans
OP-ED: Mr. President: Get fully behind your tax plan and twist arms if necessary
We have not been shy about criticizing the President — especially over his handling of the BP Disaster. But we fully support his position on the Bush era tax cuts.
Mr. Obama’s proposal would allow the Bush tax cuts expire for the wealthiest 2 % of Americans, those with incomes greater than $200,000 (individual) or $250,000 (joint), but would preserve the tax cuts for the 98 % of Americans (individuals and families with lower than these break points).
Most Republican and a small but significant minority of Democratic lawmakers want to extend the tax breaks for rich as well as the middle class. The latest ploy is a “compromise” deal by Senator John Cornyn (R-Texas) — this would extend the Bush tax cuts for taxpayers of all incomes on a temporary basis. However, the President should fight and fight hard for his plan. See recent Paul Krugman NY Times Op Ed on the politics of the battle.
Retaining the tax break for the wealthy will add some $700 billion to the budget deficit over the next 10-years. And guess what, the wealthy aren’t hurting while the middle class may soon be added to endangered species list.
The following chart by Ezra Klein of the Washington Post shows how the Obama vs. Republican plans would affect families at various income levels. The chart shows that with the Republican plan the more you earn, the bigger the break. The nation’s 315,000 millionaire households would save more than $100,000 in 2011. See article by Washington Post’s Lori Montgomery. (Click graph to enlarge)
What about small businesses? Tax-break-for-the-rich advocates (ala Grover Norquist) are running around saying that the Obama proposal would be a fatal blow for small businesses. However, according an article in today’s NY Times, data from the Internal Revenue Service shows that only 3 percent of small business owners would be subject to the higher tax, and studies of past tax increases suggest that letting the Bush tax for the wealthy would have little impact on hiring.
On the other hand the Senate this week approved the Administration’s multi-billion dollar package of tax breaks and government-backed loans for small businesses.
Where are the deficit Hawks, now?: Ironically, many members of Congress who want the rich to keep their reduced taxes are deficit hawks who routinely vote against extending unemployment benefits to those in need but who favor an extension of tax benefits to the wealthy — benefits that will add some $700 billion to the federal deficit over the next decade. (According to the nonpartisan congressional Joint Committee on Taxation).
Do Republican tax policies work? The following graph (CNN) also suggests that Bush era economic and tax policies don’t work so well for the middle class. Note the the sharp rise in percentage poverty rates during the Bush era which provided a bonanza to those with the highest incomes. The enormous tax cuts and war funding during the Bush Administrations helped to turn a $230 billion federal surplus into a 1.3 trillion deficit — the inheritance that the Obama Administration assumed.
Why it matters: According to the latest U.S. Census Bureau data (2009), some 43.6 million Americans (one in seven) are below the poverty line — less than some $10,000 for a single person, $22,000 for a family of four. The number is growing rapidly, up by 4 million more people from the year before. (The third consecutive annual increase). And if you’re struggling to support your family on $22,000 you’re already hurting badly and probably slipping with every rent and utility bill.
The ranks of the working-age poor reached the highest levels since the 1960s. In addition, the number without health insurance topped 50 million, as people lost jobs and the employer-funded medical coverage. All of these problems create a downward spiral. People who can hardly pay the rent don’t spend, fewer products are sold, businesses layoff workers and so forth. And Home mortgage foreclosures just hit their highest level since the housing meltdown began. There were 95,000 homes repossessed last month.