Taking a defiant tone against Republicans unwilling to raise taxes in order to close the deficit, President Obama today unveiled a $3 trillion long-term deficit reduction plan that relies heavily on raising taxes on the wealthiest Americans.
"This is not class warfare -- it's math," Mr. Obama said from the White House Rose Garden, addressing GOP critiques of his plan head on.
"The money has to come from some place," he continued. "If we're not willing to ask those who've done extraordinarily well to help America close the deficit... the math says everybody else has to do a whole lot more, we've got to put the entire burden on the middle class and the poor."
The core of Mr. Obama's deficit reduction plan is $1.5 trillion in new taxes. About $800 billion comes from repealing the Bush-era tax rates for couples making more than $250,000. The plan also closes certain corporate tax loopholes and limits certain tax deductions.
The president is also putting forward a measure he's calling the "Buffett Rule" -- named for billionaire investor Warren Buffett -- to compel those making $1 million or more a year to pay the same overall rate as other taxpayers. Taxpayers making $1 million or more often make their fortune through investment income, which is taxed at 15 percent; the top income tax rate is 35 percent.
Even before the president unveiled it Monday, Republicans on Capitol Hill were declaring the president's deficit reduction plan dead. On Sunday, House Budget Committee Chairman Paul Ryan said Mr. Obama's plan signaled the president is too focused on his own re-election. "He's in a political class warfare mode and campaign mode. And that's not good for our economy," Ryan said.
In response, Mr. Obama said, "I reject the idea that asking a hedge fund manager to pay the same tax rate as a plumber or teacher is class warfare. I think it's just the right thing to do."
The plan also includes about $580 billion in cuts to mandatory benefit programs, including $248 billion from Medicare. However, in a nod to his liberal base, the president made clear he would veto any plan to cut Medicare benefits that isn't paired with tax increases on upper-income people. (Watch at left.)
The plan doesn't touch Social Security, and there is no proposed increase in the Medicare eligibility age -- a cost-saving proposal the president was willing to agree to earlier in the year, to the dismay of liberals.
To get to $3 trillion in savings, the White House is counting $1 trillion in savings over 10 years from the withdrawal of troops from Iraq and Afghanistan.
While Mr. Obama earlier this year was seeking a "grand bargain" with Republicans over deficit reduction, he's now adopting a decidedly populist, combative tone designed to contrast his vision of the future with the GOP vision.
Mr. Obama specifically called out House Speaker John Boehner, blaming him for their inability to come to an agreement for deficit reduction earlier in the year. Mr. Obama said they were close to the "grand bargain," but "Unfortunately, the speaker walked away."
He also blasted Boehner for delivering an economic speech last week in which he came out against any plan for deficit reduction that included raising taxes. "The speaker says we can't have it 'My way or the highway' and then basically says 'My way or the highway,'" Mr. Obama said.
Mr. Obama also took a shot at Ryan's budget blueprint, which proposed turning Medicare into a voucher system. "While we do need to reduce health care costs, I'm not going to allow that to be an excuse for turning Medicare into a voucher program that leaves seniors at the mercy of the insurance industry," he said.
The president said that trying to significantly reduce the deficit without raising taxes on the wealthy and corporations would lead to crumbling infrastructure, second-rate schools and a lack of investments in critical research.
"That's unacceptable to me, [and] that's unacceptable to the American people," Mr. Obama said. "It will not happen on my watch. I will not support any plan that puts all the burden for closing the deficit on ordinary Americans."
Mr. Obama will send his deficit reduction plan to Congress as a means of paying down the debt, as well as a means of paying for the $447 billion economic plan he unveiled earlier this month. Larger than most people expected, that plan includes an extension of unemployment benefits, investments in areas like infrastructure, and tax cuts for small businesses and individuals.
The president urged Congress to pass the economic plan right away. "There shouldn't be any reason for Congress to drag its feet," he said. "I'm ready to sign a bill. I've got the pens all ready."
Specifically, Mr. Obama will send his deficit reduction plan to the so-called congressional "super committee" tasked with finding at least $1.2 trillion in budget savings by Thanksgiving. The "super committee" was created as part of a deal to raise the debt ceiling. That deal also included $1 trillion in budget savings that have already been signed into law.
CBS News Poll:
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I'll believe corporations are persons when Texas executes one.: LBJ's Ghost
I agree with taxing the rich over 250, but I think that taxing the corperations will senf even more over seas. I would rather see INCOMING products taxed higher and their companies and tax breaks for those us companies who hire Americans and stay here.
