Obama launches tax ploy against GOP

ALJAZEERA AMERICA

Obama launches tax ploy against GOP

State of the Union address pushes tax reforms to set stage for 2016 electoral fight

January 21, 2015 2:00AM ET

 

by David Cay Johnston @DavidCayJ

 

The most political law in America is the federal tax code. Far from being grounded in sound economics and the Constitutional duty to promote the general welfare, it’s shaped by influence won with campaign contributions and lobbying. We are about to see just how political tax law is thanks to a savvy move by President Barack Obama to frame the 2016 election in ways that will help Democrats keep the White House.

In his State of the Union address, the president proposed a host of tax ideas Republicans have long advocated in order to force them to choose between Main Street and Wall Street. He believes they will side with the rich, whose campaign donations are increasingly significant in elections and whose companies provide jobs for friends and family of politicians.

But the president’s strategy is not full-proof. There is a clever way for congressional Republicans to turn his proposal into a trap for the Democrats.

Obama’s tax plan

Obama’s proposals are pro children, family, savings and work. He would prevent a scheduled 11-percent tax increase in 2017 for full-time workers earning the minimum wage. He also wants tax simplifications that the IRS Taxpayer Advocate — a post that GOP lawmakers created in 1998 — has urged annually, to no avail.

Top Congressional Republicans immediately dismissed these proposals. Orrin Hatch, the Utah Republican who chairs the Senate Finance Committee, said Obama was fomenting “class warfare.” Rep. Charles Boustany, the Louisiana Republican who chairs the tax-writing Ways and Means Committee, called Obama’s proposals “just another poke in the eye at Republicans.”

The president’s plan, which has no chance of adoption by the Republican majorities in the House and Senate, would raises taxes on the top half of one percent to benefit those in the middle class who pay taxes plus individuals among the working poor.

Obama’s proposals would cost $230 billion over ten years — less than $2 billion per month. The cost of this modest tax relief for middle class Americans would be paid by raising taxes at the top by $320 billion — a bit more than $2.6 billion per month.

The net effect would be to further reduce the federal budget deficit.
Republicans have steadily hammered Obama for increasing the federal debt even though on his watch the annual federal budget shortfall, the deficit, has fallen from 10 percent of the economy to under 3 percent. By the time Obama leaves office in two years the budget may even be in surplus for the first time since Bill Clinton’s presidency.

Polling suggests that Americans are increasingly aware of rampant inequality, especially as their own fortunes decline.

 

Most of the Obama tax increases would fall on people who inherited their wealth and those with incomes of more than $2 million — roughly the top tenth of one percent. Obama would raise the capital gains tax rate on incomes above $500,000 to 28 percent, the rate signed into law by President Ronald Reagan in 1986. Only the top half of one percent would be affected by this increase, which would not apply to salaries.

He also wants capital gains taxes paid on appreciated assets people inherit, closing what the White House calls the “trust fund loophole.”

Obama’s proposals have popular support. Large majorities of Americans, polls show, believe the best off Americans should pay more taxes. Surveys report that many Republicans favor high taxes on the rich, including one in which more than half of Republicans supported a 50-percent tax rate on incomes of more than $1 million annually.

Growing inequality

Such polling suggests that Americans are increasingly aware of rampant inequality, especially as their own fortunes decline. Obama’s State of the Union address came the day after OxFam, the British charity, issued a  report showing that next year more than half of the planet’s wealth will be owned by just 1 percent of the global population. Credit Suisse, in its own report on inequality, said that just 80 people own as much wealth as the poorest 3.5 billion people.
This growing concentration of wealth is largely driven by government policies, including reducing tax rates on the highest incomes, radically reducing audits of the wealthy and of corporations and a plethora of complex regulatory rules that take from the many to benefit the few, all of which I have been exposing for two decades.

In America real per capita income was $1,000 less in 2012 than in 2000. The same period saw a severe narrowing of stock and bond ownership. The number of taxpayers reporting capital gains, for example, fell from 1 in 8 in 2000 to 1 in 15 in 2012. The total share of dividends going to Americans making $2 million or more rose from 50 to 62 percent in that time period.

