From today’s Washington Post, “Topic A” asked me and several much more prominent experts what we think of President Obama’s proposed tax increases on the rich.
Here’s what I said (limited as I was to fewer than 250 words–very hard for me):
DIANE LIM ROGERS
Chief economist of the Concord Coalition; blogger at EconomistMom.com; former senior economist for President Clinton’s Council of Economic Advisers
President Obama’s tax proposal is motivated by understandable fairness concerns. Income inequality was exacerbated by the Bush tax cuts, which went disproportionately to the rich. But raising taxes the way the administration has outlined is probably too limiting (and explains why the Obama budget proposal reduces the deficit only over time and not relative to current law, under which all of the Bush tax cuts expire).
In economic terms, a return to Clinton-era marginal tax rates on upper-income households by 2011 (by which time we hope the recession will have ended) is a very reasonable policy. That does not mean, however, that it will be sufficient to meet current costs — much less the higher spending Obama proposes — or optimal. Raising taxes only on those making more than $250,000 a year may not provide enough of a revenue base. There are also better ways to raise taxes on the rich, such as reducing tax preferences that go mostly to the wealthy; this would allow revenue to grow without having to increase tax rates and their disincentive effects.
Politically, there’s a danger in framing the debate over Obama tax policy as one over the “Bush tax cuts.” This will promote the same partisan head-butting and reluctance to cooperate on hard choices that have plagued this town for eight years. It is time for a bigger change in tax policy, too.
But CNBC’s Jim Cramer well demonstrates why I fear that the only pieces of the Obama budget that will survive its hazing on Capitol Hill will be the pieces that cost money–not the pieces that raise money. So if you’re scared by the level of deficits proposed in the Obama budget, well, maybe you haven’t seen the half of it:
Chairman of TheStreet.com; host of CNBC’s “Mad Money”
As someone who can expect a real shock when I get an Obama-shredded paycheck the moment his plus-$250,000 tax levy kicks in, I can’t be thrilled. Only the brain-dead like to take a pay cut for doing the same job. I probably won’t get paid for my work until July, with my current salary going to fund an immense expansion of the federal budget ordered by the man I voted for.
I was recently informed by Rush Limbaugh that I am on the president’s “enemies list” for speaking out against what I consider to be the most wealth-destroying budget in history. But I genuinely wouldn’t mind the increase if the country weren’t staring the second Great Depression in the face. I have supported the vast majority of Obama’s initiatives. Back when I donated to candidates, I supported those who favored higher taxes for those who make the most money because we can most afford it.
But for heaven’s sake, not now! This is the moment when the president needed to tell us, “America, I have an agenda that I wanted badly to put through, but not here, not now, when tax increases might send us over a cliff of fear and dread. We need everyone, especially the wealthy, to start companies, put people to work and get this economy back on track.
“Then we’ll deal with paying for it when the economy’s thriving again and more people are joining the workforce than leaving it.”
Right agenda; wrong time. Give it up, Obama, before unhappy days, like 1932, are here again. Get people back to work and you’ll have all the power you need to enact your agenda and then some!
See, no one likes to pay higher taxes, not even the rich people (like Jim Cramer) who actually understand the importance of getting back to living within our means for the health of our overall economy. It’s like Senator Russell Long used to say: “Don’t tax you, don’t tax me, tax that fellow behind the tree.”
The President’s got some work to do selling this “shared sacrifice, for the common good, fiscal responsibility” idea. (See Michael Shear’s opinion on how the President is doing on this responsibility theme.) I worry the sales job could backfire and lead to even larger budget deficits as Congress ends up supporting the President’s costly spending programs but none of his proposed tax increases.