For some time now, liberals have been demanding—their visages positively aglow with sweet reasonableness—that “the rich” should pay their “fair share” in taxes in order to help the government meet its expenses. Let’s leave aside the fact that they often make up the numbers and manipulate the statistics to suit themselves. (For instance, last year President Obama said that closing loopholes, etc., could produce $1.2 trillion in taxes, now he says it couldn’t produce $800 billion, so only raising marginal rates can force the rich to disgorge their fair share.)
No one can really argue with the proposition that the rich should pay their fair share. Of course they should, just like everyone else. But who are the rich and what is their fair share?
Because Republicans are more likely to be blamed for any fiscal cliff fallout, the closer they get to the deadline the more pressure they’ll be under to make concessions. Which is why the White House is slow-walking negotiations, according to John Boehner:
Speaker John Boehner (R-Ohio) accused the White House Friday of trying to “slow-walk” the “fiscal cliff” negotiations.
Boehner said there was “no progress” in the talks just three weeks before tax hikes and spending cuts are set to kick in, and expressed frustration that President Obama hasn’t made a counter-offer to the GOP’s proposal of $800 billion in new tax revenue as part of a $2.2 trillion deficit-reduction plan.
“This isn’t a progress report, because there’s no progress to report,” Boehner said in a brief press conference at the Capitol.
One of the things that has become apparent during the presidential campaign and now, during the negotiations over how to avoid the “fiscal cliff,” is the importance the president places on raising the rates on the top 2 percent of income earners. I’ve written before on why I believe conservatives shouldn’t make a “no new taxes” pledge and why keeping the top rate at 35 percent (which I support) isn’t a matter of high principle.
At the same time, Speaker John Boehner and House Republicans–who after all have been willing to put $800 billion in revenues (through closing loopholes and deductions) on the table–have been far more open to compromise than President Obama, who has not given an inch. In particular, the president has made it clear that he would gladly go over the fiscal cliff rather than give up on his obsession to raise tax rates on the top 2 percent.
For Obama, the top two percent are the Great White Whale–and he is Captain Ahab.
Although the Occupy Wall Street protest movement often shunned both organization and the formation of a coherent set of principles and demands, its antipathy to Wall Street–hence the name of the movement–was central to its cause and its grievances, real or imagined. Punishing Wall Street was a given to the protesters, because in their minds the city’s kings of finance were greedy oligarchs hoarding their wealth. But occasionally the OWS protesters accidentally stumbled upon some cold hard facts that undercut their complaints, such as when New York City Councilman Daniel Halloran approached the crowd and told them:
I think there needs to be Wall Street reform, but we also have to remember that one-third of the city’s revenue comes from Wall Street right now, OK? One-third of the city’s revenue stream already comes from Wall Street.
That recent CNN poll showing a majority of Americans would blame the GOP if the country goes over the fiscal cliff apparently wasn’t an outlier. A new Washington Post-Pew Research Center poll found similar results, The Fix reports:
While 53 percent of those surveyed say the GOP would (and should) lose the fiscal cliff blame game, just 27 percent say President Obama would be deserving of more of the blame. Roughly one in 10 (12 percent) volunteer that both sides would be equally to blame.
Those numbers are largely unchanged from a Post-Pew survey conducted three weeks ago and suggest that for all of the back and forth in Washington on the fiscal cliff, there has been little movement in public perception. The numbers also explain why Republicans privately fret about the political dangers of going over the cliff, while Democrats are more sanguine about such a prospect.
President Obama’s proposal to Republicans to avoid going over the so-called fiscal cliff — huge tax increases, huge spending increases, and no serious entitlement reform — is risible. What the president is offering up is essentially his last budget, which didn’t win a single vote of support from any member of Congress.
It may be that this proposal was simply an extreme negotiating position that will be dramatically reshaped over the next 27 days. Or it may be that the president is, for political reasons, happy to have us go over the cliff. The calculation would be that he’s confident he can pin blame on Republicans for this having happened, portraying them as willing to increase taxes on the middle class and wreck the economy in order to keep taxes on the richest 1 percent from going up to Clinton-era rates.
