Maine Sen. Susan Collins is in a position to demonstrate leadership on practical ways for Congress to help the country regain its fiscal health. As a moderate Republican in a Congress containing wild-card conservatives, she is the only member of her party in the Senate to propose raising taxes on the wealthy. Last year she and Sen. Claire McCaskill, D-Mo., presented an economic plan that included a 2 percent surtax on millionaires, with a carve-out exemption for small businesses.
Realistically, Collins will probably not directly affect ongoing negotiations between Congressional leaders on how to avoid the “fiscal cliff,” which includes the expiration of the Bush-era tax cuts and automatic spending cuts that could tip the country back into recession. But by being willing to state publicly her belief that millionaires and billionaires, who are not running businesses, could pay more to help reduce the country’s deficit, she makes it slightly easier for other Republicans to follow suit. We encourage her to be open to a deal that may widen her suggested percentage of top-income earners who should pay more.
Collins has said many times that she wants to protect job creators — clearly a laudable goal. While other Republicans have often lumped wealthy people into the same category as job creators, Collins has distinguished between the two. The real job creators are not necessarily the rich but, instead, businesses. Hence, she has proposed to protect those businesses from tax increases. However, we encourage residents to learn more about how current deficit-reducing proposals would likely affect businesses.
The real debate comes down to which and how many businesses would have to pay more, and whether their hiring power would be diminished. The president has proposed letting the temporary Bush-era tax cuts expire for couples earning $250,000 or more, though he has indicated willingness to negotiate on that particular threshold number. Because some businesses are taxed as individuals, the plan would affect them, too. But, according to the nonpartisan Joint Committee on Taxation, only 3.5 percent of taxpayers with business income in 2013 would see their taxes increase under the president’s proposal. Some people point out that that small slice of businesses employs a vast number of people, which is important to keep in mind; but don’t forget to look at profit margins.
If a business earns more than $250,000, after accounting for expenses and payroll, it’s probably not going to reduce hiring or new investment if the top marginal income tax rates are raised, according to several independent economists and nonpartisan think tanks. Also, the Congressional Budget Office found that letting the tax cuts expire would help long-term economic growth if lawmakers used the money to offset the deficit. That means: If there’s any negative impact on high-income earners paying higher taxes, it would be more than offset by the overall positive economic results of using the revenue to reduce the deficit.
The fiscal cliff would result in more than $500 billion in tax increases and spending cuts in fiscal year 2013 alone. In a 10-year period, taxes would increase as much as $6 trillion. Taxes would go up for everybody: poor, middle class and rich. Unemployment would spike, causing more reliance on safety net programs. Defense would see drastic cuts, as would areas like education, transportation and medical research. Though both Democrats and Republicans seem to agree on part of the solution — reducing or eliminating loopholes, tax subsidies and deductions at the upper end of the income scale — Republican leaders so far have opposed any plan to raise tax rates.
They should follow Collins’ lead and put the option on the table. In May 2001, when Congress was debating President George W. Bush’s proposed tax cuts, the BDN described the plan as “an assertion that taxpayers, particularly the wealthy, who pay most of the taxes, deserve their money back more than the government needs to carry out certain programs. It is, further, a promise that the bills will be taken care of a decade from now. The question for Congress is, will the people who benefit most now be eager to help when those bills come due?”
Eleven years later, after one compromise in 2010 by President Barack Obama to extend the cuts, those bills are past due. It’s time for Congress, with Collins’ leadership, to agree to a solution that balances spending cuts and revenue increases, with an overall goal to reduce the deficit and assist the country’s economic recovery.