Obama Likely to Get His Tax Hikes
Republicans were quick to condemn President Obama's proposal to raise taxes on individuals making $200,000 or more a year and families making $250,000. But condemning it may be all they can do. They don't have the votes to stop him.
Obama campaigned on a promise to repeal the Bush tax cuts for high income taxpayers. Then, when the recession hit, he deferred the move until the cuts are set to expire at the end of next year. The budget released today confirms that this is still his plan, but he's going much further. In addition to raising rates on the wealthy, from 35% to 39.6%, Obama wants to limit their itemized deductions. Under his plan, a couple in the 35% marginal tax bracket, for example, would see the value of each $1 of deductions drop from 35 cents to 28 cents. That will be phased in over several years beginning in 2011.
That will set off a howl among charitable groups that worry about contributions drying up, and they may persuade Obama to do some tinkering with that clause. The housing industry will also object to making the mortgage deduction less valuable. But the bulk of his proposed hikes are almost sure to go through, assuming the economy is no longer in a recession next year, as we expect.
Why? Because Republicans just don't have the votes to stop him. For one thing, the Bush tax cuts expire automatically, and Obama won't sign an extension. For another, his proposed tax hikes can be included in what's called a budget reconciliation bill that cannot be filibustered. That means Obama only needs 50 Senate votes, not 60, so if he has to, he can push it through without any Republican support. Some Democrats may defect, but probably not enough to deny him a majority.
Keep in mind, though, that none of the hikes affect low and middle income taxpayers. In fact, Obama wants to make the current tax cuts for those groups permanent.