“Why is the modern Republican Party so opposed to allowing the rich to pay just a little bit more in taxes to help solve the debt and deficit problem in this country that they would prefer no deal at all?” Sen. Patty Murray, D-Wash., asked at The Brookings Institution on Monday.
First off, Murray should be honest; this isn’t about “allowing” the rich to pay more. They’re already allowed to pay more. President Barack Obama wants to force the top 2 percent of income tax payers — those earning $200,000 or more, who already pay about 51 percent of federal income taxes, according to the Tax Foundation — to pay a much higher tax rate. Also, Obama would increase the top tax rate from 35 percent to 39.6 percent. If the federal government raised your tax rate by nearly 5 percent, you probably would not look at that increase as “just a little bit more.”
Secondly, Obama’s soak-the-rich levy wouldn’t, as Murray claimed, “solve the debt and deficit problem.” It wouldn’t even come close. Tax Foundation President Scott A. Hodge estimates that the Obama tax plan would fund the government for just less than a week — that is, 6.8 days.
“This really doesn’t have anything to do with the deficit,” Hodge observed. “This is ideology. It really doesn’t have anything to do with economics. This is their philosophical belief that the rich should pay more.”
Obama’s one week’s worth of savings comes with a price tag. A new Ernst & Young report, prepared for the National Federation of Independent Business and the Independent Community Bankers of America, warns that the Obama tax increases, which also would tax dividends as ordinary income and attach a 3.8 percent Medicare levy on investment income, could slow the economy in a way that results in roughly 710,000 fewer jobs.
Republicans have good reason not to vote for a tax increase that they believe could hobble the recovery.
To recap: The Obama tax plan relies on raising taxes on the 2 percent of earners who pay more than half of income taxes; that’s the Democrats’ idea of balance. These new tax increases would barely dent the deficit, would not be expected to help the economy and might well damage it.
Democrats are insisting on this tactic, not because they believe their plan would create jobs — Murray did not argue to that effect — or because these new taxes would jump-start the economy but because they desperately need a campaign gimmick that can masquerade as a solution to the ailing U.S. economy, which is saddled with a $15.8 trillion national debt.
There’s nothing responsible about this so-called balanced approach. By insinuating that Washington can pay down the national debt by squeezing the rich “just a little bit,” Democrats are no more responsible than Republicans who have pledged never to increase taxes.
When the economy has recovered fully, I believe that Washington will have to enact tax reform that increases revenues. But first the U.S. economy has to improve.
Obama has no idea how to make that happen. He knows that the private sector is sitting on cash — more than $1.7 trillion in May, according to The Wall Street Journal. That’s why Obama claimed in June that “the private sector is doing fine.” But the president has no blueprint for how to instill corporate decision-makers with the confidence they need to hire more workers rather than hoard their cash. Indeed, his remedy scares employers.
So why would Americans re-elect him?