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Tax cuts, tax hikes, tax talk

By Kay Bell · Bankrate.com
Wednesday, September 21, 2011
Posted: 4 pm ET

President Barack Obama has come up with ways to get more Americans working and reduce the federal deficit. His plan to reduce the deficit by about $3 trillion over 10 years also would pay for his previously announced $447 billion jobs package.

Cynics might say that the person Obama is most interested in employing is himself, since the president's jobs bill and his deficit reduction as well as his tax proposal to pay for it make for good campaign rhetoric.

Yes, you will be hearing the "This is not class warfare, it's math," response to opponents of the proposed millionaires' tax in Obama television campaign spots next year.

The reality, though, is that the president is going to have a very tough job getting Congress to approve even portions of his sweeping plan.

Part of the problem is the sheer size of the proposals. The jobs bill is almost 200 pages; the measure to pay for it is 80 pages more. That is a lot of legislation to wade through.

Then you get to what's in all those pages.

Republicans who control the House obviously will fight tooth and nail against any tax increases, even those targeting just the very wealthy. They point to Congressional Budget Office data showing that high-income households pay a disproportionate share of federal taxes.

But, argue the "make them pay their fair share" contingent, those same high-earning taxpayers have seen their after-tax incomes increase as tax rates have remained low. And much of the income of the very wealthy, according to Internal Revenue Service data, comes from capital gains, which are currently taxed at just 15 percent.

Now about those tax rates, $866 billion in revenue in the president's plan would come from finally letting the Bush-era tax cuts for the highest earners expire in 2013. This is something Obama has wanted since he hit the national campaign trail in 2007. However, he caved on that issue in December 2010 in a last-minute tax deal he made with Republicans.

A lot of Democrats are still unhappy with how that went down and Obama is still dealing with that fallout.

While progressives are generally pleased with Obama's new combative stance -- he's threatened to veto any bill that cuts Medicare benefits without increasing taxes on corporations or the wealthy -- some still fear that the president's inclination to compromise could produce another deal in which the GOP again comes out ahead.

Then there's the super committee. Created as part of the debt ceiling legislation, the officially named Select Committee on Deficit Reduction must come up with a federal deficit cutting plan by Nov. 23, or automatic program cuts will take effect.

Some of what Obama is proposing might end up in some form in the super committee's final proposal. As that legislative process moves forward, many on Capitol Hill are holding their assessments of proposals that might or might not be part of a final deficit reduction package.

The bottom line is don't get too excited or exercised yet about what is or isn't, will or won't be in a final deficit and tax deal.

But do be prepared to hear parts of the measure, whether they pass or especially if they aren't approved, during the 2012 election campaigns.

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2 Comments
DyAnn
September 22, 2011 at 6:11 pm

Cuts to Medicare benefits should not be even considered until Medicare FRAUD and OVER CHARGING by physicians and institutions is drastically reduced. How many billions are being paid out to scammers at all levels?
Letting them down now after our elders have worked for the country and paid taxes, ( at the REAL PURCHASING VALUE of the dollar for each of the years that they worked), is not moral.