Sen. McConnell: Unless millionaires get a tax cut, the middle class can’t have one either.
The current Republican political philosophy as stated today by Senate Majority Leader Mitch McConnell: The middle class can’t have their tax cut unless millionaires get one too.
So, who’s playing “class warfare” now?
Give millionaires a $100K/family tax cut or the struggling middle class who’ve seen their wages flat line or decease over the last ten years and their lives fall apart will see their rates increase. If that’s not a call to class warfare, I don’t know what is.
I’ve studied a lot of socio-economic and cultural history, and I’ve not seen this kind of declared class warfare since the Gilded Age or in Ireland during the potato famine.
“Senate GOP leaders declared on Monday that Republicans are, to a person, opposed to legislation that would extend only middle-class tax relief – which Obama has repeatedly promised to deliver – if Democrats follow through on plans to let tax rates rise for the wealthiest Americans. The GOP senators forcefully made their case one day after House Republican leader John Boehner suggested he might vote for Obama’s plan if that ends up the only option.” – CQ Politics
Regardless of Republican talking points, these tax cuts for the wealthy do not create more jobs. Every statistic and economist says that when tax rates for the wealthy are really low – as they are now – the wealthy tend to save – not spend – their tax savings. They put it in safe investments like treasuries or off-shore it. It’s not spent on equities (stocks) or bonds, especially in a volatile market like this one. They are reserving their cash rather than spending it.
Contrary to current Republican spin, higher tax rates actually do increase not only tax revenues but also increase job growth. The reason? The tax code.
Wealthy people can write off a good share of their taxes through equity and business investments to decrease their taxes. Right now, there is no incentive to invest and, thus, create jobs because their tax rates are already so low.
Remember, too, that taxes are not on revenues (earned income), they are on profits (post expenses, commonly known as adjusted gross income). So, the more money a business owner puts into his business (capital equipment, employees, R&D, etc) the lower his/her taxes will be because he’s lowered his taxable profit margin – the adjusted gross income. Plus any person, family or business owner will still receive a lower tax rate on income up to 250K/family and a maximum of 3% more on any profits (adjusted gross income) above that amount.
So what does this mean?
It means that the first $250k of profit (AGI) will be taxed at the lower tax rate and anything above that will be taxed at a higher of no more than 3%. In other words, if your AGI is $300k, you’ll only be paying a 3% higher ate on $50k of your AGI.
Beyond that tax fact and as an actual matter of statistical fact, it’s only when taxes on the wealthy exceed 50% that tax revenues (the actual amount the government receives in taxes) appear to begin to decrease. In fact, the tax rates on the wealthy at the current low level actually suppress federal tax revenues, causing the government to borrow money to pay for necessary services and benefits which results in an increase in the federal deficit.
Bruce Bartlett, one of Pres. Reagan’s senior domestic policy advisers, and David Stockman, a director of the Office of Management and Budget under President Ronald Reagan, have both stated that raising taxes on the wealthy is an important, fiscally responsible step to take. Both have written that there is no way to cut the federal government enough to offset the the costs of the lowered taxes and pay down the growing deficit. Even Greg Mankiw, GW Bush’s leading economic adviser, says that keeping the tax rate for the wealthy at this time is not good policy.
In addition, the hard-wired Republican ideology of “starving the government” will not decrease spending. In all of American history, that’s never happened, even under Reagan who famously said he wanted to cut the size of government. However, under Reagan the nation ended up with a much larger deficit, forcing him to reverse his position and raise taxes twice, wiping out his initial tax cut.
For example, just look at the state government and industry lobbying now occurring after Sec. Gates stated that he planned to cut DoD expenses. Or look at the increased number of TV ads paid by the oil and gas industries to prevent their federal subsidies from being cut, even though they are more than highly profitable. Does anyone seriously think that coal companies, from W. Virginia to Colorado, will stand by quietly while their Congressional representatives take away their 150-plus year old tax subsidies that push most of their risk and costs onto the taxpayer? Not likely.
They’ll lobby to the tune of hundreds of millions of dollars and talk incessantly through the media about how many jobs will be lost in those Congressional districts. The fact is that cutting federal spending is not as easily done as said. Pres. Reagan found that out which is why his primary domestic adviser, Bruce Bartlett, has been so vocal on this subject…and the need to raise taxes to cover federal expenses.
Bottom line, if the tax cuts for the wealthy are continued, $4 trillion dollars will be added to the deficit over the next 10 years, according to the CBO. That will push the deficit to close to 100% of GDP. More importantly, as the deficit grows closer to GDP, borrowing will become more expensive (remember the highway billboards, counting up the deficit, during the early Clinton years?) as bondholders and foreign governments (China) seek to insure their risk is covered.
But instead of asking the wealthy to pay their fair share – which previous generations of wealthy thought only honorable and right – for a civil, just, and prosperous society, Republicans are saying let the millionaires (and billionaires) keep all their cash (all of which reminds me of 16th Century France). Rather, these Republicans are saying that to reduce or eliminate the deficit, let’s work on ways to eliminate social security, medicare and medicaid – or at least cut back on the benefits, most of which accrue to the middle class.
True to his libertarian, Randian view, Wisconsin House member and “Young Gun” Paul Ryan has already put forth a plan to eliminate all federal social programs, including social security, medicare and medicaid. Their belief system is that the federal government, not because of the Constitutionality of these programs, has no business in social economics. The problem with his plan is that it will probably lead to greater poverty of the elderly and poor and will undoubtedly lead to higher federal budget costs. Having read his plan, I’m highly skeptical of its fiscal feasibility.
Regardless of my opinion, the point is that Rep Ryan and his Republican colleagues believe that to offset the cost of low taxes on the wealthy they must impose sharp cuts on the benefits to the middle and poorer classes. In other words, declare war on the middle class but tactically and rhetorically frame it in ways the “poor, ignorant slobs” will never know they’re being taken to the cleaners.
Supreme Court Justice Kennedy, it is said, determines many cases based on “fairness.” Therefore, is it “fair” for the wealthy not to pay their fair share for the benefits they receive by living and working in our free democratic Republic?
Republicans like Sen. McConnell, without a doubt, are declaring war on the middle class and using “fine sounding” words to distort the truth.
You can fight back with your emails, phone calls, and letters to your Congressional representatives, and again at the ballot box, or you can sit back quietly – acquiesce – to seeing your life go down further and your future go downhill.
The choice is yours!
UPDATE: Sen. Minority Leader introduce a bill on permanently extending the Bush tax cuts along with making permanent several other tax provisions. From the Washington Post: “McConnell’s bill would permanently reduce the estate tax, as well as codify Bush-era reductions in income tax rates and the alternative-minimum tax – an addition that would push the total cost of the package to well more than $4 trillion by 2020.”
$4 Trillion added to the deficit in 9 years!?! Is this guy nuts? Where is the fiscal responsibility? At this kind of spending rate, we’ll never get out the deficit hole…and what national creditor will want to buy our bonds if they think the nation is going to tank financially?