Actually, the measures Obama proposes do not amount to much. David Wessel, a highly regarded economic analyst at the Brookings Institution, put it succinctly when he told NPR that “even if Congress accepted all [Obama’s] tax proposals— which it won’t—the Treasury says they would touch only about 30 percent of taxpayers. Most taxpayers would see neither a tax increase nor a tax cut.” The amounts involved in many of the proposals are small. These include a paltry $500 tax credit for dual-earner couples and an expanded tax credit of up to $3,000 per child for child care (for families who earn less than $120,000). The budget includes many other good, progressive proposals, but most sound consequential only if one confuses the ten-year figures with annual ones. Thus, the call to provide affordable child care to 1.1 million children under age four seems ambitious, until one notes that this is not to be achieved until 2025. At the same time, the additional $900m to be spent on Pell Grants in 2016 is scarcely adequate to keep pace with inflation. It doesn’t take a degree in math to figure out that if you make, say, $40,000 a year, rent an apartment, and have to service a debt—and the other guy makes $300,000 a year, owns his home, and has a portfolio of stocks—even if you get $3,000 or so in tax benefits, this will do precious little to narrow the inequality gap. You may say, “Well, this is about all you can do in our kind of society.” Fair enough. But then do not run around telling people, as the President does, that he is out to help “folks afford childcare, college, health care, a home, retirement—and my budget will address each of these issues.”
Currently income from investments is taxed at much lower rates than income from labor. Obama might have taken a neutral stance, calling for both kinds of incomes to be treated in the same way. Instead, he is calling for income from capital to continue to be treated much more favorably than that from labor. He favors increasing the rate to 28 percent, a change that merely returns it to the level of the conservative Reagan era.
There is one measure Obama proffers that at first blush seems both more significant and truly liberal. He proposes to return estate taxes to their 2009 levels, reducing the size of estates exempted from taxes from $5,430,000 to $3,500,000 (while increasing the top tax rate from 40% to 45%.) This is important because inequality of assets is much more consequential than that of income. Differences in assets are often much larger than differences in income because they are accumulative (while most income is spent), and above all because they are passed from one generation to another. This means that those with affluent parents get a big head start over those with poor parents, not because they work harder or save more, but because their parents did.