BTW, I also think this is not enough and will need some HEAVY work to get this country back on top. It's taken decades for our sorry situation to occur and it may take that to get back.
I agree with taxing the rich over 250, but I think that taxing the corperations will senf even more over seas. I would rather see INCOMING products taxed higher and their companies and tax breaks for those us companies who hire Americans and stay here.
When Bush gave Big Oil a tax windfall it didn't create jobs, just dividends. The bankers are saying the money is there for investment and the interest on growth loans is tiny if it exists at all in many incentive formats.
If we tax INCOMING someone in turn taxes our exports. Can't win that way and the trade agreements may not even allow it.
100 years ago the US was agrarian. That changed to a manufacturing economy but emerging nations beat us with cheap labor. I don't know what we will become next but it's clear people can't live on service economy wages.
Pensions and affordable healthcare are givens in developed Western nations so blaming basic needs is a cop out. Certain careers are part of the past but there will be jobs needing filling in other areas. The trick is deciding where to get training & education. Those who won't or can't adapt won't fare well. Those who can adapt to massive changes should be fine.
Most of all we need an oversight body that identifies economic dangers early on rather than after the fact. In the mid-eighties everyone in the semiconductor industry saw clearly their jobs were over. Not all could have been saved but business never really tried.
Today business advertises claims that are often erroneous about a pint of product in a box twice the size required and laden with HFC & additives no one should ingest.
We need far less hype and more quality in our markets.
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I'll believe corporations are persons when Texas executes one.: LBJ's Ghost
While this is what NEEDS to happen and what rationally SHOULD happen the republicans are right, Obama is playing the republican game and refusing to take a centrist position (as he has through his entire presidency) and it's about time he quits letting them bully him around, we elected a democrat let's see him play the republican strategy, make the republicans vote against tax increases on the rich and make the public aware this is putting more burden on the average worker so that we can continue to have the lowest tax rate on millionaire and billionaires in the developed world..... let the republicans vote against that and then claim the middle class needs to take it up the *** and use that to use his advantage during the election....
it's not cool to quote somebody with what they didn't actually say...... In fact it's incredibly childish.
it's not an obama thing, it's an economics thing, I am not for anybody, I AM FOR what will help this economy and right now what is needed is not shifting more burden on the average worker to ease the load on the rich.
This article appeared on Investor's Business Daily on September 12, 2011.
In last week's campaign speech disguised as an address to Congress, President Obama said, "Warren Buffett pays a lower tax rate than his secretary ? an outrage he has asked us to fix."
Writing recently in The New York Times, the famed chairman of Berkshire Hathaway complained that his federal income tax last year was "only 17.4% of my taxable income" ? less than $7 million on a taxable income of about $40 million.
Buffett claimed that, like himself, other "mega-rich pay income taxes at a rate of 15% on most of their earnings," but that is not at all common. The average income-tax rate of those earning between $1 million and $10 million was 29.5% in 2009.
Obama used Buffett's uniquely low 17.4% tax as proof that "a few of the most affluent citizens and most profitable corporations enjoy tax breaks and loopholes that nobody else gets." That is not true.
To hold out the tax policies of 1977 or 1992 as examples of effective ways to raise more revenue is ludicrous.
Anyone whose income is almost entirely composed of realized capital gains or dividends would "pay income taxes at a rate of 15% on most of their earning." Investors with modest incomes also pay a tax rate of 15% on dividends and capital gains, although that rate is scheduled to rise to 18.8% under the Obama health law (and much higher if Congress enacted the "reforms" Obama will propose next Monday).
Before 2003, when the tax on dividends was made the same as the tax on capital gains, Berkshire Hathaway was a handy tax dodge ? a way to own dividend-paying stocks without paying taxes on the dividends. Buffett is famous for collecting stocks with a generous dividend yield without Berkshire itself paying any dividend.
The dividends Berkshire receives are reinvested in buying more stocks, so the holding company ends up with more assets per share which results in capital gains that would be taxable only if the shares are sold.
Warren Buffett is the second wealthiest person in America, but he reports surprisingly little taxable income for someone who owns more than $50 billion of Berkshire shares. Increasing the tax rate on salaries and interest income would barely affect him.
He pays himself a salary of just $100,000, which explains how he pays less than his employees do in payroll taxes. He dodged the estate tax by donating his wealth to the Bill and Melinda Gates Foundation. He doubtless reduces his taxable income with other donations to charity, which explains why he repeatedly refers to taxable income rather than adjusted gross income.
