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LAMBRO: Bent out of shape over Bush tax cuts

Obama won’t budge from demand to dun the rich

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Ten years after President George W. Bush cut income-tax rates, his decision remains at the epicenter of debate about future economic policy. President Obama, who came charging into office vowing to repeal the Bush tax cuts, has been blocked at every turn by Republicans but also by some members of own party who thought it was insane to raise taxes in the midst of a recession when businesses were struggling and so many Americans were out of work.

He reluctantly threw in the towel at the end of last year when the tax cuts were set to expire, conceding that this was "no time to raise taxes" in a high unemployment economy that was still struggling to recover. No kidding.

It was a grudging decision made from a position of weakness after Republicans swept Democrats from power in the House and slashed their majority in the Senate - in part on the issue of raising taxes in a weak economy that Mr. Obama's policies had failed to revive.

With Congress in a budget stalemate over keeping the government funded into the next fiscal year, Mr. Obama cut a deal with the Republicans to extend the Bush tax cuts for two more years.

But he hasn't given up and neither have the Democrats in Congress. He has been campaigning virtually nonstop across the country, pounding Republicans for their refusal to raise taxes and once more pointing to the Bush tax cuts as the cause of all our economic ills.

Mr. Obama flies to Scranton, Pa., on Wednesday, his 56th visit this year to a 2012 battleground state where polls show the president is in deep trouble.

"He's talked a lot about the Bush tax cuts, but the only thing he's ever done is extend them, and he's on record favoring many of them," said economist Douglas Holtz-Eakin, who has advised Republican candidates.

After his cave-in on the Bush tax cuts last year, he drew another line in the sand on the debt-ceiling debate, saying that it was time for upper-income Americans to "pay their fair share." Never mind that taxpayers in the top income brackets pay the lion's share of all income taxes, while the bottom 40 percent pay zero income taxes.

The debt-ceiling battle ended with a compromise on the size of the budget cuts to be worked out, but the Bush tax cuts survived.

But then the tax cuts came under renewed assault in the Joint Select Committee on Deficit Reduction that was part of debt-ceiling deal. After months of negotiations, the panel couldn't agree on a plan to cut $1.2 trillion in deficit spending over 10 years, and once again the sticking point was the Bush tax cuts.

The news headlines focused on the supercommittee's failure to reach agreement on taxes but offered relatively few details on what they disagreed about. Nor was much light shed on the Republicans' offer to break the impasse by agreeing to raise some taxes.

In the closing days of the negotiations, Sen. Pat Toomey, Pennsylvania Republican, offered a plan that would cut a range of itemized tax deductions and other credits that wealthier taxpayers use to reduce their taxable income, along with other fees and taxes that together totaled more than $500 billion in deficit reduction and $900 billion in spending cuts.

Cleansing the tax code of these tax breaks would result in higher revenue, some of which would be used to lower the marginal tax rates across the board. This is the same plan that President Reagan and Democratic leaders agreed to in 1986 that lowered the top tax rate to 28 percent.

"We believe this lowering of the rates and broadening of the tax base would have spurred economic growth, created jobs and, in the process, generated billions more in revenue from growth in the economy," Mr. Toomey and his five Republican colleagues said a column they wrote for The Washington Post last week.

At the time, Mr. Toomey's plan looked like a solution to the impasse that the 12 lawmakers were seeking. Senate Democratic Whip Richard J. Durbin of Illinois, of all people, called the plan a "breakthrough" and the first new idea they had heard.

In the end, however, Mr. Durbin and the Democrats were unwilling to abandon their rigid ideological demands that ending Bush tax cuts for the top two income brackets must be a part of the deal.

But as Mr. Toomey and his colleagues wrote in The Post, none of the tax reforms they had proposed "can happen if the current law's automatic tax increases occur on Jan. 1, 2013" - the date when the two-year extension of the Bush tax cuts expires.

"We can't both reform the code as Republicans propose and undo it all 12 months later," they said.

Let's be clear about what the Democrats are proposing in this battle over the Bush tax reductions, which also cut taxes for the middle class and created a new, lower, 10 percent tax rate for those in the bottom income bracket.

They would raise the top two individual tax rates to 36 percent and 39.6 percent, tax levels that would hit a lot of struggling small businesses; and they would boost the 15 percent capital gains and dividends tax to 20 percent, dealing a job-killing blow to needed venture capital formation at a time when businesses are desperate for more investment, the mother's milk of economic expansion.

What's especially ironic is the fact that the compromise Mr. Toomey and the Republicans offered was right out of the debt-reducing, base-broadening tax rate reduction plan proposed by the president's bipartisan deficit commission.

The White House and the supercommittee's Democrats had turned against their commission's proposals, proving they weren't interested in serious debt reductions in the first place.

In an anemic, jobless economy that's barely growing at 2 percent, with poverty, homelessness and hunger on the ascendancy, the Democrats' refusal to accept the GOP's offer was, at best, irresponsible and at worst, criminal.

Donald Lambro is a syndicated columnist and former chief political correspondent for The Washington Times.

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