In 2007, Sen. Barack Obama proposed rolling back the Bush tax cuts on the wealthiest Americans to pay for his proposals, including universal health care. Today, President Barack Obama proposed rolling back the Bush tax cuts on the wealthiest Americans to pay for his proposals, including universal health care.
Some centrist pundits claim that Obama's key to victory is repeating himself. They should hail this moment as a campaign breakthrough. The rest of us shouldn't be too fazed. President Obama has publicly announced that he fully supports the campaign platform of President Obama.
Although the media has had five years to chew on this proposal (or even more if you include Sen. John Kerry's similar plan in 2004), there are still some facts that have been elided in today's coverage. Here are three:
(1) Everybody is getting a tax cut. Everybody. Or, everybody is "keeping" part of their tax cut, if you prefer that construction. The '01/'03 tax cut passed under Bush and extended under Obama is set to expire in its totality in December. The president has proposed preserving tax rates on every dollar of earned income up to $241,000. If you make $250,001, you will pay a slightly higher tax rate on those marginal $9,000 and only on those marginal $9,000. That's what the marginal in the term "marginal tax rates" stands for.
Upshot: The proposal is typically reported as a tax cut on people making under $250,000. In fact, it's a tax cut on all income under $241,000 -- even on the first $241,000 of a millionaire's income.
(2) This isn't Obama's only major tax increase. That is, if you choose to see this plan as a tax increase on the rich, as opposed to a tax cut for everybody except the rich. The Affordable Care Act contains more than $800 billion in new taxes -- mostly on the highest-earning percentiles and health care providers. In fact, after President Clinton's tax increase in 1993, Obamacare is the largest tax increase signed by a Democrat since LBJ (although two out of the last three GOP presidents have signed bigger ones). The biggest tax hike is concentrated on the rich: a Medicare Part A tax rate increase of 0.9% and a new tax on investment income for families in the top 2-3% of earners.
Upshot: Rates for the richest Americans aren't going back to their 1999 levels. They're going higher.
(3) In the long run, historically low tax rates for the "bottom" 98 percent aren't sustainable. For President Obama, demanding higher taxes on rich people is the easy part. Three in five people told Gallup that "upper-income people" were paying too little in federal taxes, Molly Ball reported. The hard part is facing up to the long-term reality that historically low tax rates on 98 percent of Americans is no way to pay for historically high entitlements for 100 percent of Americans. Taxes should go up, and they should up first on the richest Americans who are least likely to feel the pinch from paying a couple hundreds to a couple thousand dollars more to Washington. This is a fine first step. It's not an end solution.
Oh, and in case you're curious about Mitt Romney's tax plan, it's ... well, it's extremely curious itself.