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May 9, 2008
WSJ: Obama's Faulty Tax Argument
Op-ed in today's Wall Street Journal: Obama's Faulty Argument, by Andrew G. Biggs (American Enterprise Institute):
As the presidential campaign heats up, a key issue is whether to extend the 2001 and 2003 income tax cuts, which expire in 2011. John McCain wants to make the tax cuts permanent. Barack Obama and Hillary Clinton want to let the rates rise.
Opponents of the tax cuts point to spending programs that could be financed by the extra revenues. Chief among these is Social Security. Sen. Obama's Web site, for example, argues that "extending the Bush tax cuts will cost three times as much as what is needed to fix Social Security's solvency over the next 75 years."
Such statements imply that if we return to the seemingly modest tax rates of the 1990s, we could fund the $4.3 trillion Social Security deficit, and so much more. As Mr. Obama recently told Fox News, "I would roll back the Bush tax cuts on the wealthiest Americans back to the level they were under Bill Clinton, when I don't remember rich people feeling oppressed."
This argument seems compelling, but it is misguided. In reality, repealing the tax cuts would raise taxes far above Clinton-era levels. Due to quirks in the tax code, average taxes would be almost 25% higher than during the 1990s. ...
The next president will face difficult choices regarding how much to collect in taxes, and how much to spend on entitlements like Social Security. Future citizens may decide that paying higher taxes is worthwhile. But in any event, the misleading tax cuts vs. Social Security argument should not guide policy makers on this issue.
May 9, 2008 in News | Permalink
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Comments
Could the WSJ please explain what "quirks" would cause an increase in the top bracket to also somehow increase tax rates for everyone else? If they are just taking "average" tax burden then yes it would rise but that is misleading b/c they are averaging it out over everyone when only upper income earners would actaully be getting hit. The lower 90% of income earners would get an "average" tax increase of zero percent. I would argue repealing the income tax cut on the wealthiest still doesn't make taxes on the upper income earners greater than or equal to the Clinton era because most of rich people's income is from investment income anyways and Bush's capital gains tax cut vastly reduced taxes on this income source. Hence, rich people would still be paying less taxes than the Clinton era if Obama only raised the upper income rate and not capital gains taxes.
Posted by: taxlawstudent | May 9, 2008 6:38:31 PM