The Wall Street Journal has a lead editorial today describing how companies are rushing to send out dividends in 2012 to avoid what will almost certainly be much higher taxes on dividends next year. Right now dividends are taxed at 15 percent. If the Bush tax cuts simply expire on January 1, then dividends will be taxed as ordinary income, up to 39.6 percent. For someone earning over $250,000, the tax rate on “unearned income”—a phrase that is pure, undiluted demagogy—will be 43.4 percent, as those people will be slapped with a 3.8-percent surcharge on dividends and capital gains to help pay for Obamacare.
This rush to pay dividends early is about as predictable as the sun rising in the east. Just consider: Costco is issuing a special dividend of $7 a share. If it is paid on December 31, the owner of 1,000 shares (worth $102,580 as of yesterday’s close) would owe taxes amounting to $1,050 on the $7,000 in dividend income. Paid on January 1, however, someone in the top bracket would owe $3,038 in taxes on that dividend.
With negotiations over how to avoid going over the “fiscal cliff” intensifying, there’s a lot of attention on Grover Norquist and his “Taxpayer Protection Pledge,” in which lawmakers who sign it pledge to taxpayers that they will (a) oppose any and all efforts to increase the marginal income tax rates for individuals and/or businesses; and (b) oppose any net reduction or elimination of deductions and credits, unless matched dollar for dollar by further reducing tax rates.
On the pledge, I have several thoughts.
1. Mr. Norquist has basically been a force for good, since he raises the price of tax increases and allows Republicans to get more in return for them. That said, I have never liked the idea of politicians signing pledges beyond their oath to support and defend the Constitution. It locks a person into a position that may seem reasonable at the time but eventually becomes unwise. I support lower tax rates, but they are not a talisman. And whether or not one should agree to higher taxes depends on what one is able to get in return.
Grover Norquist isn’t about to let Republicans off the hook on his no-tax pledge, but he seems to be getting ruffled by them. His criticism of potential pledge-breakers got personal last night:
“The pledge is not for life, but everybody who signed the pledge including Peter King, and tried to weasel out of it, shame on him,” Norquist said on CNN’s “Piers Morgan Tonight” on Monday, adding, “I hope his wife understands that commitments last a little longer than two years or something.”
Norquist’s comments came as King and some other top Republicans said they were willing to end their commitment to the pledge as Washington scrambles to find a deal that will fend off the looming fiscal cliff. On Sunday, King said that the “taxpayer protection pledge” — first offered in 1986 from Norquist’s organization, Americans for Tax Reform — isn’t binding today.
“Hey, if you think a commitment is not for as long as you make it for, the commitment for the pledge, as Peter King well knows when he signed it, is that as long as you’re in Congress, you will [rein in] spending and reform government and not raise taxes,” Norquist said. “It’s not for 500 years or two generations. It’s only as long as you’re in the House or Senate. If he stayed too long, that’s his problem. But you don’t tell the bank, ‘Oh, the mortgage, wasn’t that a long time ago?’
“If you make a commitment, you keep it,” he continued.
The latest CNN/ORC poll finds a plurality would blame congressional Republicans if no agreement is reached before the U.S. hits the so-called fiscal cliff:
Forty-five percent surveyed in a new CNN/ORC poll said they would blame congressional Republicans if there is no agreement, with 34 percent pointing the finger at Obama.
Two-thirds say the U.S. would experience serious problems if the combination of tax rate increases and automatic spending cuts expected in January take effect.
One in four says the country would experience a crisis, with 44 percent expecting major problems if a deal to avoid the fiscal cliff is not found. One in four says the fiscal cliff would cause minor problems, with 7 percent saying there would not be any consequences.
Seventy-seven percent of Americans believe their personal situation would be affected if the U.S. fell over the cliff.
