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Relax, Rich People!
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Obama's budget is now in play in Congress, and critics are crying 'socialism.' But Clinton budget adviser Matt Miller says the new taxes are hardly radical.
As the Kabuki dance known as Washington’s budget process settles into another long performance, an unsurprising choreography is unfolding. The president proposes an ambitious but hardly revolutionary budget. Republicans rise as one to brand it “radical.” Mild-mannered pundits (like the Times’ David Brooks and the Financial Times’s Clive Crook) froth uncharacteristically that the thing looks downright scary—before retreating (after a White House pushback) to a more-sober skepticism. Meanwhile, as Obama aides head to Capitol Hill to testify on the details, and the president himself wooed Democratic budgeteers Wednesday, rhetorical-battle lines harden and bear no relation to the facts.
A closer look at Obama’s budget should reassure that they will retain their traditional place at the top of Uncle Sam’s housing and charity dole.
Obama’s “socialism” is the silliest charge. Republicans are up in arms over the “class war” supposedly launched by the president through tax increases he’s proposed on top earners in his new budget. Some top Democrats now say they’re having second thoughts, too. But it’s important to parse their claims.
Republican ire isn’t really directed at Obama’s call to let the Bush income-tax cuts for the top expire. After all, Obama campaigned on that idea, it won’t take effect until 2011 (when the economy will presumably be past the worst), and we know from the boom of the 1990s that a top marginal rate of 39.6 percent puts no brake on entrepreneurship and growth.
Nor is the idea of hedge-fund and private-equity kings having their income treated as, well, income (and not as capital gains) particularly offensive to the GOP. This affects only a few people who’ve done extremely well, and who probably had something to do with the overleveraged mess we’re in anyway.
No, their real pique is reserved for Obama’s plan to limit the value of the itemized deductions top earners take for mortgage interest and charitable donations. If the president aims to “punish success” in this way, Republicans say, and use the proceeds to help fund liberal dreams like universal health care, then as a matter of principle they must fight with everything they’ve got. According to the New York Times, Democratic tax chieftains Max Baucus in the Senate and Charlie Rangel in the House actually agree with the GOP here.
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Paul Schrodt is a writer living in New York City. He has contributed to New York magazine, Radar, and Esquire.com.
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xbainx
Which of course won't stop Sean Hannity from going on the air and screaming terrorist! He's an economic terrorist!
Maybe this week Glenn Beck can teach us how we can boil and eat our boot leather in his war room.
And how O'Reilly... Actually O'Reilly has been getting much better lately. He actually complimented Jon Stewart on skewering Cramer. So wow. Maybe Obama is having an effect on him too.
connie47
Thank you, Matt, for a common sense article in times when inflammatory words like *socialism* and *communism* are thrown around so irresponsibly.
Today, every $1,000 in mortgage interest or charitable gifts generates $350 in tax savings for top earners; under the new plan the tax savings would be $280. If that's enough to make somone who earns $250,000 stop giving to charity, let them keep their donation and shame on them.
Under the existing tax deduction rates, the owner of a mansion was subsidized by the owner of a ranch house, because the mansion owner deducted at the 35% rate, where the modest home deducted at the 28% rate. A little fairness here is socialism?
The richest 1% of Americans about half of all the wealth in the country. Enough is enough. A decent life for the working class does not equal either communism or socialism.
ljryan
I'm confused about this. We haven't been able to take "mortgage deductions" for years because of the AMT
We live in a high cost of living region (the northeast) and our family's dual income ~$200K allows for a modest middle class lifestyle (partially due to the enourmous childcare bills.)
How will this really change anything at all?
estcruzer
It'll take a while to roll back the massive tax rebate the rich are getting in this country. The progressive income tax policy was put in place because it was a more equitable way to share the responsibility and reward for Government benefits. The tax deduction was put in place for the rich to escape this responsibility and so they could bless their representatives with cash gifts. It's time that the progressive tax solution actually was given a chance to work in this country.
To counter the cry that taxing will discourage hard work just look at the numbers. If someone makes $50,000/year and their tax bracket is 10% they take home $45,000/year. If someone makes $500,000/yr and their tax bracket is 50%, they take home $250,000/year. Do you think the higher earner is going to stop working?
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n--Y--MrRepublicanflyoverland
What a stupid interpretation. You should be happy you are only losing $70 PER THOUSAND. Who has a thousand dollar mortgage? If you have a million dollar mortgage, guess what? That is a lot of dough. You should be happy becaise lower earners only can deduct 15%? That's because they only PAY 15%! Try teling them they only get to deduct 8% and see how loudly they scream. This is never going to pass, so forget it. It is DOA. The thing I don't understand is why all these rich haters come to a website that is fixated on excess and glamour?
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n--Y--MrRepublicandrkaza12
MrRepublican; point out a few--socialism's--for me, I'm curious. And tell me what you think of Ayn Rand and her brand of cultural eugenics; Glen Beck mentioned her yesterday.
magicman
Uhhh, I hate to be the only one in the room who can do Math, but a higher tax deduction percentage ensures higher home VALUES???? You work for who exactly? This is not reassurring. You do know about the Housing Price decline?
Will the President be recanting his devotion to our Local Policeman, as an example of success in saving Ohio Jobs in his Stimulus Program, in light of the ALABAMA SHOOTINGS. Perhaps, I could suggest to the President that he import Hessians for the job?
Not to be too Liberal here, but I think 'Instant Karma' just got you?
Perhaps he's found Osama Bin Laden's whereabouts? It should be there in that note left from President Bush.
Thank you.
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