How is the President doing this? By announcing that Congress must either bow to his agenda or send all Americans a higher tax bill.
While Obama was busily pushing his ultimatum, he seems to have not fully considered all the options on the table. He made the appearance of wanting discussion and being open to ideas, but in the same breath made it clear that he is unwilling to compromise. He offered only two choices. First, accept his plan to prevent the tax hikes on only the first $250,000 of income. The only alternative offered is to let everyone’s taxes increase if Congress refuses to acquiesce to this plan.
Under option one, Obama gets to make good on his class warfare rhetoric by raising taxes on the wealthy, sanitized in the terminology of “paying their fair share.” However, what the President fails to inform Americans is that the wealthy already fund most of government. According to the Internal Revenue Service, while individuals in the top 5% of income-earners made 32% of all income in the United States in 2009, they also paid nearly 59% of all individual income taxes.
The President seems to think that taxing higher income individuals will solve the problem with the Federal Government’s budget; he can fix the massive spending by bringing in more revenue. But he fails to face the reality that an extreme 100% tax on higher income individuals could not fund the government for even 6 months. Once the wealthy have been taxed heavily, the only option is to hit everyone else with higher taxes also.
Absolutely no one wants option two, and the President believes that the threat of across-the-board tax increases will cow Congress into doing his bidding. President Obama himself said that he does not want this scenario, acknowledging that increased taxes will strike a blow to a still-weak economy. In extending the tax cuts in 2010 the President stated, “It [raising taxes] would have been a blow to our economy just as we’re climbing out of a devastating recession.” Americans do not need the economic instability that accompanies higher taxes. While the President seems to realize that higher taxes on everyone will harm the economy, he seems unaware that a higher tax on the wealthy will also likely harm our fragile economy.
President Obama stated Wednesday that he was open to new ideas – good news considering the only options he has come up with both harm the economy. So here is an idea, although it is not new. In fact, at one time the President himself acknowledged it.
The best plan would be to extend tax cuts for everyone.
As one reporter pointed out in the press conference, President Obama extended all these tax cuts two years ago, so why shouldn’t he work with Congress to extend them again? If, as the President claims, we are better off economically than we were at that point, why would we cease implementing policies that have helped us?
Economists across the spectrum agree that raising taxes in a weak economy could have devastating effects. Even Obama acknowledged in a 2010 speech that the “consensus among people who know the economy best” is that raising taxes is one of two ways to damage the economy. Leaving more money with every pay check in the hands of individuals, families, and businesses is a proven way to spur economic growth. Regardless of the tax bracket one fits in, the principles are the same: lower taxes increase individuals’ incentives to work hard, make more money and invest. All actions that in turn create a better economy for all Americans.
The President should work with Congress to ensure all Americans are not hit with a tax increase in an economy that has a long way to go yet in recovery.
Raising taxes is not only bad for Americans and the economy; it also fails to address the government spending crisis. We must balance our budget by reducing spending. Congress has already made the tough choices by determining to cut $109 billion from the budget, now it just has to stay the course and make sure the cuts happen.
Congress has already made promises to rein in spending, and the President has promised to work with Congress and entertain ideas from both sides of the aisle. This lame-duck session is a golden opportunity for both to do the right thing and fulfill those promises. The only path forward to a better and more prosperous America depends on it.