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.
As sure as the sun rises in the east and sets in the west, President Barack Obama wants to raise taxes. At the White House yesterday, Obama again repeated his call to extend current tax rates for anyone making under $250,000, but taxpayers making over that amount would, under his proposal, see their taxes go up to pre-2001 levels:
In a White House statement delivered while people described as working Americans stood behind him, Obama said his proposal would provide the certainty of no tax increase next year for 98% of Americans.
Noting that Republicans seek to maintain all of the Bush tax cuts enacted in 2001 and 2003, Obama said both sides therefore agree on extending the lower rates for middle-class families.
“Let’s agree to do what we agree on, right?” Obama said to laughter and applause in the East Room. “That’s what compromise is all about.”
The White House also let it be known that President Obama would veto an extension of all current tax rates, which is what House Republicans prefer and will likely pass in the coming weeks. Sorry, but the White House is not compromising. And while Obama is determined to raise taxes, some Senate Democrats, particularly those in tough bids for re-election, may not be willing to go along with his plan. Obama is essentially hanging them out to dry here.
Over the last four years, Americans have been told by President Barack Obama and Democrats that taxes need to be raised in order to close the budget deficit, which, for the fourth consecutive year, will exceed $1 trillion. Unless Congress acts before the end of the year, Americans may face what has been dubbed as “Taxmageddon,” which the Congressional Budget Office warns could cause another recession.
But would raising taxes really do much to close or balance the budget? In a new video from Learn Liberty, Professor Antony Davies looks the issue and shows what tax rates would be need to solve the deficit issue:
On Monday, the Washington Post reported that negotiations had begun in Congress to deal with what has become known as “Taxmageddon,” when the 2001 and 2003 tax cuts expire. Even though it seems that the larger focus is tax reform, Conn Carroll notes that no one should bank on President Barack Obama going along with extending current tax rates, even temporarily:
If American voters reelect President Obama, they have no right to complain when their taxes go up by $494 billion on January 1st. That is the total amount taxes are set to increase, automatically if Congress does not pass, and Obama does not sign, tax relief before December 31st of this year.
In the current edition of The New Yorker, Ryan Lizza reports that unlike 2010 and 2011, Obama is prepared to follow through on his threat to let taxes go up after he no longer has to face voters ever again: “Several White House officials I talked to made it clear that if a deal, or at least the framework of a deal, is not reached before December 31st Obama would allow all the Bush tax cuts to expire – a tactic that would achieve huge deficit reduction, but in a particularly painful and ill-conceived fashion.”
Over the last several months, President Barack Obama, Democrats, and Occupy Wall Street have told us that higher-income earners must pay more in taxes. They say that this is about “fairness” and “income inequality.” They may soon get their wish if Obama and Senate Democrats don’t take action to extend the 2001 and 2003 tax cuts. Failure to act would, as the Congressional Budget Office recently noted, cause another recession.
But do the rich get a pass on taxes? Not according to Mark J. Perry, who has crunched the numbers and produced this chart (below) showing that the top 400 taxpayers paid nearly as much in federal income taxes than the bottom 50% of income earners.
Here’s Perry’s conclusion:
A small group of 400 of America’s most successful earners in 2009, about the number of residents living in a typical apartment building in Washington, D.C., paid almost as much in federal income taxes as the entire bottom half of America’s 138 million tax filers, which is a population equivalent to the combined number of residents living in America’s 29 least populated states, plus the District of Columbia. What makes this disparity possible is the fact that an estimated 47% of individual income tax returns filed in 2009 had a zero or negative tax liability.
And the chart:
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.
While President Barack Obama’s re-election strategy is focused on class warfare and attacking private capital, the Congressional Budget Office is warning that the coming “Taxmageddon” at the beginning of the year would send the economy reeling back into a recession:
Tax hikes and spending cuts set to take effect in January would suck $607 billion out of the economy next year, plunging the nation at least briefly back into recession, the nonpartisan Congressional Budget Office said Tuesday.
Unless lawmakers act, the economy is likely to contract in the first half of 2013 at an annualized rate of 1.3 percent, the CBO said, before returning to 2.3 percent growth later in the year.
Canceling those tax and spending policies would protect the recovery in the short run and encourage more vibrant growth, around 4.4 percent, in 2013, the CBO said. However, unless lawmakers adopt policies that would reduce budget deficits by a comparable amount down the road, the CBO said, the national debt would continue to climb, imperiling future economic growth.
The report, “Economic Effects of Reducing the Fiscal Restraint That Is Scheduled to Occur in 2013,” comes as policymakers are bracing for the most consequential battle over government tax and spending policies in years. The George W. Bush-era tax cuts are set to expire on Dec. 31, along with a payroll tax cut proposed by President Obama. Meanwhile, sharp cuts are scheduled to hit the Pentagon and other federal agencies to meet a deal cut during last summer’s showdown over the nation’s debt limit.
Despite the recent failure of the Buffett Rule in the Senate, a ruse wedge issue for Democrats, we’re still debating the merits of higher taxes. At the end of the year, the 2001 and 2003 taxes cuts are set to expire and there has been no movement from the White House or Congress to extend them — even the cuts for the middle class.
Of course, not extending the tax cuts could be harmful to the economy — what some are calling “Taxmageddon.” Some Democrats think we should go back to the incredibly high rates tax rates of decades ago, which is truly a terrible idea. Higher taxes, however, will not balance the budget, in fact, they will slow our economy down:
Democrats also continue to claim that cutting spending will set the economy back. This is a claim that President Barack Obama and his economic advisors have made many times. However, new research concludes that spending cuts lead to economic growth:
It’s a day that nearly all of us dread. We have to make sure that our tax forms are filled our properly and all of our documents are correctly included and send them off to the Internal Revenue Service (IRS), hoping that we at least get some money back. Others of us cross our fingers and pray that we don’t get audited on the return at some point later in the future.
But Tax Day always gives us a chance to talk about tax reform, which almost seems like a unicorn in today’s political climate. Some, including the White House, want to use the term as a way to raise taxes on politically convenient targets. Others, like Rep. Paul Ryan, are proposing a watered down, though mildly better, system that somewhat simplifies our tax code. Unfortunately, those of us wanting a system that eliminates ridiculous tax breaks and credits while at the same time creating a tax code that encourages investment and economic growth are left wanting.
Over at the Cato Institute, Chris Edwards explains why our current tax code is a complete mess and how compliance costs are hurting the economy and taxpayers, no matter where they fall on the income scale:
The federal tax code is getting uglier every year as politicians from both parties add more credits, deductions and other special breaks. In the first year of the income tax in 1913, the 1040 tax form came with just one page of instructions. This year the instruction book for the 1040 is 189 pages long.
That’s just one IRS tax form, but there are more than 500 others. Consider, for example, that the number of special tax breaks for energy has soared from 11 in 1995 to 26 today, and each break has separate tax forms, instructions, regulations and other paperwork.