Obama Tax Hikes
Yesterday afternoon, the House of Representatives adopted an adjournment resolution, by a vote of 210 to 209 (Speaker Nancy Pelosi cast the tie-breaking vote), that will send them home without taking a vote on extending tax cuts set to expire at the end of the year.
Republicans claimed to have the votes to extend the tax cuts and the numbers would suggest that is likely. Eight Republicans missed the vote, that’s 217 assuming the caucus is together on this issue and the 39 Democrats that voted against their leadership stick around.
There are a couple of Democrats that voted for the resolution that are on record supporting extension of the tax cuts. However, that is now, whether or not they will hold true to their word in a lame duck session, when the pressure is off, is a completely different story.
To add a new wrinkle for Democrats, the Congressional Budget Office warns that increases in taxes will not help our struggling economy:
The Economic Outlook released by the Congressional Budget Office (CBO) on Tuesday states that coming tax hikes will hinder spending and hurt recovery efforts.
With President Obama set to unveil his new economic plan this week, there is sure to be much talk about the “cost” of tax cuts. The premise, albeit false, is that a tax cut is equivalent to a spending program.
Don’t be fooled.
As the debate over whether to extend the Bush Tax Cuts heats up, look for the Democrats to try to paint the Republicans as big spenders as the GOP continues to advocate an extension. The idea being that the Democrats can try to beat the Republicans at their own game (Spend Less) all the while stoking the fires of class envy and divisiveness.
The problem with all of this is that tax cuts are not spending programs. And Mr. Obama’s effort to focus tax cuts towards Research and Development is yet another example of how the Federal Government is trying to use the tax code as a social engineering tool.
Tax cuts are simply allowing the tax payer to keep more of their own money to spend how they see fit. It costs the government nothing because they are not collecting that money at the time it is earned and then redistributing it.
House Republicans have stood firm on their opposition to President Barack Obama’s proposed tax hikes, which would come at a time when the economy is growing at an anemic pace. Back in August, the House passed a one-year extension of all current tax rates, hoping that Obama and Senate Democrats would come to their senses, reach a compromise with Republicans and avoid the economic troubles raising taxes would bring in these tough economic times.
Unfortunately, that hasn’t happened. What’s worse was a Washington Post report from September noting House Republicans were preparing to retreat on taxes should President Barack Obama win re-election.
While Republicans are still urging Obama to compromise since raising taxes would hamper an already tepid economic recovery — if not make it worse, House Speaker John Boehner said yesterday that he expects some sort of a deal to be reached during lame-duck session, which will be defined by the outcome of the election:
House Speaker John Boehner doesn’t expect a grand bargain avoiding the fiscal cliff to materialize in a lame duck session of Congress, but that doesn’t mean the country is headed over the edge. Instead, Boehner said Sunday, he thinks Congress and the White House will find a way to punt the looming deadlines on the debt ceiling, the Bush tax cuts and the budget sequester into 2013.
It appears that President Barack Obama is ready to send the United States over the “fiscal cliff.” The White House has said that that Obama would veto any tax deal that comes out of Congress that doesn’t raise taxes on higher-income earners:
The White House denies its position the fiscal cliff has changed in the wake of a Washington Post story Thursday that reported President Barack Obama was ready to play hardball with Republicans.
“The president has long made clear that he would veto an extension of tax cuts for the top 2 percent of Americans, the wealthiest Americans,” White House press secretary Jay Carney told reporters traveling with Obama on Thursday. “That has been his position, as you know, for a very long time.”
Carney said that the Republican-controlled House of Representatives could act to end some of that uncertainty right now.
“If there is concern about what we can do right now to address the so-called fiscal cliff, the House ought to follow the Senate and pass an extension of tax cuts for 98 percent of the American people, the middle class,” Carney said.
Over the last few years, President Barack Obama has pushed a so-called “balanced approach” to the deal with the out-of-control budget deficits that have become the status quo in Washington over the last four years — totaling more than $5.5 trillion. But James Pethokoukis notes that President Obama’s approach to dealing with budget deficits relies overwhelmingly on increase revenues to the federal government (ie. taxes hikes) than it does on spending cuts:
Obama says his budget would achieve $4 trillion in new savings, just like Simpson-Bowles. But he includes a lot of stuff in that $4 trillion that S-B do not. As the Committee for a Responsible Federal Budget points out:
To reach his $4.3 trillion in savings through 2021, the President’s budget counts $1.6 trillion (excluding interest) of already-enacted savings. In addition, it includes two elements which the Fiscal Commission assumed in its baseline – a drawdown of the wars ($740 billion through 2021) and the expiration of the upper-income tax cuts ($830 billion through 2021). If the Commission’s plan were scored the same way as the President’s $4.3 trillion, we estimate it would save roughly $6.5 trillion through 2021.
Compared to CRFB’s Realistic Baseline, we estimate that all new policies in the President’s budget would save nearly $2 trillion through 2022.
The issue of the fiscal cliff may have taken a backseat thanks to the party conventions and the distractions that have popped up along the campaign, but it looks like President Barack Obama’s tax plan, which would raise tax rates on families making more than $250,000 may be losing some steam among Senate Democrats:
President Barack Obama has made his tax position abundantly clear: Let the tax rates for the wealthiest Americans expire at year’s end.
