Obama Throws Down A Tax Gauntlet

Yesterday (as expected), the president announced he would ask for an extension of the Bush tax cuts for another year -- but only for those who make less than $250,000 a year. For those making more than that amount, the tax rate would return to what it was during the Clinton administration (about 38%) -- a time when the economy was healthy and 22 million jobs were created (as opposed to the 1 million jobs created in the eight years under President Bush).

This is tantamount to throwing down a gauntlet to Congress -- especially the Republican-dominated House of Representatives, who have declared that they won't extend the tax cuts at all unless it also includes the massive tax cuts Bush had given to the richest Americans. The Republicans claim that not including the richest Americans would pose an onerous burden on the rich -- and would be bad for both economic growth and job creation.

All three of those arguments by Republicans are bogus (and amount to nothing more than a pay-off to the rich for pumping millions into Republican campaign coffers in this election year). As the chart above shows, even if the rich don't get to keep the huge Bush tax cuts they currently enjoy, they will still have a much lower tax rate than during most of our history since before World War II. It was not until the mid-seventies that the top tax rate dipped below 70% -- and was another 10 years or so until it dipped below 50%. A return to the rates of the Clinton administration would still keep the top rate far below those rates -- and would certainly not pose an onerous burden on the rich.

And the two charts below (from Think Progress) blow a big hole in the other two Republican arguments. As you can see, the top tax rate has nothing to do with either GDP growth or job creation. In fact, the strongest GDP growth and job creation seems to have happened at times when the top tax rate was much higher that what has been proposed by President Obama. The claims by Republicans are simply not true, but we will still probably hear them repeated many times before election day.

The only real question now is whether President Obama will stick to his guns when push comes to shove -- as it undoubtably will. Last year, the president made the same proposal -- but with time running out on the tax cuts, he backed down and let the rich keep their cuts. White House spokesmen say if the Republican version somehow passes Congress and gets to the president, he will veto it. I hope that is true. It would be better to lose all of the cuts than to let the national debt keep piling up because of massive giveaways to the rich.

Letting the tax cuts expire would only cause a small increase for those making less than $250,000, but it would increase tax revenues by many billions for the rich to lose their cuts. Opposing letting these cuts expire for the rich just shows the Republicans are really not interested in cutting the deficit (as they claim to be).

Hopefully, the president now realizes that most Americans believe he has the right answer. A huge majority of Americans, in poll after poll, say they are in favor of the rich paying more in taxes. They don't necessarily want to return to the rates of the forties and fifties, but they do want the rich to pay a fairer share of tax revenues than they currently do.