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What took Obama so long to address our unfair tax system? And why is his plan so complicated?
Barack Obama started with majorities in both the House and Senate. Six years later the opposition holds both.
Why did the president wait until he was in the overwhelming minority to push for higher taxes for the wealthy and lower taxes on the middle class?
True, a few years back Democrats and Republicans kind of negotiated an agreement that raised taxes slightly on the top 1%, but it was accompanied with Draconian cuts to federal programs. And it is true that the richer you are, the more you have to pay in taxes related to the Affordable Care Act. But neither of those moves had attached to them the grandiose notion of taking from the wealthy to give to the middle class.
The big picture of Obama’s current proposal sounds great. But the details are not exciting, as Obama prefers to tinker with the tax code instead of just raising marginal tax rates. The New York Times said that Obama proposes eliminating a federal tax provision regarding inherited assets that shields hundreds of billions of dollars from taxation each year. The plan also raises the top capital gains tax rate to 28% for couples with incomes above $500,000 annually and places a new fee on banks with assets over $50 billion.
What the middle class gets is equally as complicated as what the rich pay: tax breaks for middle-income earners; a $500 credit for families in which both spouses work; increased child care and education credits; and incentives to save for retirement.
It’s interesting how many of the tax breaks Obama is proposing for the middle class facilitate and perpetuate the new world economy wrought by Reaganism. It used to be that a family could afford to have only one spouse work, but now two incomes are absolutely necessary to maintain middle class status for tens of millions of families. $500 isn’t much, but it does help to some degree to keep the second spouse in the workforce, thereby keeping a lid on wages that would surely increase if fewer people wanted to work. Incentives for retirement are only necessary because defined benefit pensions are gone and people are on their own, sink or swim, except for Social Security, a program that many Republicans would love to dismantle. The increased education credit also responds to the new world reality of college costs made prohibitive to the middle class and poor because of the steady decline in federal and state support of higher education.
Obama’s noble gesture—calling for some fine-tuning of the system that has led to the greatest inequality of wealth in the United States since the Gilded Age—comes only after his only hope for controlling the direction of the government has become the veto and executive order. It’s so much sound and fury, so much rhetoric meant to paint the Republicans into a corner, meant to draw a contrast between the Republican and Democrats for the 2016 election cycle.
Politics seems to enter into the decisions of all contemporary politicians. But politics aside, Obama’s decision to resume friendly relations with Cuba, his decision to grant papers to about 5 million illegal immigrants and his climate change accord with China all moved the country in the direction it needs to head, even if in the case of the environmental accord, it was only a nudge. The decision to seek support for community colleges takes a realistic approach to giving more poor kids access to higher education.
But calling on Congress to end some tax breaks for the wealthy and give others to the middle class is nothing but grandstanding, given it will never pass. I call it grandstanding because it creates a minimal distance between where he and other Democrats stand and where Republicans stand. This small distance is supposed to make the 99% want to vote Democratic, because the Democrats are going to reverse the 35-year flow of wealth and income up the ladder to the wealthy and ultra-wealthy. But what Obama is calling for isn’t even a start. It’s a quarter turn of a screw.
I would feel differently if Obama were calling for a large increase in the capital gains tax or lifting the cap on income assessed the Social Security tax. Congress wouldn’t go for it, but at least Obama would be making a point.
Instead, he’s trying to further redefine the definition of what it means to be left in this country, moving it further to the right.
copyright 2015 Marc Jampole