Inequality has become such a major issue that even former Republican presidential nominee Mitt Romney sought last week to remake himself into an economic populist as he readies a possible third campaign for the White House. “Under President Obama the rich have gotten richer, income inequality has gotten worse and there are more people in poverty in American than ever before,” Romney said to Republican National Committee members in San Diego on Jan. 16.

Republican strategy

If the Republicans instead follow the lead of Hatch, Boustany and Sen. Marco Rubio of Florida, it will enable Democrats in the 2016 elections to pillory them as tools of the plutocrats with no real concern for most Americans.

That may not help much in House races, where gerrymandering by state legislatures has corralled Democrats and their allies into highly concentrated districts. But it could provide a big boost in 2016 for Senate races and the race for the White House, where demographic factors favor the Democrats.
But Republicans could turn the tables on the president if they think strategically. Instead of dismissing the proposals, they could strip out the tax increases on the wealthy in the bill and pass the rest of it as presented.

That would put Obama in the hot seat. He could veto the bill because the tax relief for the middle class would not be paid for from higher taxes on the wealthy, but that decision might anger middle-class voters who wanted lower taxes. Or he could sign it, leaving the rich with their tax breaks and risking public scorn for lacking a set of principles while also allowing the federal budget deficit to increase.

However this fight goes, keep in mind that what we will witness is not real tax reform, tax simplification or basing tax burdens on the common sense principle of ability to pay. It’s all about electoral politics.

David Cay Johnston, an investigative reporter who won a Pulitzer Prize while at The New York Times, teaches business, tax and property law of the ancient world at the Syracuse University College of Law. He is the best-selling author of “Perfectly Legal,” “Free Lunch” and “The Fine Print” and editor of the new anthology “Divided: The Perils of Our Growing Inequality.”

The views expressed in this article are the author's own and do not necessarily reflect Al Jazeera America's editorial policy.

Obama ditches the centrists: How a break from neoliberalism boosted his popularity

SALON

Saturday, Jan 17, 2015 08:00 AM EST

Obama ditches the centrists: How a break from neoliberalism boosted his popularity

The president's more popular than he's been in nearly two years. Here's why that should have neoliberals scared

Elias Isquith Follow

Topics: Andrew Sullivan, Jonathan Chait, sam wang, neoliberalism, Rahm Emanuel, Andrew Cuomo, Bill Clinton, Hillary Clinton, Tony Blair, Third Way, Affordable Care Act, Obamacare, Ronald Reagan, Editor's Picks, Media News, News, Politics News

 

 
Andrew Cuomo, Barack Obama, Rahm Emanuel (Credit: AP/Mike Groll/Reuters/Junko Kimura-Matsumoto/Larry Downing/Photo montage by Salon)

For quite some time now, the media’s desire to see the American economy return to its ’90s-era peak — or at least improve enough to be safely ignored in favor of a new overarching narrative — has been nearly palpable. Which is why it’s not shocking to see how a spate of good news about the economy has changed the conventional wisdom about the President Obama’s record, with “objective” reporters describing him as on the rebound, and with his most ardent defenders busting out superlatives like it’s 2008. Andrew Sullivan is once again calling him the center-left version of Ronald Reagan. And Jonathan Chait believes history will ultimately recognize his performance as not just good but capital-G great. That’s that, I guess; do we really need to bother with the rest of his second term?

Even though I snark, and even though the persistence of stagnant wages means we’re still experiencing a McJobs recovery, it’s certainly true that the president’s followed his second midterm shellacking with a surprisingly good few weeks. His poll numbers are looking better than they have in almost two years, and Princeton election analyst Sam Wang says it’s “a real phenomenon,” not a fluke. But while Sullivan, and especially Chait, write as if Obama’s comeback were basically inevitable, I think there’s a case to be made that the president’s rising popularity — while certainly due in part to his decision to enact less crippling austerity than the Eurozone has and Republicans wanted — has more to do with recent actions of his that were a break from the approach that defined most of his second (and nearly all of his first) term.

