February 26, 2024

Republicans Call Obama’s Tax Plan ‘Class Warfare’

Representative Paul Ryan, chairman of the House Budget Committee, said the tax proposal, which Mr. Obama is expected to unveil on Monday, would also weigh heavily on a stagnating economy.

“It adds further instability to our system, more uncertainty, and it punishes job creation,” Mr. Ryan said on “Fox News Sunday.” “Class warfare may make for really good politics, but it makes for rotten economics.”

The pushback from Republicans — Mr. Ryan was not the only one to use the words “class warfare” — was in response to a White House assertion that Mr. Obama would call for a new minimum tax rate for individuals making more than $1 million a year to ensure that they pay at least the same percentage of their earnings as middle-income taxpayers.

With a special joint Congressional committee starting work on a bipartisan budget deal, the proposal adds a new and populist feature to Mr. Obama’s effort to raise the political pressure on Republicans to agree to higher revenues from the wealthy in return for Democrats’ support of future cuts to Medicare and Medicaid.

Indeed, Richard J. Durbin, a Democrat who is the senior senator from Illinois, took direct aim at the Republican speaker of the House when he said Sunday on CNN’s “State of the Union”: “I wonder if John Boehner knows what it sounds like when he continues to say the position of the Republican Party in America is you can’t impose one more penny in taxes on the wealthiest people. I wonder if he understands how that sounds in Ohio, where people are struggling paycheck to paycheck.”

Mr. Durbin said that taxes should be raised on “those who are wealthy and comfortable and wouldn’t even notice it.”

Mr. Obama, in a bit of political salesmanship, plans to call his proposal the “Buffett Rule,” in a reference to Warren E. Buffett, the billionaire investor who has complained repeatedly that the richest Americans generally pay a smaller share of their income in federal taxes than do middle-income workers because investment gains are taxed at a lower rate than wages.

The Senate minority leader, Mitch McConnell of Kentucky, said Sunday that there was “bipartisan opposition to what the president is recommending“ because it would slow growth in difficult times.

Still, “if Warren Buffett would like to give up some of his benefits, we’d be happy to talk about it,” he said on the NBC News program “Meet the Press” before adding, a bit more seriously, that Republicans were ready to consider means-testing as part of broader reforms to the big entitlement programs — meaning that the well-to-do would receive less.

Senator Lindsey Graham, Republican of South Carolina, who was among those to speak of “class warfare,” suggested on CNN that the proposed tax would bring in far less revenue than the administration has implied.

Mr. Graham said that raising taxes on billionaires and millionaires would add a minimum amount of money to the Treasury to pay off the debt.

Mr. Obama will not specify a rate or other details, and it is unclear how much revenue his plan would raise. But his idea of a millionaires’ minimum tax will be prominent in the broad plan for long-term deficit reduction that he will outline on Monday.

The proposal could invite scrutiny from some economists who have disputed Mr. Buffett’s assertion that the megarich pay a lower tax rate over all.

Two former government economists said Sunday they would like to see a more all-encompassing approach.

The economists, Alice Rivlin, who was director of the White House Office of Management and Budget under President Bill Clinton, and Douglas J. Holtz-Eakin, who led the Congressional Budget Office during George W. Bush’s presidency, said Mr. Obama’s proposal would simply add a complication to a tax code that needs more fundamental reform.

The special committee, said Ms. Rivlin, has a rare opportunity to “reform entitlements and reform the tax code and put us on a sustainable deficit track.” She and Mr. Holtz-Eakin both spoke on CNN.

The Obama proposal has little chance of becoming law unless Republican lawmakers bend. But by focusing on the wealthiest Americans, the president is sharpening the contrast between Republicans and Democrats. It is a theme he can carry into his bid for re-election in 2012.

It could also reassure Democrats who have feared that Mr. Obama would agree to changes in programs like Medicare without forcing Republicans to compromise on taxes.

The administration wants to replace the alternative minimum tax, which was created decades ago to make sure that wealthy taxpayers who have plenty of deductions and credits did not avoid income taxes, but which now hits millions of Americans who are considered upper middle class. Mr. Obama has said that many average Americans would see a tax cut if the system was overhauled, since ending many tax breaks would allow for lower rates while raising more revenues from the wealthiest.

The millionaires’ tax is among several changes Mr. Obama will propose in urging Congress to overhaul the federal income tax code next year in an effort to raise revenues, reduce deficits and make the tax system simpler and fairer, said administration officials, who agreed to speak in advance of the president’s announcement on the condition of anonymity.

The millionaires’ rate would apply to fewer than 450,000 taxpayers, they said; 144 million returns were filed for 2010.

Behind the arguments of Mr. Obama, Mr. Buffett and others about the inequity of the tax system is the difference between taxpayers’ marginal rate, popularly known as their tax bracket, and the effective rate they end up paying after subtracting for deductions, credits and other breaks.

Under Mr. Obama’s proposal, Mr. Buffett and others with taxable income of more than $1 million would pay a minimum tax rate closer to that of the people they employ. But Mr. Obama will leave the details of how such a rate would be calculated — whether to focus on the overall federal tax burden of middle-income individuals generally or on their marginal rates — to the debate over rewriting the tax code.

Mr. Obama, in his plan, will call for more than $300 billion in savings from Medicare and Medicaid, but not for any changes in Social Security.

Article source: http://feeds.nytimes.com/click.phdo?i=369f3656bdebe18c22971bffb0b82bd3

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