Tax Cuts for the Rich? Fuhgeddaboutit!
I was in a New Jersey restaurant last weekend and couldn't help overhearing a very loud customer at a nearby table ranting about how no one should vote for Obama because he'd raise taxes on people like him who'd worked hard all their lives to reach a position where they finally make a lot of money. He was going to vote for McCain, who is promising to protect him and his wallet. My choices were to go over and set him straight or to lower the volume on my hearing aid. I chose the latter, but I wish I had gotten his name so I could send him a link to some facts that should be obvious: If you make over $250,000, your taxes are going to go up no matter who is president. You can bet on it.
It was amusing to read that both Barack Obama and John McCain insisted yesterday that the ballooning deficit -- which may approach $1 trillion next year -- won't force them to cut back on their campaign promises, whether to cut taxes, fight two wars or increase spending. Amusing, but disappointing.
Even before the government's new rescue plan, the deficit next year was heading toward $600 billion ($800 billion if we didn't cheat and count the Social Security surplus) and the national debt was approaching 70% of GDP -- higher than it's been since we paid off the World War II debt. Interest on the debt, which mostly goes to foreign investors who hold U.S. bonds, takes up more than 10 times what we spend every year on earmarks.
McCain's promise is to extend and expand the Bush tax cuts that are set to expire over the next few years. The Tax Policy Center estimates the 10-year cost of that to be $627 billion. Obama would extend and add new tax cuts for the middle class and seniors, but he would also raise taxes on those making over $250,000 a year, for a net increase in revenue of $595 billion. But Obama is no spendthrift. He'd use much of the extra money to provide health care for almost everyone, and to invest more in alternative energy, education and a host of other programs.
The sad fact is that the next president will have his hands tied by the fiscal crisis -- and who knows how much worse it will be by Jan. 20? McCain can push tax cuts for the rich all he wants, but he'll never convince the Democrats who are sure to control Congress that it's a good idea. They just won't vote for it. And the Bush tax cuts were set up to automatically expire, so a McCain veto will be of no use. He needs Congress to take the initiative and approve making the cuts for high incomers permanent. He can't rely on a veto of a tax hike.
Compromises are always possible because Democrats do want to keep lower rates for the middle class in effect, but no compromise will come anywhere close to what McCain -- and my uninvited dinner companion -- want. The cold fact is that if you make over $250,000 a year, your taxes are going to go up, probably by a lot. That may be a good thing or a bad idea in a slow economy, but that's the fact.
And one other thing. The guy in the restaurant was particularly incensed because he believes that Obama would tax all the capital gains tax on the home he's planning to sell when he retires. That's wrong. Obama would not change the rules on taxing the gains on the sale of a principal residence. That's one of those talk radio falsehoods that have been circulated and accepted as fact. Just ain't so.