Obama Going Big On Taxes

President Obama unveiled his tax reform plan in a speech today in the Rose Garden. It was a populist message that called for raising taxes on the wealthy, and reminded everyone of his jobs plan he sent to Congress last week. Obama said the plan has “two dollars in cuts for every dollar in revenues” and that he would not have had to propose these cuts if the Republicans did not walk away from the debt ceiling talks.

Overall there are a lot of good ideas in the plan, most notably raising taxes on the rich along with closing corporate loopholes in order to help pay down the deficit. The spending cuts are from the military draw downs in Iraq and Afghanistan and areas to Medicare and Medicaid that will take place in 2017. It is meant to cover the $447 billion jobs plan and reduces the countries debt by $3 trillion over ten years.

This is a very populist proposal that will rally his base and has no chance of passing Congress. It helps Obama with liberals because he is raising taxes on the wealthy and not raising the age when people are eligible for Medicare or Medicaid. Nancy Pelosi and other Democratic members of Congress have already praised the proposal mainly because of its emphasis on taxes and that it does not make changes to Social Security.

We have already seen early signs these ideas are putting Republicans on the offensive. GOP elected officials and pundits have already said these ideas are “dead on arrival” because they have already been voted down. Some of the new revenue comes from tax increases from the Bush tax cuts that were meant to expire at the end of the year, making it harder for Obama to take credit for “changing” the tax code. Those are also cuts Republicans have staunchly defended in the past.

Republicans have been calling these ideas “class warfare” because Obama is targeting the rich. It is true that these ideas have been proposed before, particularly in the intense debt ceiling debate, where everyone wound up looking bad. To say this is class warfare though is a hit below the belt. If it is good policy to cut benefits to the poor like food stamps and other unemployment benefits, why is that not class warfare too? Most Americans have common sense and realize it simply is not right to put all the burden of fixing the economy on one group.

That is why there is a chance Obama can reach Independents and Moderates with his new proposals. Most Americans already believe increasing taxes on millionaires is a good idea. In a poll conducted recently by Zogby, they found 46 percent of American’s agreed with the statement “Modernize the nation’s infrastructure and help pay for it by ending the Bush tax cuts for households earning more than $250,000 and closing tax loopholes for large corporations.” That includes 48 percent of Independents (the poll release does not say how many people said they could not decide). It is not a majority but it is strong a start.

One thing to keep in mind with deficit reduction though is that these spending cuts could hurt job creation in the short term. Many economists have been sounding the alarm because many states have been cutting spending, which has lead to less construction projects and not as many new jobs for teachers and other areas in the public sector. You also lose revenue for those social programs everyone wants to save, and when it comes to the state sales tax; if people do not have a job and are spending less money, you lose revenue their too. That is why, while I am glad Obama is talking like his old self again, I know in the back of my mind the policy recommendations he is putting out there could be stronger.

The jobs plan, and today’s deficit reduction plan, are good steps in the right direction to getting this economy going again. It focuses on big and important changes that need to take place. It starts honing in on areas that effect every day Americans who are struggling to find a job and pay the rent. It also helps the middle class by securing a stronger future for their children by investing in education and other programs now that will create jobs for them later on. And of course, they will not be solely responsible for paying back the debt.

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Filed under Economics, Obama, taxes

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