To hear the media report it, President Obama is proposing a tax increase on wealthy Americans. That’s misleading at best. He’s proposing that everyone ― including the rich ― receive a continuation of the Bush tax cuts on the first $250,000 of their incomes. (If they’re filing singly, the first $200,000.) Any dollars they earn in excess of $250,000 will be taxed at the old Clinton-era rates.
Get it? Everyone is treated exactly the same. Everyone gets a one-year extension of the Bush tax cut on the first $250,000 of income. No “class warfare.”
Yet some people apparently are determined to mislead the American public about this. The editorial writers of the Wall Street Journal, for example, write that the president wants to extend the Bush tax cuts only “for some taxpayers.” They urge House Republicans to extend the Bush tax cuts for “everyone” and thereby put Senate Democrats on the spot by “forcing them to choose between extending rates for everyone and accepting Mr. Obama’s tax increase.”
The Wall Street Journal should know better. The Journal is widely read, and its editorial pages carry significant weight, especially in the business community and on Wall Street.
The Journal’s editorial writers also want Americans to think the president’s proposal would hurt “tens of thousands of job-creating businesses.”
More baloney. A small-business owner earning $251,000 would pay the Bush rate on the first $250,000 and the old Clinton rate on just $1,000.
Congress’s Joint Tax Committee estimates that in 2013 about 940,000 taxpayers would have enough business income to break through the $250,000 ceiling ― and, again, they’d pay additional taxes only on dollars earned above $250,000.
All told, fewer than 3 percent of small business owners would even reach the $250,000 threshold.
A third misleading statement is that Obama’s proposal will “increase uncertainly and further retard investment and job creation,” as the Journal puts it.
Don’t believe it. The real reason businesses aren’t creating more jobs is American consumers ― whose purchases constitute 70 percent of U.S. economic activity ― don’t have the money to buy more, and they can no longer borrow as before. And the reason they don’t have the money is median wages keep dropping, largely because businesses keep whacking payrolls. Yet businesses won’t invest and hire more workers without enough sales to justify the added costs.
The only people who’d have to pay substantially more taxes under Obama’s proposal are those earning far in excess of $250,000. They aren’t small businesses. Nor are they in the vast middle class, whose purchases account for most consumer spending. They’re the fattest of corpulent felines. And their spending will not be affected if their official tax rate rises from the Bush 35 percent to the Bill Clinton 39.6 percent.
In fact, most of these wealthy people’s income is unearned ― capital gains and dividends that are now taxed at only 15 percent. If the Bush tax cuts expire on schedule, the capital gains rate would return to the same 20 percent it was under Bill Clinton.
But what’s so bad about the Clinton tax rates anyway? I don’t remember the economy suffering under Bill Clinton. I was in Clinton’s Cabinet, so perhaps my memory is self-serving. But as I recall, the economy generated 22 million net new jobs during those years. Unemployment fell dramatically, and almost everyone’s income grew. Poverty dropped as the economy soared.
In fact, the Clinton years generated the strongest and best economy we’ve had in anyone’s memory.
In sum: Don’t fall for these untruths ― that Obama wants to extend the Bush tax cut only for some people, that small businesses will be badly hit, that businesses won’t hire because of uncertainty this proposal would create, or that the Clinton-era tax levels crippled the economy.
It’s not just the lofty editorial pages of the Wall Street Journal that are putting out these whoppers. A ton of corporate and billionaire money is financing political advertisements that are repeating them across the country.
The truth is already a casualty of this election year. That’s why it’s so important for you to know it and to spread it.
By Robert B. Reich
Robert B. Reich, chancellor’s professor of public policy at the University of California and former U.S. secretary of labor, is the author of the newly released “Beyond Outrage: What has gone wrong with our economy and our democracy, and how to fix it,” a Knopf e-book original. ― Ed.
(Tribune Media Services)