6 Key Points About the Tax Cuts for the Wealthy Debate Raging in Washington
Washington is engaged in a noisy fight over extending George W. Bush’s “temporary” tax cuts, set to expire at the end of the year.
The battle lines are clearly defined: President Barack Obama and the Democratic leadership are pressing to extend the cuts that put some money into the pockets of the middle class and let those for the top of the heap expire on schedule. House Minority Leader John Boehner, R-Ohio, said this week he might go along with that plan, but Senate Minority Leader Mitch McConnell, R-Kentucky, joined the rest of the GOP caucus in insisting that the cuts giving huge breaks to the rich be continued indefinitely as well. Some Blue Dogs have said they’d prefer to keep the break for their wealthy patrons in place, and Ben Nelson, D-Nebraska, arguably corporate America’s most reliable mouthpiece in the Senate, has signaled that he may join a Republican filibuster to block passage of any bill that allows them to expire.
National polls -- six of them in recent weeks -- show that the American people are firmly on the side of the Democrats in this fight, but as Greg Sargent pointed out in the Washington Post, conservatives are betting that any discussion of taxes will feed into the wholly inaccurate narrative that "Democrats want to raise your taxes." “Republicans,” he wrote, “seem to be gambling that the nuance of the debate will get lost in all the noise, and people will see Dems as liberal tax-hikers even though they want to extend the tax cuts for the middle class.”
It may work. The corporate media is once again doing its typically horrendous job illuminating what’s at stake in the fight, and for whom. And Democrats are doing their typically pathetic job crafting a cohesive winning message. They’ve allowed the tax cuts, passed in 2001 and set to expire this year -- in order to get away with some parliamentary shenanigans in the Senate -- to be branded the “Bush tax cuts,” and the debate to center around whether to extend them or to “raise taxes.” The entire discussion would look very different if the administration had put together a package of cuts that target only the middle class, called them the “Obama tax cuts,” and then forced conservatives to oppose them.
But that didn’t happen, so we have another muddled debate over a significant matter of public policy. To sort out the fact from the fiction, here are some of the key issues underpinning this fall’s big tax fight.
1. The Rich Get Plenty of Relief from Those 'Middle-Class' Tax Cuts
The central point of debate on this issue -- tax cuts for the middle class versus those for the wealthy -- represents a false narrative. The “middle class” tax cuts give everyone a break, across the board, on their first $200,000 of income ($250K for married couples). What’s more, according to the Center for Budget and Policy Priorities (CPBB), “high-income people actually receive much larger benefits in dollar terms from the so-called ‘middle-class tax cuts’ than middle-class people do.”
Specifically, recent estimates from the Joint Committee on Taxation show that extending just the middle-class tax cuts would provide more than $6,300 in tax cuts to households with incomes above $200,000, on average, compared to $1,132 in tax cuts for households with incomes between $50,000 and $75,000.
People making between $500K and a cool million would get a cut of $6,701 if the “middle-class” cuts are extended; if the cuts for the “wealthy” continue, they’d pocket an extra 10 grand, on average -- a cut of $17,467.
What’s really at stake are the very large cuts for those at the very top. According to CPBB, households with incomes of over $1 million would receive an average tax break of nearly $104,000 if the high-income measures are extended, versus $6,349 if they’re not. So, the issue is pretty simple: do we want to take on $1 trillion more in national debt over the next decade, on which we’d have to pay interest, to lop $98,000 from American millionaires’ tax bills?
There’s no “class war” between the rich and the middle class; the battle is between those who are wealthy today and all American workers who will be saddled with a bunch of additional debt in the future.
2. Budget Busters
According to the Congressional Budget Office, the sum total of the Bush tax cuts, if extended, would represent the single largest contributor to the deficit over the next decade. Conservative deficit hawks -- or deficit chickenhawks as the case may be -- respond to that reality by whistling as they pass the graveyard. Senator David Vitter, R-Louisiana, recently opined, “I don’t think we have to quote unquote ‘pay’ for that because it’s about Americans keeping their own money and our simply keeping the present tax rates in place.” He didn’t offer any proposed spending cuts, and didn’t mention the $2.7 trillion that extending all of the cuts would add to federal deficits over the next 10 years (or the cool trillion it would cost to extend only those cuts targeted at the top 2 percent of U.S. earners).
3. The Wealthy Don’t Invest the Money They Save in 'Job Creation'
One thing almost every conservative believes to be true, and all respectable economists agree is nonsense, is the idea that the wealthy take those tax breaks and funnel them back into the economy, spending lavishly and stimulating businesses to invest and create tons of new, high-paying jobs.
The reason that narrative is false is simple: they spend the same amount of money on their lifestyles either way, and simply take those cuts and add their value to their already healthy estates.
According to a study of high earners’ spending and saving patterns conducted by Moody's, “Tax cuts in 2001 and 2003 under President George W. Bush were followed by increases in the saving rate among the rich.”
The Moody’s research covering couples earning more than $210,000 found that spending by the wealthy is more likely to be influenced by the ups and downs of the stock market than changes in income-tax rates.
Stock-market performance is the “primary factor that is driving the savings of the top 5 percent of households,” said Mustafa Akcay, economist and co-researcher of the savings data.
Increasing Americans’ saving rate is a worthy goal; borrowing a trillion dollars to do so for the wealthiest would be nothing short of a brain-dead policy.
4. Actually, Extending the Millionaire Cuts Will Stymie Long-Term Growth
Adding significant amounts of national debt threatens to send interest rates upward, which constrains new business investment and job creation. According to an estimate of that relationship conducted by former Bush Council of Economic Advisers chair Glenn Hubbard, Federal Reserve economist Eric Engen, outgoing OMB director Peter Orszag and William Gale, “the overall effect of the Bush tax cuts on economic growth has therefore been negative -- and it will continue to be negative if the cuts are extended.”
The res of the key points are at the link. making the wealthy pay for their share of America's debt is only fair. Americans have always believed those who benefit the most from public roads, national defense, police, firefighters, a publicly educated work force - the wealthy - should pay for all the benefits that help them make tons of money.
Kentucky senatorial candidate Rand Paul is not mentally stable enough to be a U.S. Senator - Rand Paul doesn't understand how budgets, the Senate, math work, The Kentucky candidate promises to filibuster every unbalanced budget -- but that isn't allowed
Should Kentucky voters send Paul to the Senate, he promises not just to vote against, but to actively filibuster every budget bill that's not balanced.
OK! Good on you, Rand. That's true fiscal conservatism. Of course, that means you'll have to single-handedly close a $1.3 trillion budget gap in one year. So ... good luck with that one, I guess. You'll need to get rid of like 10 Departments of Agriculture.
Oh, wait, there's one other very small problem: Senators can't filibuster budgets.
Paul continues to prove my theory that he's just kind of dumb.
Rand doesn't think the Republican plan to destroy Social Security and Medicare in some bizarre bookkeeping trick to balance the budget is radical enough. Don't worry America when your elderly relatives and friends are starving they can always go begging to Paul's back door at the mansion.
