Republicans like to talk about President Obama as if he were Jimmy Carter, but sometimes he
sounds more like Carter's erstwhile vice president, Walter Mondale -- the guy who promised
voters in 1984 that he would raise their taxes if he were elected.
Obama doesn't put his fiscal plan in those terms, naturally. Instead, he talks about
raising taxes on Americans who make more than $250,000 (for couples; for individuals, the
cutoff is $200,000), while maintaining the current rates on everybody else. The president
revisited that topic Monday, calling on Congress to renew the Bush-era tax cuts for middle-
and lower-income Americans for another year while postponing the decision on "the wealthy"
until after the election.
The point was to remind voters that presumptive GOP nominee Mitt Romney isn't the only one
calling for tax cuts. Obama also was trying to defend himself against a meme advanced by
the GOP and its conservative allies that the president was leading the country toward "one
of the biggest tax increases in history" -- the expiration in January of the Bush-era tax
cuts, the temporary reduction in payroll taxes and an assortment of other pending changes
in tax law.
VIDEO: Obama says election will decide economic fate
His proposal would eliminate about $1.2 trillion in tax increases over 10 years. Yet
because it would allow some of the Bush-era breaks to lapse, it would result in a tax
increase of about $700 billion compared with current law. That's the revenue projected from
not renewing the Bush-era cuts for the top two tax brackets, a level reached by less than
2% of those who file income tax returns.
In other words, every time Obama talks about his plans for the Bush-era cuts, he reminds
voters that he would raise taxes if reelected. Those increases are in addition to the ones
Congress adopted as part of the 2010 Patient Protection and Affordable Care Act, which
upped the Medicare taxes on those earning more than $200,000 and imposed new levies on drug
makers, insurers, medical device manufacturers and indoor tanning salons.
Polls show that most people like the idea of raising taxes on someone else, i.e., the
wealthy, so perhaps Obama's approach is the right one politically. Granted, in high-cost
states such as California and New York, someone who makes $200,000 may not feel wealthy --
that's why some congressional Democrats have pushed to hold taxes steady for anyone making
less than $1 million. But the burgeoning federal deficit makes it easier to argue that the
country can't afford to renew all of the Bush-era cuts, and those with high taxable incomes
are better able to pay than the middle and lower classes.
And yet, there's the example set by Mondale, who took a near-historic electoral beatdown at
the hands of incumbent Ronald Reagan despite a less-than-robust economy. Mondale's pledge
to raise taxes to reduce a large (at the time) federal deficit wasn't the only factor in
his defeat, but it certainly didn't help.
Obama's proposal to raise taxes on the wealthy also comes in the context of narrowing the
federal deficit, and it's hard to come up with a credible plan to shrink the deficit that
doesn't involve collecting more revenue. After all, the recession dropped federal revenue
to the lowest level (as a percentage of GDP) in nearly 60 years. The question is whether
the government can raise taxes now without slowing the economy, which would only exacerbate
the fiscal problems.
That, too, was a problem for Mondale, who called for higher taxes while the U.S. economy
was still recovering from a recession. But there's another element to Obama's position on
taxes that has nothing to do with deficit reduction. In Obama's view, the Bush-era cuts
contributed to the increasing income gap between the rich and average Americans. That's why
the president talks about having the wealthy shoulder a "fair share" of the tax burden.
Here's how he put it Monday:
"At the beginning of the last decade, Congress passed trillions of dollars in tax cuts that
benefited the wealthiest Americans more than anybody else. And we were told that it would
lead to more jobs and higher incomes for everybody, and that prosperity would start at the
top but then trickle down.
"And what happened? The wealthy got wealthier, but most Americans struggled. Instead of
creating more jobs, we had the slowest job growth in half a century. Instead of widespread
prosperity, the typical family saw its income fall. And in just a few years, we went from
record surpluses under Bill Clinton to record deficits that we are now still struggling to
pay off today.
"So we don’t need more top-down economics."
To Republicans, those are the words of class warfare. Never mind that those earning more
than $200,000 collected almost one-fourth of the savings from the Bush-era cuts in 2010,
even though they make up a small fraction of the taxpaying public. The top 1% pay more than
20% of the federal taxes collected, so broad-based tax cuts would naturally result in more
dollars flowing to them than anyone else.
Romney has called for reducing tax rates by one-fifth across the board, while narrowing or
eliminating enough (as yet unspecified) deductions, exemptions and credits to offset any
loss in revenue. It's an intriguing idea -- the wealthy benefit most from tax breaks, so
they'd arguably benefit the least from Romney's plan -- but it's quixotic to believe
Congress could actually eliminate enough of those breaks to keep the plan from exacerbating
the deficit.
All the same, it would be far better for lawmakers to craft a plan to radically overhaul
and simplify the loophole-ridden tax code than to stick to the current framework. Both
Obama and Romney say they're in favor of tax reform, but they want to postpone any
discussion of the details until after the election. At least Obama's proposal for just a
temporary extension of the middle- and working-class tax cuts will keep the pressure on for
a more fundamental reworking of the tax code. If anything's going to drive that sort of
change, it would be the threat of raising taxes on all Americans.
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