President Barack Obama made his pitch yesterday to jack up tax rates on high-income earners and bring a host of new fees that will reach across income groups — offering $3 in tax hikes for every $1 in spending cuts:
Drawing clear battle lines for next year’s elections, a combative President Barack Obama on Monday demanded that the richest Americans pay higher taxes to help cut soaring U.S. deficits by more than $3 trillion. He promised to veto any effort by congressional Republicans to cut Medicare benefits for the elderly without raising taxes as well.
“This is not class warfare. It’s math,” Obama declared, anticipating Republican criticism, which was quick in coming.
The president’s proposal, which he challenged Congress to approve, would predominantly hit upper-income taxpayers and would also target tax loopholes and subsidies used by many larger corporations. It would spare retirees from any changes in Social Security, and it would direct most of the cuts in Medicare spending to health care providers, not beneficiaries.
Benefit programs wouldn’t be unscathed. Obama’s plan would reduce spending for those, including Medicare and Medicaid, by $580 billion. But with Republicans calling for massive cuts in entitlement programs, Obama said he would veto any legislation that cut Medicare benefits without raising new revenue.
We’ve already noted that some conservative organizations — including Americans for Tax Reform — are supporting Speaker John Boehner’s “Plan B,” which includes tax rate hikes on those earning more than $1 million. However, Erick Erickson, editor of the influential conservative blog, RedState.com, announced his opposition to the plan just moments ago:
Republicans in Congress intend to vote today on Plan B, John Boehner’s fall back plan on the fiscal cliff.
The President says he will veto it.
In other words, the Republicans are going to go on record that they will sell out their last remaining principle — no tax increases — and get nothing from the Democrats in return. Nothing.
There’ll be no Democrat deal on entitlements. There’ll be no Democrat deal on spending. There will only be the GOP’s sell out.
Click here to call your congressman. Tell him to oppose this Republican deal.
Erickson isn’t alone in his opposition to Boehner’s “Plan B” as the Heritage Foundation, which is headed by former Sen. Jim DeMint, and the Club for Growth isare also opposing the plan.
Despite the White House rejecting his offer to raise tax rates on millionaires, a proposal formerly supported by many Democrats, House Speaker John Boehner is expected to move a version of his proposal through the House of Representatives:
Speaker John Boehner told his conference on Tuesday he will move to a “Plan B” in fiscal cliff talks with the White House that would raise tax rates on annual income above $1 million.
Boehner announced the plan to his conference behind closed doors after a flurry of negotiations with President Obama that showed the two sides were moving closer to a deal. Yet differences remain over spending cuts, entitlement reforms, new spending measures demanded by Obama and the president’s request for a hike to the debt limit.
Boehner is scheduled to address the media this morning.
“For weeks, Senate Republicans — and a growing number of you — have been pushing for us to pivot to a “Plan B.” I think there’s a better way. But the White House just can’t seem to bring itself to agree to a “balanced” approach, and time is running short,” Boehner said, according to prepared remarks.
“At the same time we’re moving on “Plan B,” we’re leaving the door wide open for something better. And I have been clear about that with the president. Plan B is Plan B for a reason. It’s a less-than-ideal outcome. I’ve always believed we can do better,” he said.
Though he has rejected House Speaker John Boehner’s offer, which included higher tax rates on millionaires and raising the debt ceiling, President Barack Obama made a counter-offer yesterday showing some movement in “fiscal cliff” talks:
The Associated Press is reporting that President Barack Obama has made a new budget offer to House Speaker, including a significant shift from a previous sticking point in their negotiations to avert the so-called fiscal cliff.
Obama’s latest counteroffer raises the threshold for tax increases up to incomes above $400,000. That’s an increase from previous demands dating all the way back to the presidential campaign, in which Obama had called for taxes on incomes above $250,000 to return to Clinton-era rates.
Reuters reported on Twitter that Obama’s plan includes $1.2 trillion in increased revenue and $1.22 trillion in reduced spending. Boehner’s office, however, pegged the numbers at $1.3 trillion in new revenue and only $930 billion in spending cuts.
Is there some movement in talks on the so-called “fiscal cliff?” It remains unclear right now, but House Speaker John Boehner made a pretty big concession on Saturday that may provide a path to a deal. According to Politico, Boehner is willing to raise tax rates on anyone earning over $1 million in exchange for significant entitlement cuts:
Speaker John Boehner has proposed allowing tax rates to rise for the wealthiest Americans if President Barack Obama agrees to major entitlement cuts, according to several sources close to the talks.
It is the first time Boehner has offered any boost in marginal tax rates for any income group, and it would represent a major concession for the Ohio Republican. Boehner suggested hiking the Bush-era tax rates for top wage earners, including those with annual incomes of $1 million or more annually, beginning Jan. 1, two sources said.
