Saturday, December 11, 2010

Obama On Income Taxes, Then And Now

At his news conference Tuesday, President Obama claimed

I know that there are some who would prefer a protracted political fight even if it had meant higher taxes for all Americans. And I understand the desire for a fight. I'm sympathetic to that. I'm also as opposed to the high-end tax cuts today as I have been for years. In the long run we simply can't afford them. And when they expire, I will fight to end them.

Opinions may defer as to whether Barack Obama really is so lacking in self-awareness that he believes that he will fight to end the upper-income tax cuts in two years. If the economy rebounds sharply, Republicans will demand that the President extend rates which, they'll claim, brought about the recovery. If the economy continues to falter, the GOP will argue that a recession is no time to raise taxes. And in the latter case, Barack Obama, facing an extremely difficult re-election battle, will not buck the GOP, which will claim that allowing the cuts to expire amounts to a "tax increase" (sound familiar?).

Curious, though, is Obama's contention that he is "as opposed to the high-end tax cuts today as I have been for years." At first glance, it is a president merely assuring the public that he is the same public official who, at the third and final presidential debate (transcript here) in 2008, stated

What I've said is I want to provide a tax cut for 95 percent of working Americans, 95 percent. If you make more -- if you make less than a quarter million dollars a year, then you will not see your income tax go up, your capital gains tax go up, your payroll tax. Not one dime. And 95 percent of working families, 95 percent of you out there, will get a tax cut.

So Barack Obama insists that as Senator Obama and as President Obama he has been opposed to tax cuts for income above $200,000 (individuals)/ $250,000 (households). But this assurance is belied by a remark he made in November to Senator Chuck Schumer (D-NY), whose bill to allow the cuts to expire on incomes above $1,000,000 was defeated shortly before the Obama/McConnell deal was announced. Politico reports

But privately, White House officials, who have long viewed Schumer as a talented but essentially self-promotional operator with no abiding loyalty to Obama, think he was pursuing an irresponsible partisan fight that would delay the tax cuts and the extension of unemployment benefits for months. And Obama himself warned Schumer that the millionaire strategy could sink the stock market.

Barack Obama says he is as opposed to the upper-income cuts as always; yet, he tells Chuck Schumer that without them, the stock market would plunge, a scenario he dreads. Yet, he claims, he remains as opposed as ever to cuts which he believes would prevent a plummeting market.

He is as opposed today as I have been for years. It seems that if, as he told Schumer, he believes the higher rates would have severely wounded the stock market, he is not opposed (though claiming otherwise) to lowering the rate in principle. (Obviously, he is not opposed to the cuts in reality; that was the deal, after all.) And that throws into doubt Barack Obama's earlier claim of support for resumption of higher rates on upper incomes.

Nonetheless, Senator Obama generally was honest about taxes. He argued as a candidate for low rates for most (95%) and high rates for a few (5%) of Americans. Comes now this (for link, try "Tax Package Will Aid Nearly All, Especially Highest Earners") from David Kocienewski of The New York Times:

The proposal does not include an extension of Mr. Obama’s signature tax cut, the Making Work Pay credit, which provided a credit of up to $400 for individuals and $800 for families of low and moderate income. Instead, the plan creates a one-year reduction in Social Security payroll taxes, which are generally levied on the first $106,800 of income. For an individual earning $110,000, that provision would reduce payroll taxes by $2,136.

Although the $120 billion payroll tax reduction offers nearly twice the tax savings of the credit it replaces, it will nonetheless lead to higher tax bills for individuals with incomes below $20,000 and families that make less than $40,000. That is because their payroll tax savings are less than the $400 or $800 they will lose from the Making Work Pay credit.

“It will come to a few dollars a week,” said Roberton Williams, an analyst at the nonpartisan Tax Policy Center, “but it is an increase.”

Senator Obama did acknowledge that his tax plan would lead to an increase for some citizens. He just didn't say that it was for the lower-middle class while, Kocienewski reports, "to the wealthiest Americans, however, an assortment of breaks is available." Our mistake.

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