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LAMBRO: Plotting a winning tax divide
Obama, Democrats dispute where to draw line between haves and have-nots
Question of the Day
President Obama is running around the country trying to sell his plan to create jobs by raising income taxes. The idea draws cheers from liberals but boos from Republicans and even many Democrats on Capitol Hill who say we shouldn’t be raising taxes on anyone, especially in a recession.
In his stump speeches, Mr. Obama chooses to ignore the cold shoulder his latest recovery scheme is getting from Democrats and points the finger of blame at House and Senate Republicans who think his plan is a “job killer.”
But with this week’s polls showing more than 60 percent of Americans surveyed disapprove of his handling of the economy, the president’s revised strategy is aimed at just winning back his party’s dispirited liberal base. Nothing stirs their political blood more than class warfare and raising taxes on the rich.
“You’re already hearing the Republicans in Congress dusting off the old talking points,” he told a fundraising group recently. “You know what? If asking a billionaire to pay the same rate as plumber or a teacher makes me a warrior for the middle class, I wear that charge as a badge of honor.”
But his tax bill is really aimed at income brackets well below the “billionaires and millionaires” he is so fond of attacking - slapping taxes on individuals making more than $200,000 and families earning more than $250,000. This could include a lot of working-class people such as plumbers, many of whom earn well into six figures.
That’s why Senate Democratic leaders on Wednesday scrapped Mr. Obama’s proposal to tax people in the lower six figures, replacing it with a 5.6 percent surtax on annual incomes of more than $1 million.
It took a while, but the Democrats now feel that setting the tax dividing line at $200,000 to $250,000, as Mr. Obama is doing, “fuzzies the picture,” as Democratic Sen. Charles E. Schumer of New York told reporters.
“There are lots of people who either make $250,000 or are close” to that income level, Mr. Schumer said, singling out small-business owners and dual-income couples in upper-income urban regions of the country.
“If we’re able to draw a very clear line - people above a million dollars should pay their fair share - it’s much easier to win that argument,” said Mr. Schumer, who is the political message-maker for his party in the Senate.
What forced this midstream change in the Democrats’ jobs bill? It was a bunch of vulnerable senators who are among the 23 Democrats up for re-election next year and fear a vote for Mr. Obama’s tax increases on plumbers and the like would end their careers.
Democrats such as Sens. Joe Manchin III of West Virginia, Jon Tester of Montana, Claire McCaskill of Missouri and Ben Nelson of Nebraska hail from swing states where Mr. Obama’s dismal job-approval ratings run between 39 percent and 44 percent.
The latest Washington Post-ABC News survey shows that 75 percent of those polled support raising taxes on millionaires, but to what end? To finance Mr. Obama’s $447 billion jobs bill, another public-works spending plan that looks a lot like his failed $825 billion plan in 2009.
House Republicans aren’t going to approve any bill that raises taxes in an economy that’s barely growing, one that Federal Reserve Chairman Ben S. Bernanke warned this week is “close to faltering,” his strongest language to date.
Neither are Senate Republicans, who understand that in a high-unemployment economy, we need everyone’s oars in the water, especially those of higher-income earners, who are among the nation’s biggest business investors.
As for polls showing a strong majority for raising taxes on wealthier Americans, the same Washington Post-ABC News poll shows that Republicans, not Democrats, have the advantage on the tax issue. Forty-nine percent said they trusted Republicans to better handle taxes, versus 39 percent who trust Mr. Obama - “a 12-percentage-point swing toward the GOP since April,” The Post reported.
That level of trust in Republicans on tax policy is well justified. Look beneath the surface of the White House/Democrats’ tax plans, and you see confiscatory tax rates that would shut down what little growth remains in Mr. Obama’s economy.
The Democrats’ millionaires surtax would be slapped onto investment income, raising the top tax rate to 40.6 percent and even higher, 45.2 percent, if the George W. Bush tax cuts are allowed to expire at the end of next year.
Raising federal taxes on capital investment in the U.S. economy would effectively kill investment, undermining future business expansion, curbing growth and reducing job creation, or what’s left of it.
But Mr. Obama and his party aren’t interested in boosting private-sector investment by enacting tax-cut incentives to unlock trillions of dollars in capital reserves that remain on the sidelines. They’re only interested in getting more money to spend on the same failed central-planning programs they’ve tried before without success.
Mr. Obama wants to make next year’s election about the rich and big business versus the middle class, when it’s really going to be all about who has the smartest ideas to expand the economy, boost investment and create jobs.
His plan is to divide the economic pie into smaller slices rather than create a bigger pie through robust economic growth and more capital formation.
He thinks that by raising taxes on dividends and capital gains, the government will receive more tax revenue when it will get less of both. When President Clinton cut the capital gains tax rate in his second term, the economy took off like a rocket, unemployment fell, and higher tax revenue led to a budget surplus.
Mr. Obama saw that happen but insists on raising taxes on investors anyway, which may explain why polls show that just 58 percent of Democrats believe he will be re-elected.
Donald Lambro is a syndicated columnist and former chief political correspondent for The Washington Times.
© Copyright 2014 The Washington Times, LLC. Click here for reprint permission.
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