Lindsey Graham, Saxby Chambliss, Bob Corker, and Peter King have already distanced themselves from Grover Norquist’s pledge not to increase taxes, and now it looks like House Majority Leader Eric Cantor is downplaying the pledge too:
House Majority Leader Eric Cantor (R-Va.) appeared to take a step back from anti-tax champion Grover Norquist on Monday, suggesting that a “no new taxes” pledge coordinated by Norquist’s Americans for Tax Reform group wouldn’t determine his legislative duties regarding ongoing fiscal cliff negotiations.
“When I go to the constituents that have reelected me, it is not about that pledge,” Cantor said on MSNBC. “It really is about trying to solve problems.”
Asked if he could foresee a situation in which he would be willing to directly renounce the anti-tax pledge, Cantor dodged specifics, saying that he didn’t know because he hadn’t talked to Norquist.
This is the strongest challenge yet to Norquist’s anti-tax pledge, but it’s unclear whether any Republicans would actually follow through on the threats. Graham, for example, has said he’d go against the pledge in return for extensive concessions on entitlement reform from Democrats, which are unlikely to happen.
As President Obama reaches out to progressive activists to get their temperature on budget compromises, Politico reports that the Democratic Party may have an even more difficult time unifying their members around a deal than the GOP:
Yet getting a deal that raises tax rates for the wealthy may not be so easy for the party, and not just because of inevitable GOP resistance.
Senate Majority Leader Harry Reid (D-Nev.) will have to find 60 votes to extend just the middle-income tax rates — far from a given when a swath of the Senate’s moderate Democrats are up for reelection in 2014.
Reid and the White House will also need to navigate a hardening Democratic divide on entitlements. Progressives don’t want any deep cuts that Republicans will insist on for a deal. But a Third Way poll of 800 Obama voters set for release Tuesday found that efforts to fix Medicare and Social Security enjoy broader support than liberals suggest.
Even if Speaker John Boehner (R-Ohio) were to risk his job by backing a tax-rate increase, there are Democrats who think a $250,000 income threshold is too low. So finding 218 House members to pass a bill that would extend the lower tax brackets isn’t exactly a cakewalk. Want Boehner to raise taxes? Republicans privately say the entitlement changes would have to be unimaginably sweeping.
As Congress reconvenes, Democrats are insisting that President Obama’s re-election means that House Republicans are going to have to give in to his demands for tax increases on the wealthy. While this will do very little to actually solve the impending budget crisis, the president’s supporters have a point when they claim that his victory means a majority of Americans supported his rhetoric about backing a balanced approach that would involve spending cuts in equal proportion to revenue increases. But as James Pethokoukis writes at AEI Ideas, a close look at what the president is asking for throws any notion of balance out the window.
It may be, as Bill Kristol pointed out on Fox News the other day, that it makes no sense for the GOP to “fall on its sword for a bunch of millionaires.” Speaker John Boehner’s initial offer to raise revenue by eliminating tax deductions for the wealthy was an indication that Republicans are prepared to start bargaining. And as Kristol said, there is an argument to be made that if the House leadership bargains the tax increase cutoff up, it may be good politics. But there should be no illusions that what the president is offering is a balanced plan in any sense of the word.
In a front-page, above-the-fold story this morning, the New York Times reveals that Mitt Romney obeyed the tax laws! He actually took advantage of provisions in the tax code that allowed him to minimize his tax obligations.
This ghastly revelation is followed by an editorial:
The biggest beneficiaries of government largess are not those who struggle along on Social Security payments, Medicare or Medicaid benefits, or earned-income tax credits, . . . Rather, they are those at the highest end of the income scale: government contractors, corporate farmers and very rich individuals who have figured out how to exploit the country’s poorly written tax code for their benefit.
The Wall Street Journal hones in on the big assumption in the Tax Policy Center study that’s driven much of the media coverage and Democratic attacks against Mitt Romney’s tax plan:
The study’s biggest distortion is its raw assertion that Mr. Romney would refuse to close certain loopholes. In the appendix, the Tax Policy Center lists, among others, two giant tax deductions that it says would go untouched: the exclusion of interest on tax-exempt municipal bonds, and the exclusion of interest on life insurance savings. The study claims that Mr. Romney won’t close these because they are incentives for saving and investment.