But on Capitol Hill, some in his own party are ready to make a deal.
Senate Majority Whip Dick Durbin of Illinois is floating a six-month extension of current rates combined with budget cuts so lawmakers have time to reach a grand bargain deal early next year. Sen. Claire McCaskill of Missouri and other Democrats are open to a temporary extension of the top individual tax rate if Republicans agree to raise revenue in other parts of the Tax Code. Some liberals, like New Jersey Rep. Bill Pascrell, aren’t ruling out extending the current rates if the GOP agrees to sweeteners like a patch on the alternative minimum tax or extending dozens of lapsed business tax breaks.
And Florida Sen. Bill Nelson, along with several of his colleagues, won’t take any option off the table, knowing full well that high-stakes talks over taxes could result in any number of outcomes.
“I’ll certainly consider it,” Nelson said when asked about a short-term extension of all the Bush-era rates. “But I’ll consider anything.”
On January 1st, taxpayers will see a heavy tax increase, which some are calling “Taxmageddon.” This significant contraction could have negative effects on our economy. In fact, the Congressional Budget Office (CBO) said last week that raising taxes would send the economy back into a recession. And now even former President Bill Clinton says that the tax cuts should be extended, at least temporarily:
Former President Bill Clinton on Tuesday jumped into the debate over how to handle the looming expiration of historically low tax rates paid by nearly every American, putting him somewhat at odds with fellow Democratic President Barack Obama.
Clinton, speaking on the cable television program CNBC, said Congress may have to temporarily extend all of the low tax rates that expire at the end of the year to give lawmakers more time to come up with a plan to cut deficits.
The remarks came as the Obama campaign was trying to raise doubts about Romney’s record in the private sector.
The tax cuts were first put in place under former President George W. Bush. Obama extended the rates for two years at the end of 2010, after Democrats suffered huge losses in congressional elections.
Now, Obama and Democrats want to let some of the lower tax rates expire for the wealthiest Americans. Clinton’s comments could undercut that position.
“They will probably have to put everything off until early next year,” Clinton said on Tuesday.
News broke last night that President Barack Obama will propose a $3 trillion deficit reduction plan today, which includes $1.5 trillion in tax hikes. The plan comes at the same time he is proposing more than $460 billion in tax hikes to pay for his last stimulus plan:
President Obama will announce a proposal on Monday to tame the nation’s rocketing federal debt, calling for $1.5 trillion in new revenue as part of a plan to find more than $3 trillion in budget savings over a decade, senior administration officials said.
The proposal draws a sharp contrast with Republicans and amounts more to an opening play in the fall debate over the economy than another attempt to find common ground with the opposing party.
Obama will propose new taxes on the wealthy, a special new tax for millionaires, and eliminating or scaling back a variety of loopholes and deductions, officials say. About half of the tax savings would come from the expiration next year of the George W. Bush administration tax cuts for the wealthy.
The tax hike on millionaires is being called the “Buffett Rule.” But as we’ve noted here before, that new tax hike, as populist as though it may be, will cover only a week of federal spending. And in practice, it hasn’t worked:
Outgoing-Speaker Nancy Pelosi (D-CA) took her anger out on Republicans on the deal that has been worked out with the White House, claiming that the tax cuts aren’t “paid for.” This is often a complaint among the Left about the tax cuts. They want Americans sacrifice, even saying it’s the patriotic thing to do. But how dare anyone suggest that Congress cut spending.
[A]s Veronique de Rugy and I laid out yesterday, it would be quite easy to balance the budget in 2020 if the government would start early with small, systematic cuts designed to get government outlays about equal to the historic average of government revenue. Since 1950, the feds have brought in average revenue equal to about 18 percent of GDP. In its more-realistic “alternative scenario” budget projections, the Congressional Budget Office estimates that by 2020, revenues will equal about 19 percent of GDP, near the historic average. The CBO’s alternative scenario is based on keeping the Bush tax rates through 2020 and doing various types of AMT patches that reduce the number of people paying the AMT. In other words, CBO’s revenue scenario keeps things the way they’ve been for the past decade or so.
As we’ve noted, President Barack Obama has made a deal with Republicans that would prevent a tax hike on all Americans, while at the same time getting extension of unemployment benefits and some other tax breaks his administration has pushed for (you can read the Obama Administration’s talking points here).
Obama defended his side of the deal yesterday in an afternoon press conference at the White House, though taking jabs at Republicans in the process:
With fellow Democrats balking, President Barack Obama declared Tuesday that a compromise with Republicans on tax cuts was necessary to help the economy and protect recession-weary Americans. He passionately defended his record against Democrats who complain he’s breaking campaign promises.
“Take a tally. Look at what I promised during the campaign. There’s not a single thing that I haven’t done or tried to do,” the president said.
He staunchly defended his decision to deal with the GOP in order to extend about-to-expire tax cuts for all Americans.
“There are some who would have preferred a protracted political fight,” the president said at a White House news conference a day after the compromise was announced. “And I understand the desire for a fight. I’m sympathetic to that.”
He promised a renewed fight during 2012 when the tax cuts would expire again, making the point that he still opposes the Republican position that high-income earners should get the extension, too. The agreement includes individuals making $200,000 or more a year and families making $250,000 or more.