Mr. Buffett ends by appointing himself tax czar and declares he "would raise rates immediately on taxable income in excess of $1 million, including, of course, dividends and capital gains. And for those who make $10 million or more ... (he) would suggest an additional increase in rate."
Since he only reports $100,000 of salary, he has nothing to lose by advocating a higher tax rate on salaries. Nearly all of his income in 2010 consisted of capital gains on sales of Berkshire shares, because those shares pay no dividends. But Buffett could just as easily hang onto appreciated shares rather than selling them, or he could donate them to charity.
Raising tax rates on dividends and capital gains sounds easier than it is. Nobody with substantial wealth can be forced to realize taxable gains by selling appreciated assets. A realized gain is no more valuable than an unrealized gain. On the contrary, it is less valuable by the amount of the tax.
Nobody can be forced to hold dividend-paying stocks either. They can instead buy Berkshire Hathaway shares if the tax on dividends goes up, as Buffett understands.
Despite his personal and professional dependence on capital gains, Buffett nevertheless feigns total ignorance of who pays the capital gains tax and why. He says, "I have worked with investors for 60 years and I have yet to see anyone ? not even when capital gains rates were 39.9% in 1976-77 ? shy away from a sensible investment because of the tax rate on the potential gain."
Well, the Dow Jones industrial average was 831 at the end of 1977 ? down from 969 at the end of 1965 ? so somebody was having trouble finding investments that would still look sensible after paying a 39.9% tax.
In any case, for Buffett to focus on the act of buying stocks or property is all wrong. The capital gains tax is not a tax on buying assets. It is a tax on selling assets. If you don't sell, there is no tax. And when the capital gains tax is high, very few people are willing to sell.
In 1977, when the capital gains tax was 39.9%, realized gains amounted to less than 1.57% of GDP. From 1987 to 1996, when the capital gains tax was 28%, realized gains rose to 2.3% of GDP. Since 28% of 2.3 is larger than 39.9% of 1.57, the lower tax rate clearly raised more tax revenue.
From 2004 to 2007, when the capital gains tax was 15%, realized gains amounted to 5.2% of GDP. Since 15% of 5.2 is larger than 28% of 2.3, the lower tax rate again raised more tax revenue. The government cannot afford to raise this tax, particularly on those most likely to pay it.
Buffett focuses on the 400 tax returns with the highest reported incomes, which are often one-time capital gains from the sale of a business or real estate.
"In 1992," he writes, "the top 400 had aggregate taxable income of $16.9 billion and paid federal taxes of 29.2% on that sum. In 2008, the aggregate income of the highest 400 had soared to $90.9 billion ? a staggering $227.4 million on average ? but the rate paid had fallen to 21.5%."
In 1992 only 39% of reported income of the top 400 came from capital gains and dividends because those tax rates were so high. With most reported income coming from salaries, the average tax rate was high.
Alan Reynolds, a senior fellow with the Cato Institute, is the author of Income and Wealth (Greenwood Press 2006).
More by Alan Reynolds
By 2008, 67% of reported income of the top 400 came from capital gains and dividends because both were taxed at 15%. That diluted the average tax rate, yet nevertheless resulted in much more taxes paid because the amount of reported income was so much larger.
The big change was not in actual income, but merely in what the IRS counts as income. People were hiding more of their wealth in 1992 than they did in 2006-2008, and they were hiding even more in 1977.
It is easy to advocate a higher tax rate on capital gains, but it is even easier to avoid paying that higher tax rate. Simply hold onto assets that went up and sell those that went down, and never realize gains until you have offsetting losses.
The evidence is undeniable that affluent investors and property owners report far fewer gains whenever the capital gains tax goes up. Choosing to pay tax on capital gains and dividends is usually voluntary, and when the rate gets too high we run short of volunteers.
With the super-high 1977 tax rates of 39.9% on capital gains and 70% on dividends and salaries, federal revenues were 18% of GDP. In 1992, revenues were only 17.5% of GDP. In 2007, thanks in large part to a 15% tax rate on capital gains and dividends, revenues were 18.5% of GDP.
To hold out the tax policies of 1977 or 1992 as examples of effective ways to raise more revenue is ludicrous. It didn't work then, and it wouldn't work now.
One Simple Reason (and Two Easy Steps) to Show Why Obama?s Soak-the-Rich Tax Hikes Won?t Work
Posted by Daniel J. Mitchell
It?s hard to keep track of all the tax hikes that President Obama is proposing, but it?s very simple to recognize his main target ? the evil, nasty, awful people known as the rich.
