During the presidential campaign, a key plank in then-candidate Obama’s platform was cutting taxes for 95 percent of Americans, but allowing the Bush tax cuts for those in the top tax bracket to expire on schedule in 2011. “I would roll back the Bush tax cuts on the wealthiest Americans back to the level they were under Bill Clinton, when I don’t remember rich people feeling oppressed,” Obama said at the time.
Obama reiterated this commitment as President, saying “we need to end the tax breaks for the wealthiest 2 percent of Americans, so that folks like me are paying the same rates that the wealthiest 2 percent of Americans paid when Bill Clinton was President.” And last week, Treasury Secretary Tim Geithner swatted away reports that the administration was thinking about reversing course and extending all of the Bush tax cuts. “That’s not something we’ve contemplated,” Geithner said.
When asked if the administration would “go along if Congress took such a step,” Geithner replied, “I don’t think that would be good policy for the country, and I don’t think it’s a necessary thing to do.” Well, it seems like Geithner and the administration need to start convincing House Democrats that extending the cuts isn’t necessary:
— REP. GERRY CONNOLLY (D-VA): I think there is a certain logic to leaving well-enough alone for now, given the fragility of the economic recovery.
— REP. HARRY MITCHELL (D-AZ): Given the unique economic difficulties we face as a nation, this is the wrong time to raise these taxes. We need to retain these tax cuts that encourage investment that stimulates growth and job creation.
In an era when everyone seems to be running around screaming about the deficit, there’s absolutely no reason to extend these cuts, which this year will give millionaires more in tax breaks than 90 percent of Americans will earn in income. The Bush tax cuts have delivered $715 billion to the wealthiest one percent of the country over the last ten years, and extending the cuts would give households in that one percent $60,000 in additional breaks per year, with millionaires receiving a $150,000 annual break. Over ten years, that amounts to another $1.2 trillion in lost revenue.
Now, Mitchell and Connolly are both making the argument that this is about timing, and that raising taxes may choke economic recovery. Leaving aside that we still have another year before Bush’s cuts expire, as Michael Ettlinger pointed out, “while lower taxes during a recession can help the economy rebound, lower taxes for the wealthy are about the worst way to do it”:
Lower taxes for middle- and low-income people is a much better way to help the economy because middle- and low-income families are much more likely to spend their money than the wealthy. And it’s spending that we need to create the demand that will encourage businesses to hire and invest…If we decide we don’t want to raise taxes in a recession we should instead move the tax cuts around a bit. That is, let the tax cuts on those making over $250,000 expire and use the money to give tax cuts to people who could use the help and — more importantly for the economy — are more likely to spend the money they receive.
Rep. Jim McDermott (D-WA) “dismissed the argument that allowing taxes on investment to rise now would slow the recovery.” “There’s no proof that the Bush tax cuts had anything but a negative effect,” he said.