Back in the bad old days when Bill Clinton was president, income taxes on the very rich were as high as 39.6 percent, although most of the Gotrocks only paid 36 percent on those final dollars of income. PERHAPS PRESIDENT Barack Obama’s convincing re-election will lighten the atmosphere in the Capitol and make progress possible. Senate Republicans can no longer say their main purpose is to make Obama a one-term president. The House now will have every reason to govern well and earn re-election from a conflict-weary electorate. The president has fought his last campaign battle and can focus on bringing some of the nation’s daunting dilemmas to bay.
Today the top rates are 33 percent and 35 percent.
That’s right, what all the fuss is about comes down to less than 5 percent. Granted, 5 percent of $100 million is a lot of money, but the nation’s billionaires managed to scrape through while Clinton was in the White House and had enough left after appeasing the IRS to create jobs like crazy. There is every reason to believe that the country would survive — even flourish — if the top rates were allowed to rise on Jan. 1 as part of a deal to keep the economy from toppling off the fiscal cliff.
But if that rational step won’t be allowed because of the Republican Party’s new religion, then maybe Mitt Romney’s cap on deductions will prove acceptable. Romney proposed a $35,000 hard cap on deductions as part of the restructuring necessary to allow him his 20 percent across-the-board income tax cut. If he fleshed out his proposal to make his tax cut income neutral, I missed it, but the cap on deductions is so appealing that Democrats have signed on.
A $35,000 cap would have zero effect on most American families. Only the affluent — those who can afford it — can write off that much in deductible expenses in a year. But it would be a serious tax hike for the very rich — for families like the Romneys, who give millions to their churches, to charities and their own foundations.
More to the point, adopting Romney’s proposal as part of a deficit-reducing deal would make it bipartisan by definition and should bring Republicans aboard.
Military spending should be reduced, too. With the Iraq war over and the occupation of Afghanistan nearing an end, it should be possible to trim the Pentagon’s budget significantly while remaining strong enough to protect our interests worldwide. We are, after all, spending more on defense than the next 17 nations combined.
It would not be fair to put all of the reform burden on the military and the wealthy. The payroll tax holiday should also come to an end to pump more much-needed money into Social Security.
Enacted in 2010, the payroll tax break was designed to help pull a stagnant economy out of the doldrums by boosting consumer spending. The money came from taxes paid to fund Social Security, half of which is paid by employers and the other half by workers. For 2011 and 2012, the tax went from 6.2 percent to 4.2 percent.
So for a family making $50,000, the tax break meant an extra $1,000.
The Bush tax cuts on the middle class also should be allowed to expire as soon as middle class incomes rise to their former levels in inflation-adjusted dollars as the economy recovers.
Across-the-board tax cuts threw the nation into deficit spending. It will take across-the-board increases to restore balanced budgets.
Twenty-thirteen may turn out to be our nation’s lucky year.
— Emerson Lynn, jr.
