Tax Hikes

Pelosi begins the push for even more tax hikes

Nancy Pelosi

Last week, Politico ran a story noting that Democrats may finally be “done hiking tax rates” after scoring a victory through raising taxes on higher-income earners in the “fiscal cliff” deal. The story quoted a couple of House Democrats, including House Ways and Means Chair Sander Levin, who said that the issue seemed to be settled for now.

But according to House Minority Leader Nancy Pelosi (D-CA), the push for higher taxes isn’t over. During an interview with Bob Schieffer yesterday on Face the Nation, Pelosi said that more revenues are needed, presumably as part of any debt ceiling deal that Republicans hope to make:

Pushing back against the Republicans’ deficit-reduction strategy, House Minority Leader Nancy Pelosi (D-Calif.) said this weekend that more tax revenues – not just spending cuts – must be a part of Congress’s effort to rein in deficits.

Pelosi said the tax hikes in the recent “fiscal-cliff” deal are a start, but don’t go far enough to generate the revenues the government needs to run the country effectively.

“In this legislation we had $620 billion, very significant … changing the high-end tax rate to 39.6 percent. But that is not enough on the revenue side,” Pelosi told CBS’s Bob Schieffer in an interview taped Friday.

Without offering many specifics, the California Democrat said she wants to scour the tax code for unnecessary loopholes and “unfair” benefits that help those – either companies or individuals – who don’t need it.

Tax hikes expected to slow job growth

The White House and many members of Congress — Democrats and Republicans alike — are patting themselves on the back this week as they averted the so-called “fiscal cliff.” Only in Washington, DC could making nothing in the way of substantive spending and raising taxes on 77% of American households be considered as some sort of victory.

President Obama claimed that the ”fiscal cliff” deal “protects 98 percent of Americans and 97 percent of small business owners from a middle class tax hike” and that he would “continue to fight every day on behalf of the middle class.”

Of course, this isn’t reality. What the middle class needs are jobs, and the “fiscal cliff” deal, which includes higher taxes on small businesses, is expected to keep the economy from living up to its full potential:

The tax deal is also expected to result in hiring growth at last year’s pace, meaning the creation of 150,000 to 160,000 payroll jobs a month, according to Michael Gapen, senior United States economist and asset allocation strategist at Barclays.

Without the tax increases, employers would probably be adding more than 200,000 jobs a month.

Altogether, that means the economy will “create 600,000 fewer jobs in 2013 — leaving the unemployment rate 0.4 percentage point higher — than it would have if the 2012 tax policies had been kept in place,” said Mark Zandi, chief economist at Moody’s Analytics.

Chart of the Day: It’s the spending, stupid

Since he’s been in office, President Barack Obama has constantly railed against higher-income earners and talked about the need for tax hikes. Throughout the course of the “fiscal cliff” discussion, Obama stressed the need for a “balanced approach,” meaning a combination of tax hikes and spending cuts.

However, the “fiscal cliff” deal that was passed by Congress yesterday is horribly unbalanced — cutting spending by $1 for every $41 of tax hikes — and costs upwards of $4 trillion. But Zero Hedge put out this chart this morning that really puts it all in perspective:

Grading the Fiscal Cliff Deal: Terrible, but Could Be Worse

Written by Daniel J. Mitchell, a senior fellow at the Cato Institute. Posted with permission from Cato @ Liberty.

The faux drama in Washington is finally over. The misfits in Washington reached a deal on the fiscal cliff.

Republicans and Democrats managed to come together and decide that they should get a bigger slice of what the American people earn. Gee, what a surprise.

First, the good news:

Oh, wait, there isn’t any.

Now for the bad news.

Obama meets with congressional leaders on “fiscal cliff”

Obama meeting with congressional leaders

Congressional leaders from both parties are meeting with President Barack Obama this afternoon at the White House to discuss the so-called “fiscal cliff.” Reports have come out since yesterday indicating that Obama may make an offer just a few days before automatic spending cuts and tax hikes are supposed to go into effect.

Via Politico, here is the sum of Obama’s offer:

Obama is expected to make what the White House considers a scaled-back offer — one to raise taxes on income over $250,000, extend jobless benefits, delay defense and domestic cuts and patch the Alternative Minimum Tax, sources say. Raising taxes at that level is a non-starter for Republicans, who want far more in spending cuts.

In reality, there isn’t anything new to report. There doesn’t seem to be any indication that Republicans will be willing to accept Obama’s offer given that it still raises taxes on families earning more than $250,000. Some Republicans have hinted that the White House could attract support if Obama raised the income threshold to $400,000, which would protect some small business owners. There is no indication that Obama is interested in that sort of a deal or that Speaker John Boehner, who is politically wounded after last week’s failed effort, could convince House Republicans to go along with it.

FreedomWorks is not on board with Boehner’s “Plan B”

Yesterday, Dean Clancy, Legislative Counsel and Vice President of Health Care Policy at FreedomWorks, wrote approvingly of House Speaker John Boehner’s “Plan B.” Clancy explained, “While not nearly as good as the FreedomWorks Plan to avert the fiscal cliff, Plan B is much better than the so-called ‘balanced approach’ that Mr. Boehner had, until Monday, been trying to negotiate with Mr. Obama.

While this may have left the impression that FreedomWorks was endorsing Boehner’s proposal, alongside Americans for Tax Reform, it would seem that Clancy was just stating his opinion, describing why “Plan B” might be reasonable, not speaking for FreedomWorks as an organization. He updated his post this afternoon, noting that FreedomWorks will be opposing the plan:

After review of the Boehner Plan B legislation, pending in the House today, FreedomWorks has found it must oppose the legislation, and will be urging House members to vote NO on the bill. We will post our formal opposition letter on our site, soon.

Word is that FreedomWorks may also score the vote, which is scheduled to take place some time this evening.

House to vote on “Plan B,” Boehner aggressively whipping votes

boehner

It looks like Speaker John Boehner’s so-called “Plan B” — which would raise taxes on individuals earning more than $1 million and cut entitlement programs — is facing much skepticism from House Republicans, despite earning the approval of Grover Norquist, President of Americans for Tax Reform, and FreedomWorks.

Daniel Malloy from the Atlanta Journal-Constitution noted last night that Boehner was seen on the House floor last night whipping three conservatives from Georgia — Reps. Paul Broun, Phil Gingrey, and Tom Price. Malloy described the conversation as “pretty intense.” One would have to imagine that a similar mood exists among other conservative members of the House.

In hopes to convince conservatives to get on board with the plan, CNN explains that Republicans leaders may add spending cuts to the mix:

Apparently scrambling for votes on their alternative to a fiscal cliff deal - known as Plan B - House Republicans late Wednesday were considering expanding the scope of their tax cut extension measure to include spending cuts.

Boehner to push his “Plan B” through the House

John Boehner

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.

White House makes a “fiscal cliff” counter-offer to House Republicans

Barack Obama

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.

Boehner willing to trade higher taxes on millionaires for entitlement cuts

boehner

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.

 


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