The Obama administration believes it has finally found the income threshold at which it is politically safe to raise taxes. If you earn $1 million or more each year, you’re in the tax man’s cross hairs. Of course, if you earn $1 million or more, you’re also a member of a very small club. Just three-tenths of 1 percent of all taxpayers, in fact (450,000 filers from among 44 million).
This week’s The Maine Debate asks whether this is good policy; too little, too late; a hit on the wrong people at the wrong time; or a political stunt. Join us here from 9 a.m. to noon on Tuesday, Sept. 20 to discuss the proposal.
The plan, announced over the weekend, would set a new minimum tax rate for individuals making more than $1 million annually to ensure they pay the same percentage, or more, as middle-income taxpayers.
The president is calling his proposal the “Buffett Rule,” alluding to billionaire fund manager Warren Buffett, who has said repeatedly that he should not be paying taxes at a lower percentage of income rate than his secretary.
The component of the tax code that allows someone like Mr. Buffett to pay taxes at a lower percentage of income than middle-income Americans is the unearned income tax rate. Those like Mr. Buffett who earn substantial income from investment pay a low tax rate on that income.
The Republican push back is characterizing such a tax policy as a burden on “the job creators.” That sort of rhetoric is effective, making an electorate already nervous about the economy even more anxious about ruffling the feathers of those who might contribute to it.
But Republicans, who have spent the summer sounding the alarm about the grave danger of growing federal debt and deficits, have offered only part of the solution: spending cuts.
If ever there were a kind of income that is ripe for targeting for higher tax rates, it is this unearned income. Unearned income is not the profit of small businesses; it is not the money that a business would reinvest into equipment, training or new hires. It is money, making money. This is the other part of the debt solution: new revenue.
The Obama “Buffett Rule” articulates an important truth about the nation’s fiscal problems, that there is a stark choice to make — either raise taxes on the wealthiest among us or cut the benefits for the economically limited among us, the Social Security, Medicare and Medicaid recipients.
Debate on tax and spending issues commingle two disparate concerns: the weak economy and the mounting federal debt and budget deficit. The issues are related, but Republicans have incorrectly labeled the cause and effect. The weak economy is not caused by the debt. In fact, cutting federal spending, while necessary, will weaken the recovery. The deficits are caused by the weak economy.
The Obama proposal smacks of desperation and represents a significant retrenchment from candidate Obama’s promise to shift some of the tax burden back to individuals earning $200,000 or more each year and households earning $250,000 or more.
But that lower threshold is a politically safe place. A Sept. 16 CBS-New York Times poll revealed 56 percent of Americans support raising taxes on those earning $250,000 or more, with 36 percent opposed to such a move.
Is it time to end the Bush tax holiday for the wealthy? Or will such taxes really hurt small businesses? Join us at The Maine Debate.