February 11, 2010
President Obama Calls for 'Restoring Balance to the Tax Code'
The second major step the Administration is taking to address the long-run fiscal challenge is restoring balance to the tax code that has been lost since 2001. The 2001 and 2003 tax cuts disproportionately favored wealthy taxpayers. ... These tax cuts for the wealthiest Americans took place when the incomes of ordinary Americans were stagnating and inequality was reaching almost unprecedented levels. In other words, the tax cuts exacerbated the broader trend rather than mitigated it.
The President has consistently maintained that the tax cuts went too far in cutting taxes for people making more than $250,000 per year and that the country could not afford the tax breaks given to that group over the past eight years. That is why one important plank of his fiscal responsibility framework is to rebalance the tax code, so that it is similar to what existed in the late 1990s for those making more than $250,000 per year. Specifically, the Administration has proposed letting the marginal tax rates on ordinary income and capital gains for people making more than $250,000 per year return to the levels they were in 2000. It has also proposed setting the tax rate on dividends for high-income taxpayers to the same 20% rate that would apply to capital gains—which is lower than the rate in the 1990s—and letting all other features of the 2001 and 2003 tax cuts expire for these taxpayers. In addition, it has proposed limiting the rate of deductions for high-income taxpayers to 28%, so that the wealthy do not obtain proportionately larger benefits from their deductions than other Americans do. None of these changes would take effect until 2011, so they would not affect disposable incomes as the economy recovers in 2010. Nonetheless, they would raise nearly $1 trillion over the next 10 years and even more over the longer run.
TrackBack URL for this entry:
Listed below are links to weblogs that reference President Obama Calls for 'Restoring Balance to the Tax Code':
The logical inference is that the Obama Administration believes that the 1986 Tax Reform was a huge mistake, because its top rates were even lower than current rates.
A cynic could argue that it's just as well that Obama opposes traditional rate-lowering base-broadening tax reform. After all, the low rates from the 1986 effort lasted only 4 years until Bush raised them a little, then another 3 years until Clinton raised them a lot. In contrast, the base broadening measures of 1986 were largely permanent. This history undercuts the credibility of any future tax reform proposals.
Posted by: AMTbuff | Feb 11, 2010 3:47:31 PM
What the chart lacks is line showing the budget deficeit from 1960 to 2010. Does anyone understand the word "unsustainable"?
Posted by: WD Kebschull | Feb 11, 2010 5:28:37 PM
The think that the tax code got out of balance around 1913.
Posted by: Woody | Feb 11, 2010 6:47:30 PM
Sheer propaganda from the White House, for the reasons given by AMTbuff above.
Posted by: Jake | Feb 11, 2010 8:58:01 PM
Yes, looking at these two graphs, I can understand why the John Galts of the world are so terribly oppressed and set upon. Good God, they still pay a smidgen more than their personal shoppers!
That ain't fair.
Posted by: Liberty60 | Feb 11, 2010 11:07:55 PM
The Bush tax cuts should largely be allowed to expire. If you have a tax level that runs big deficits in boom times its too low.
Posted by: jimharper | Feb 12, 2010 1:38:12 AM
We will see a war tax imposed after the midterms.
Posted by: gmathol | Feb 12, 2010 3:39:23 AM