What better way for President Obama to welcome me back from the beach than with a wrong-headed plan to jack up income taxes on “the rich.” From the Hill:
The White House said Monday that President Obama wants to pay for his $447 billion jobs bill by raising taxes on the wealthy and businesses.
In fact, we don’t really need to go beyond that first sentence: Obama’s bright idea is to pay for a jobs bill by raising taxes on businesses. The economy be damned, this president is determined to take money from job creators and use it to renovate school buildings. That would be bad enough — but, as Megan McArdle explains, it’s already too late for school-renovation projects to navigate the federal procurement process in time for work to begin next summer. Which means we’re back to spending money on jobs that aren’t ready for shovels.
Still, let’s soldier on to the details as provided by Jack Lew, director of the Office of Management and Budget:
The chief provision…would be to limit itemized deductions for individuals who make more than $200,000 a year and families that make more than $250,000, something the Obama administration has previously pushed to do through its budget proposals. Lew told reporters at the White House press briefing that this would raise about $400 billion.
The administration would tax the income investment fund managers make, known as “carried interest,” as regular income instead of as capital gains, which has a low 15 percent tax rate. This is another longstanding administration goal that has been resisted by Wall Street as well as some Democrats.
The administration estimates the capital gains change would provide $18 billion in revenue.
The administration also wants to eliminate tax breaks for the oil-and-gas sector, which would raise $40 billion, the administration said.
Another $3 billion would come from changing the way corporate jets depreciate. With a few other revenue increases, Lew indicated the total measures proposed by the administration would bring in $467 billion, $20 billion more than the cost of the bill.
Note, above, that line about the first item being “something the Obama administration has previously pushed to do through its budget proposals.” One wonders whether Obama has produced a “jobs bill” so much as a “tax increase justification bill.”
As it happens, I agree in principle with reducing or eliminating deductions and credits from the tax code — but as a trade-off for lowering marginal tax rates. Instead, Obama plans to raise tax rates on these same taxpayers (while apparently double-counting the increased revenues as part of his deficit-reduction package). He is effectively trying to make the tax code more complicated, not simpler. And experience teaches us that the wealthy are best positioned to take advantage of a complicated tax code and send Uncle Sam less money than he expected. This is a lose-lose-lose.
And yet this is not the only major flaw with Obama’s proposal. The congressional “super committee” tasked with drafting a deficit-reduction plan this fall is expected to consider flattening the tax code — that is, removing loopholes and lowering rates — for all taxpayers as part of its package. But if Obama removes loopholes for high earners to pay for his jobs plan, does anyone really think the super committee is then, separately, going to remove loopholes for the middle class?
And without that component, everything else on Obama’s list of “pay-fors” amounts to peanuts relative to the cost of the jobs bill.
This plan will win plaudits from the likes of MoveOn.org — and given the president’s deep political problems heading into 2012, maybe that’s all it’s designed to do. But it’s a double-whammy for the millions of Americans who are out of work and tired of hoping for change.
– By Kyle Wingfield