Yet almost all of these supposedly anti-deficit senators also want to add about a trillion dollars to the deficit over the next decade by making permanent the Bush tax cuts that benefit the very richest taxpayers. While the relatively small, temporary job measures that these senators blocked would have little or no impact on the long-term budget deficit, making permanent the Bush tax cuts for the rich would drastically increase the deficit and reduce our ability to invest in America's future.
There are three parts to the debate over the Bush tax cuts. The first involves the cuts enacted under President Bush in the federal income tax. Under President Obama's proposal, the 98 percent of taxpayers with adjusted gross income less than $200,000 (or $250,000 for married couples) would retain all of these income tax cuts. That leaves in dispute only whether the richest 2 percent will also continue to enjoy fully these income tax cuts, as congressional Republicans propose.
The second involves the federal tax on the estates of millionaires, which President Bush temporarily repealed. While congressional Republicans want to make this repeal permanent, President Obama would meet Bush halfway by cutting the estate tax in half (compared to what it would be if Congress simply allowed the Bush repeal to expire).
Under Obama's proposal, fewer than half of 1 percent of deaths would result in estate tax liability. This means that the federal estate tax would only affect the very richest families — whose fortunes could only have been made because of the roads that facilitate commerce, the public education that creates a productive workforce and the stability that government provides and which taxes make possible.
The third part of this debate involves modifications to the Bush tax cuts that were included as part of the economic recovery act enacted last year. These provisions, which modestly expanded the Child Tax Credit and the Earned Income Tax Credit, expire at the end of this year, just like the Bush tax cuts. President Obama would make these provisions permanent, while congressional Republicans would not. The result is that the poorest three-fifths of taxpayers would actually pay more in taxes under the Republican approach than under Obama's plan.
How do Republicans (and conservative Democrats who agree with them) justify their position? One argument they make is that the tax system unfairly burdens the rich and lets the poor off too easily. For example, conservatives have lately fixated on the fact that many people don't owe any federal income taxes. Many cite this fact to explain their opposition to the Earned Income Tax Credit and the Child Tax Credit and their support for more tax cuts for the rich.
But the fact that some people do not owe income taxes is a red herring. Everyone who works pays federal payroll taxes, even if they do not earn enough to owe federal income taxes. Everyone pays state and local taxes, which tend to be very regressive, meaning they eat up a larger fraction of a poor family's budget than a rich family's budget. The progressive aspects of the federal income tax just barely offset the regressive features of all these other taxes.
Conservative lawmakers also like to argue that if the rich lose their tax cuts, the small businesses they own won't be able to grow and create jobs. This is also a red herring. Only 3 percent to 5 percent of taxpayers with business income would lose any of their income tax cuts under Obama's plan. And even for these taxpayers, there is no connection between income tax rates and hiring decisions. Businesses are not taxed on money they pay to their employees as wages, and small business owners are not taxed on income they reinvest in their businesses.
Congressional Republicans want to add a trillion dollars to deficits over the next decade by extending Bush tax cuts for the very rich. At the same time, they claim we can't afford programs and tax breaks to help the economy and working families that cost a tiny fraction of their proposed giveaway to the wealthy. Their approach is both hypocritical and irresponsible.
ABOUT THE WRITER
Steve Wamhoff is the legislative director for Citizens for Tax Justice, 1616 P Street NW, Suite 200, Washington, D.C. 20036; website: www.ctj.org.
Copyright 2010, Citizens for Tax Justice
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