Portrait, Robert Reich, 08/16/09. (photo: Perian Flaherty)
16 November 12
The President's Opening Bid on the Grand Bargain (III): The Difference Between "Broadening the Tax Base" and Raising Taxes on the Rich
he
President says he wants $1.6 trillion in tax hikes. Republicans say
they won't raise tax rates but might be willing to close some loopholes
and limit some deductions and tax credits. Is compromise in the air?
Not a chance. True enough, such "base broadening," as
Republicans like to call it, could conceivably generate $1.6 trillion in
additional tax revenues over the next decade.
But, wait. Didn't the President just win a second
term? The major issue decided in last week's election was that the rich
should pay more. So, presumably, that $1.6 trillion should come out of
the pockets of the wealthiest Americans.
"Broadening the base" has nothing whatever to do with
the rich paying more. That's because a lot of tax credits and deductions
help the middle class and the poor.
If we end the Earned Income Tax Credit, for example,
some of the poorest Americans will end up sacrificing. That tab was $63
billion last year.
Or if the "loophole" is tax-free employee health care,
or the home mortgage tax deduction, or tax-deferred 401K accounts, most
of the added tax revenues will come out of the pockets of the middle
class.
So when Republicans talk about "broadening the base,"
watch your wallets. Now that the President has set his goal on $1.6
trillion in additional taxes, the question is whether the rich are going
to cough up $1.6 trillion more.
There's no way that $1.6 trillion can come out of the
pockets of the wealthy merely by capping the deductions the wealthy take
advantage of.
If Republicans won't budge on raising tax rates but
insist on broadening the base, Democrats should take aim at the biggest
tax loophole of all for America's wealthy: the preference for capital
gains.
Capital gains are now taxed at only 15 percent (the
major reason Mitt Romney pays a rate of under 14 percent on over $20
million of annual income). Capital gains should be taxed the same as
ordinary income. That way, under a progressive tax system, the wealthy
would pay far more - on the way to $1.6 trillion.
Robert B. Reich, Chancellor's Professor of Public
Policy at the University of California at Berkeley, was Secretary of
Labor in the Clinton administration. Time Magazine named him one of the
ten most effective cabinet secretaries of the last century. He has
written thirteen books, including the best sellers "Aftershock" and "The
Work of Nations." His latest is an e-book, "Beyond Outrage." He is also a founding editor of the American Prospect magazine and chairman of Common Cause.
1 comment:
You do realize that we borrow 1.6 trillion dollars every year don't you.
Post a Comment