Before I describe that change, though, I want to make a few things clear up front, so nobody gets the wrong idea. As Chait partially acknowledges, and as any political scientist will tell you, Americans give their presidents entirely too much blame and credit for the state of the economy (usually their No. 1 metric), which is often considerably outside any politician’s immediate control. What’s more, there’s reason to believe that at least some part of Obama’s recent good fortune owes to the plummeting price of oil, which despite what politicians of both parties tell you when they’re campaigning, has essentially nothing to do with whatever’s happening in the Oval Office. Last but not least, the president’s approval rating is not the product of an exact science; it’s more like a blurry snapshot of a moment in time. So we shouldn’t conclude too much from the recent polling, one way or another.
All that said, both Wang’s data and an anecdotal impression of recent (not-conservative) media will tell you that Obama’s ascending popularity kicked off sometime between late November and mid-December. Not incidentally, this was also the period when the president began not only acting more aggressively in terms of using his power unilaterally, which he’s actually been doing in some form or another since last year, if not earlier, but also supporting policies that could be easily characterized as typically liberal. In November, he announced a major change in how the federal government handled undocumented immigrants, which predictably cost him support from working-class whites but further established his party as the pluralist, multicultural alternative to the overwhelmingly white GOP. And in December, he not only spoke more frankly about his blackness than he had at any point in his presidency, but also announced a break from a half-century-plus-old policy by taking steps to normalize relations with Cuba.

Having walked head-on toward what have historically been two of the Republicans’ most effective attacks on Democrats — the party’s association with nonwhites and its “softness” in the realm of foreign policy, especially regarding communists — Obama went even further in January by unveiling a plan to offer millions of Americans a college education for free. He did this despite the fact that the policy would easily be described by conservatives as promoting “big government” (as indeed it was), and despite the fact that the plan’s funding would be unapologetically redistributionist. Much more than the Affordable Care Act, which also relied on using high-end taxes to provide health insurance for the working class and the poor but did so through an embrace of subsidies and by relying on market incentives, Obama’s college plan represented a straightforward argument for having government do what a broken market could not. This was not a DLC, neoliberal-style proposal to encourage the market to act, through outsourcing and tax incentives. This was simply using government.

To many, that probably seems like a distinction without a difference. But that would only be true if the neoliberal model of deregulation, outsourcing, privatization and free trade that was made Democratic Party orthodoxy by Bill Clinton (and Labour Party orthodoxy by Tony Blair) could actually reach traditional liberal ends through traditionally conservative means. You’ll certainly be able to find those who disagree, but I believe the verdict is in, and it is negative. That doesn’t mean the era of neoliberal government is over, of course; there are still plenty of high-profile “New Democrats,” like Chicago Mayor Rahm Emanuel, New York Governor Andrew Cuomo or the woman who is likely to be the party’s next presidential nominee. For that matter, Obama’s recent “My Brother’s Keeper” initiative and his continued support for the Trans-Pacific Partnership trade proposal show that he himself has hardly made a clean break from the “third way.”

Still, even if his steps are halting, and even if part of his willingness to flirt with old-fashioned liberalism stems from his knowledge that a GOP Congress all but ensures none of his proposals will come to pass during the rest of his term, Obama’s clearly begun to reverse the rightward drift his party has experienced over the past generation. (Or at the very least, he hasn’t been an implacable foe of those who’d like to reverse the trend further.) Posterity may look back at this as a far cry from the center-left Reagan and transformational president liberals dreamed of back in 2008, but American politics changes at a glacial pace, and if President Obama leaves office in 2016 with the mainstream to the left of where it was when he first started, that would be no small thing.

Elias Isquith is a staff writer at Salon, focusing on politics. Follow him on Twitter at @eliasisquith, and email him at eisquith@salon.com.