Obama and Boehner spoke by phone Friday after a lengthy face-to-face session at the White House on Thursday. The quickening pace of private conversations between the two key players in the fiscal-cliff talks shows progress is being made in the negotiations, although they are not close to a deal yet, sources said.
Boehner also wants to use a new method of calculating benefits for entitlement programs known as “chained CPI,” which would slow the growth of Medicare and other federal health programs and save hundreds of billions over the next decade.
While the so-called “Buffett Rule” is the talk of the week, Megan McArdle notes that the White House isn’t pushing a policy that would impose more taxes on Warren Buffett, a guy that could send a gift to the government if he feels he isn’t paying enough: (emphasis mine):
[I]n the White House document that I read, I saw no proposal to set some sort of AMT on millionaires. Instead, it claims to do this, while rehashing a bunch of things that the administration has long proposed: allowing the Bush tax cuts to expire for those making more than $250,000; changing the treatment of carried interest income accrued from capital gains; and altering the treatment of deductions for very high earners. If all of these things were passed, guess who would still pay a lower effective tax rate than his secretary? Hint: his initials are WB, and he lives in Omaha, Nebraska.
If a “Buffett Rule” is such a great idea, how come the administration doesn’t actually propose enacting one?
Presumably for some of the following reasons: it would add complexity to the tax code; it might not be possible to do in a way that would stand up even in our very IRS-friendly tax courts; it would have upsetting effects on the market for various forms of capital, particularly municipal bonds; it might well involve taking away deductions that less well-heeled voters currently enjoy, and they’d freak out. Note that I do not include “Republican obstructionism” on this list, because the existing proposals won’t pass the house; there’s no reason not to include a real hard “Buffett Rule” if they think such a thing is even vaguely workable. From the fact that they didn’t, I infer that they thought the idea maybe had some problems.
President Barack Obama’s proposed tax hikes have, thankfully, been a flop on the Hill as Republicans and some Democrats aren’t too anxious to raise taxes during tough economic times; a position the president himself once held.
But with the rhetoric coming from the left that is clearly hoping to revive the populist sentiment to put Obama in the White House comes a dose of reality. Despite the ramblings of Obama and his ally Warren Buffett, millionaires do indeed pay more in taxes than the middle class, according to an Associated Press fact check:
On average, the wealthiest people in America pay a lot more taxes than the middle class or the poor, according to private and government data. They pay at a higher rate, and as a group, they contribute a much larger share of the overall taxes collected by the federal government.
The 10% of households with the highest incomes pay more than half of all federal taxes. They pay more than 70% of federal income taxes, according to the Congressional Budget Office.
There may be individual millionaires who pay taxes at rates lower than middle-income workers. In 2009, 1,470 households filed tax returns with incomes above $1 million yet paid no federal income tax, according to the Internal Revenue Service. But that’s less than 1% of the nearly 237,000 returns with incomes above $1 million.
This year, households making more than $1 million will pay an average 29.1% of their income in federal taxes, including income taxes, payroll taxes and other taxes, according to the Tax Policy Center, a Washington think tank.
Households making between $50,000 and $75,000 will pay an average of 15% of their income in federal taxes.
On Friday, Stephen Moore noted that the wealthy liberals that are often are the loudest among those calling for tax hikes don’t seem to be rushing to given their millions to the federal government:
I wish I had a dollar for every time a wealthy liberal has declared he thinks he should pay more taxes. That list includes Warren Buffett, George Soros, Bill Gates Sr., Mark Zuckerberg and even Barack Obama, who now says that not only should rich people like him pay more taxes, they want to pay more. “I believe that most wealthy Americans would agree with me,” he said of his tax-hike plan. “They want to give back to the country that’s done so much for them.”
The idea that the nation’s primary wealth and job creators—i.e., the people who carry the bulk of the tax load—aren’t doing enough for the country is a bit insulting. But the president is right that there is a seemingly endless number of terribly wealthy, guilt-ridden individuals who want Americans to pay more taxes.
So why don’t they? There is a special fund at the Treasury Department for taxpayers who want to make “gift contributions to reduce debt held by the public.” But very few do. Last year that fund and others like it raised a grand total of $300 million. That’s a decimal place on Mr. Zuckerberg’s net worth and pays for less than two hours worth of federal borrowing.
According to a recent report released by Chicago based research and consulting organization Spectrem Group, examining the effects the recent market downturn has had on America’s affluent, the number of American households with a networth over $1,000,000 has declined dramatically since 2007.
While this statistic is not a direct measure of inequality, this drop in the number of millionaires will inevitably have a significant effect in bringing down total inequality in our economic system.
For most investable assets, the market has been in a 25 year bubble, instigated by the poor monetary, regulatory, and fiscal policies created by our goverment and the institutions (i.e., the Fed) that closely surround it. This bubble artificially created a greater number of affluent than the economy would naturally support, and which could no longer be sustained once the bubble popped.