One problem: Nowhere do Mitt Romney or his advisers say that these deductions can’t be touched. Senior economic adviser Glenn Hubbard says these deductions are definitely “on the table.”
This is the assumption that TPC’s study was based on, despite prior comments from Romney that indicate these deductions and exclusions could still be on the table (and the latest clarification from the Romney campaign they actually are on the table).
Several months ago, after Montgomery County, Maryland imposed a bag law taxing both paper and plastic bags, I questioned whether the new law would be a money loser for retail establishments. The tax gap between Maryland (where I live) and Virginia (where I shop) has never been so large. Since the bag law past, I have easily taken several hundred if not a couple thousand dollars worth of grocery and other purchases out of the county, not only to save money but also to gather the bags which I use for trash can liners, throwing away diapers, and cat litter disposal. If I can avoid an irritating shopping experience, driving an extra ten minutes (and saving $0.50/gallon on gasoline while I’m there) is well worth the price.
Proponents of the bag law and the overwhelmingly Democratic Montgomery County government say that the law is about reducing litter and promoting a cleaner environment. Few people believe police departments when they say that quotas and revenue do not play into speed limit enforcement, and the County’s bag explanations also strike a false note. Let’s put aside that there are litter laws already on the book, so the bag tax is effectively punishing the innocent rather than the guilty. In the last couple of days, I received a glossy flier in the mail promoting Montgomery County green initiatives. The flier didn’t look like it was made out of recycled paper and mailing it was a waste of money; I’d be willing to bet far more will end up in the trash than anywhere else.
Senate Majority Leader Harry Reid continues to accuse Mitt Romney of ducking taxes for 10 years without a hint of evidence. This morning, Reid released a statement about the “controversy” (that he created) insisting that his “source” (who he refuses to name) is “extremely credible”:
There is a controversy because the Republican presidential nominee, Governor Mitt Romney, refuses to release his tax returns. As I said before, I was told by an extremely credible source that Romney has not paid taxes for ten years. People who make as much money as Mitt Romney have many tricks at their disposal to avoid paying taxes. We already know that Romney has exploited many of these loopholes, stashing his money in secret, overseas accounts in places like Switzerland and the Cayman Islands. …
It’s clear Romney is hiding something, and the American people deserve to know what it is. Whatever Romney’s hiding probably speaks volumes about how he would approach issues that directly impact middle-class families, like tax reform and the economy. When you are running for president, you should be an open book.
BuzzFeed reports the Democratic National Committee is planning to go “nuclear” over the attacks on President Obama’s “you didn’t build that” speech, and launch a major assault on Mitt Romney’s small business record:
DNC Communications Director Brad Woodhouse outlined an all-out response to Mitt Romney’s attack on President Obama over his “You didn’t build this” line — which the president and independent fact checkers have said has been taken out of context.
“In conjunction with OFA, we’re going to turn the page tomorrow on Mitt Romney’s trumped up, out of context fact-checked-to-death BS about the president and small business and set the record straight on how Mitt Romney has a horrible record on small business,” Woodhouse said in a memo sent to BuzzFeed, saying there will be on-the-ground events across the country — including in Massachusetts — to rebut Romney’s attack.
Remember the Buffett Rule, which was supposed to usher in an age of tax fairness and solve our debt crisis? (And by that, I mean cover .23 percent of our annual deficit while providing enough loopholes for top earners to dodge the rule altogether?)
Well, in the spirit of equality, here’s a new proposal aimed at federal employees. It’s called the Pay Your Taxes Plan. It’s fairly self-explanatory, and involves federal employees simply paying the $3.4 billion they owe in back taxes (including the $833,970 owed by White House staffers, $9.3 million owed by Treasury employees, and $17 million owed by the Justice Department). And the best part is that it would even raise more than the Buffett Plan’s annual revenue.