President Obama on Monday called on Congress to pass a one-year extension of Bush-era tax cuts for the middle class, but not wealthier Americans. Households earning more than $250,000 can afford to pay higher taxes in the name of deficit reduction, he said.
“It’s time to let the tax cuts for the wealthiest Americans – folks like myself – to expire,” said Mr. Obama in an East Room appearance before an audience of about 150.
The president said he might act differently on this issue if the nation were in better fiscal shape. He’s not wild himself about paying higher taxes, he said. But the looming debt demands action.
“The money we’re spending on these tax cuts for the wealthy is a major contributor to our deficit,” said Obama.
“Unlike President Obama, Governor Romney understands that the last thing we need to do in this economy is to raise taxes on anyone,” said Romney campaign aide Andrea Saul in a statement.
Obama’s tax proposal is certain to drive Washington news for the day ahead. Here are three key points to help you understand the chatter:
It won't pass. Obama’s proposal has about as much chance of becoming law as Lichtenstein does of winning the gold medal race at the London Olympics. It won’t pass the House, given the ferocious opposition of the chamber’s majority Republicans.
Obama’s proposal is even at odds with the ideas of many in his own party. House minority leader Nancy Pelosi of California and Sen. Charles Schumer (D) of New York have both pushed an extension of tax cuts for households earning up to $1 million. (Should we note that Representative Pelosi’s district contains many wealthy San Franciscans, and New York is home to many of Wall Street’s richest?)
Voters support higher taxes on the rich. However, generally speaking, US voters have no problem with the wealthy paying bigger tax bills next April 15. That’s what polls appear to indicate, in any case. A Gallup survey from last April found that 62 percent of respondents believed that upper-income people pay “too little” in taxes. Meanwhile, 56 percent of respondents said middle-income people pay their “fair share.”
“As Republicans continue to resist any plan that would raise taxes on wealthy Americans, they face not only opposition from the Democrats and Obama, but the pressure of public opinion. This could be especially daunting if Republicans’ attempt to extend the tax cuts for all is seen as benefiting wealthy Americans at the expense of the middle class,” wrote Gallup’s Lydia Saad in April.
Will Americans equate households earning more than $250,000 as “wealthy”? That’s a question the Gallup survey does not address. Yet it could be key to the political response to Obama’s proposal.
It's a lot of money. In political terms, Obama is moving to seize the tax-cut initiative from Republicans. The House GOP plans to vote later this week on extending the Bush-era cuts for all Americans. Yet there is a practical aspect of the move, too – it’s a quick way to raise loads of tax money to help close the nation’s yawning gap between income and expenses.
Lowering the threshold for extending Bush tax cuts to $250,000 would generate $829 billion in revenue between 2013 and 2022, according to figures compiled by the Joint Committee on Taxation. Setting the threshold at the higher $1 million mark would lose $366 billion of this cash, according to an analysis of JCT data by the relatively liberal Project on Budget and Policy Priorities.