In a word, politics.
The president, not content with just winning the election, is still in campaign mode, demonizing Republicans and demanding they cave in and agree to raise taxes as part of negotiations to avoid the “fiscal cliff.”
The Bush tax cuts are set to expire Dec. 31 unless a deal is worked out. According to the Associated Press, Obama is demanding $1.6 trillion in new taxes over the next decade, partly by raising tax rates on incomes over $200,000 for individuals and $250,000 for couples (“the rich,” as he likes to describe them). Meanwhile, he is recommending $400 billion in (mostly unspecified) spending cuts over the next decade.
Obama is painting himself as the defender of the middle class by now favoring the very same middle-class tax cuts that he and most other Democrats spent the past decade fervently opposing. And he also shamelessly claims that Republicans would be responsible for the higher taxes on the middle class that would result if the Bush cuts expire — even though it was Republicans who passed the Bush tax cuts in the first place, and who want to keep those cuts in place for everybody.
Republicans argue, with history on their side, that higher tax rates like those sought by Obama translate to job losses and slower growth. His demand for higher taxes on “the wealthy”so they will have to “pay their fair share” is driven by his well-known desire for economic redistribution, not by sound economics. It’s proving to be a popular proposal, which is hardly surprising. Who wants to pay higher taxes if you can make someone else pay more instead?
Yes, the Bush tax rate cuts resulted in lower tax rates for the wealthy, just like for other Americans. But the wealthy have also wound up paying an even higher proportion of the tax burden than other Americans, thanks to those cuts. The top 1 percent of earners paid 37 percent of total taxes in 2000 before the cuts, and 40 percent in 2007. Meanwhile, the bottom 50 percent of taxpayers (a number that probably includes most of us) paid 15 percent less in taxes in 2007 than they had in 2000.
One more pertinent fact: under the Bush tax cuts, which supposedly are so favorable to “the rich,” the top 5 percent of taxpayers are paying 61 percent of the nation’s income taxes, even though they earn only 37 percent of the national income.
How’s that for paying one’s “fair share”?