TAX CUT DEBATE MYTHS AND FACTS
By Robert Weiner and Varun Saxena
A lot of rhetoric is flying in the November election but perhaps the most substantive debate is over whether to continue tax breaks for the rich. President Obama and most congressional Democrats want to extend the Bush tax cuts for 98% of Americans, everyone making under $250,000. Republicans want to extend the tax cuts for everybody despite a provision in Bush's 2001 tax bill to suspend the tax cuts at the end of 2010 in order to restore needed revenue. If nothing is done, everyone's taxes will rise.
The issue may be taken up in the November lame duck session if the Senate filibuster is broken.
Retiring Senator and long-time deficit hawk George Voinovich (R-OH) recently broke with his Party and voted for helping small businesses with tax cuts. On federal income tax rates, the nation needs him again-he can be the new poster boy for bipartisanship-a rare breed this decade. He could at least allow the issue to come to the Senate floor for discussion by being the 60th vote in favor of debate.
There is room to maneuver: Ohio's John Boehner, the House Republican Leader and would-be Speaker, said he'd vote for tax breaks for the middle class without the wealthy if that's the only choice. There is consensus by both parties that the sluggish economy makes this the wrong time to raise taxes on the middle class.
Republicans portray the Bush tax cuts as similar to President John F. Kennedy's. That is a poor analogy. Kennedy cut the top tax rate from an exorbitant 91% to 70%. In contrast, Bush cut the top tax rate from a historically low 39.6% to 35%. By increasing enforcement and cracking down on loopholes, including the use of foreign subsidiaries for tax evasion, Kennedy increased government revenue. On the other hand, the Bush rich tax cuts will cost the nation $700 billion dollars in government revenue, and Republicans are fighting limiting outsourcing and foreign loopholes. In part due to a smart taxation policy, Kennedy created 1.2 million jobs per year in office; Bush was losing 700,000 jobs a month during his last year.
"Trickle down" economics has not worked since Herbert Hoover tried it. Millionaires save more of their income gained by tax cuts. Middle class families spend more. Every dollar devoted to the middle class causes the economy to grow three times faster than a dollar for the rich, according to CBO research located by our policy analyst Varun Saxena, who hails from Dublin, Ohio. Lower taxes for the rich leave deficits that must be paid for by the middle class taking the very money we'd give working families.
At a press conference on September 10, President Obama asked, "Why would we borrow money on policies that won't help the economy and help people who don't need help?"