Taxes have never quite sat right with the American people.
Since the very inception of our nation, taxes have been the bane of the average American’s existence and the No. 1 cause for antagonism with our government.
We almost reflexively turn away in disgust at the mere mention of a possible tax increase, and the promise of a tax cut is often the go-to strategy for campaigning politicians.
Yet, are all tax cuts necessarily good policy?
The Bush tax cuts were a series of tax reforms passed in 2001 and 2003 that greatly lowered taxes for the majority of Americans. The marginal tax rates for all income brackets were lowered, as well as the capital gains tax and the tax on dividends.
These cuts were supposed to expire in 2010, but Congress renewed them for another year.
However, Obama announced earlier this month that he would push to allow the Bush tax cuts for households earning more than $250,000 or more a year to expire, while extending the tax breaks for middle and low-income families, who make up 98 percent of the population.
The announcement was met with disdain by Republicans who believe a tax increase in these harsh economic times would cripple the recovery.
Republican presidential candidate Mitt Romney called Obama’s plan a “kick in the gut” to the economy.
Now, it is true that tax cuts have the potential to spur economic progress, but this is largely dependent on the circumstances of their passing.
The Bush tax cuts were passed during an administration that rapidly increased spending, be it on overseas wars or expensive domestic programs. The Congressional Budget Office (CBO) estimated last month that, from 2002 to 2011, the Bush tax cuts in total have added nearly $1.6 trillion to the deficit alone – and that’s not including interest. Extending the cuts for all is projected to cost $3.3 trillion over ten years.
Furthermore, the claim that lowering taxes, especially for the wealthy, increases prosperity for all does not have much correlative data to back it up.
Federal tax rates have been falling almost consistently for the last 30 years. Yet, in the same time span, the top 1 percent of households have seen income grow by 275 percent, while the middle 60 percent’s income only grew 40 percent, and the bottom 20 percent’s grew by merely 18 percent, according to the CBO.
Obviously the wealth has not been trickling down but has instead been concentrated into the hands of a few.
Yet opponents to Obama’s plan still maintain that a tax increase on the top bracket would harm small businesses and the “job creators.”
Yet, only about 2 to 3 percent of small businesses would qualify for a tax increase according to the U.S. Treasury Department and the Joint Committee on Taxation, respectively.
As for the term “job creators,” it really needs to go. It’s a public relations phrase coined by Frank Luntz for the sole purpose of appealing to people’s emotions. It implies that an empty farmland would not be tilled or an empty mine mined without the interference of one of our beloved elite.
It is necessity that creates jobs and the rampant inequality in this country that keeps many Americans from attaining the necessary capital to act on that necessity.
The CBO even found in 2010 that “increasing the after-tax income of businesses typically does not create much incentive for them to hire more workers.”
Yet, just as in 2010, Republicans are holding the tax cuts for the average American hostage in order to keep taxes lowered for the wealthy.
Obama’s plan isn’t even anything that one could consider radical. It merely would allow the tax rate for the top two percent of income earners to rise to 39.6 percent, the tax rate under the Clinton administration.
I do not deny that spending should also be cut in our federal government, but a strategy revolving solely around spending cuts is as harmful as one that revolves solely around tax hikes.
In these times of economic turmoil, I don’t understand why a family making $250,000 cannot contribute to helping its country pay a deficit, while those making less than half that are just squeezing by.