Or, as Obama identifies them, the ?millionaires and billionaires? who happen to have yearly incomes of more than $200,000.
Whether the President is talking about higher income tax rates, higher payroll tax rates, an expanded alternative minimum tax, a renewed death tax, a higher capital gains tax, more double taxation of dividends, or some other way of extracting money, the goal is to have these people foot the bill for a never-ending expansion of the welfare state.
This sounds like a pretty good scam, at least if you?re a vote-buying politician, but there is one little detail that sometimes gets forgotten. Raising the tax burden is not the same as raising revenue.
That may not matter if you?re trying to win an election by stoking resentment with the politics of hate and envy. But it is a problem if you actually want to collect more money to finance a growing welfare state.
Unfortunately (at least from the perspective of the class-warfare crowd), the rich are not some sort of helpless pinata that can be pilfered at will.
The most important thing to understand is that the rich are different from the rest of us (or at least they?re unlike me, but feel free to send me a check if you?re in that category).
Ordinary slobs like me get the overwhelming share of our income from wages and salaries. The means we are somewhat easy victims when the politicians feel like raping and plundering. If my tax rate goes up, I don?t really have much opportunity to protect myself by altering my income.
Sure, I can choose not to give a speech in the middle of nowhere for $500 because the after-tax benefit shrinks. Or I can decide not to write an article for some magazine because the $300 payment shrinks to less than $200 after tax. But my ?supply-side? responses don?t have much of an effect.
For rich people, however, the world is vastly different. As the chart shows, people with more than $1 million of adjusted gross income get only 33 percent of their income from wages and salaries. And the same IRS data shows that the super-rich, those with income above $10 million, rely on wages and salaries for only 19 percent of their income.
This means that they ? unlike me and (presumably) you ? have tremendous ability to control the timing, level, and composition of their income.
Indeed, here are two completely legal and very easy things that rich people already do to minimize their taxes ? but will do much more frequently if they are targeted for more punitive tax treatment.
They will shift their investments to stocks that are perceived to appreciate in value. This means they can reduce their exposure to the double tax on dividends and postpone indefinitely taxes on capital gains. They get wealthier and the IRS collects less revenue.
They will shift their investments to municipal bonds, which are exempt from federal tax. They probably won?t risk their money on debt from basket-case states such as California and Illinois (the Greece and Portugal of America), but there are many well-run states that issue bonds. The rich will get steady income and, while the return won?t be very high, they don?t have to give one penny of their interest payments to the IRS.
For every simple idea I can envision, it goes without saying that clever lawyers, lobbyists, accountants, and financial planners can probably think of 100 ways to utilize deductions, credits, preferences, exemptions, shelters, exclusions, and loopholes. This is why class-warfare tax policy is so self-defeating.
And all of this analysis doesn?t even touch upon the other sure-fire way to escape high taxes ? and that?s to simply decide to be less productive. Most high-income people are hard-charging types who are investing money, building businesses, and otherwise engaging in behavior that is very good for them ? but also very good for the economy.
But you don?t have to be an Ayn Rand devotee to realize that many people, to varying degrees, choose to ?go Galt? when they feel that the government has excessively undermined the critical link between effort and reward.
Indeed, if Obama really wants to ?soak the rich,? he might want to abandon his current approach and endorse a simple and fair flat tax. As explained in this video, this pro-growth reform does lead to substantial ?Laffer Curve? effects.
Bama, Obama I vote as you say, I believe as you say, Obama, O holy bama....
1prat?tle verb \ˈpra-təl\
prat?tledprat?tling
Definition of PRATTLE
intransitive verb
1
: prate
2
: to utter or make meaningless sounds suggestive of the chatter of children : babble
transitive verb
: to say in an unaffected or childish manner
? prat?tler noun
? prat?tling?ly adverb
See prattle defined for English-language learners ?
See prattle defined for kids ?
Examples of PRATTLE
They prattled on into the night, discussing school, music, and friends.
<spent an hour on the phone prattling on about nothing in particular>
Origin of PRATTLE
Low German pratelen; akin to Middle Dutch praten to prate
First Known Use: 1532
Related to PRATTLE
Synonyms: babble, blab, cackle, chaffer [British], chatter, chin [slang], converse, gab, gabble, gas, jabber, jaw, kibitz (also kibbitz), natter, palaver, patter, prate, chat, rap, rattle, run on, schmooze (or shmooze), talk, twitter, visit Prattle - Definition and More from the Free Merriam-Webster Dictionary
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I'll believe corporations are persons when Texas executes one.: LBJ's Ghost
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