Obama's budget: What it means for your tax bill
When it comes to taxes, President Obama has proposed what might best be called a conceptual 鈥攁 powerful call for tax reform that is long on principles but, at least when it comes to individual levies, woefully short on specifics.
This is understandable with what is effectively a reelection manifesto. In high campaign season, specifics get a candidate in nothing but trouble. Still, this framework is at once disappointing and illuminating.
It sets up a powerful聽contrast with whomever the GOP nominates to replace Obama: Should tax reform be used to raise revenues, an explicit goal of this budget, or should it be a vehicle to cut taxes and increase the deficit鈥攖he specific aim of every remaining聽GOP presidential contender?
Yet, Obama鈥檚 fiscal plan is disappointing because it is so vague. There is simply no chance Congress will make the tough votes necessary to enact any serious tax reform without a president who is聽prepared to take the heat for specific, deeply controversial cuts in popular middle-class tax preferences.
But聽Obama鈥檚 budget contains little more than gauzy promises for a 鈥渟impler, fairer and more progressive鈥� tax system or, elsewhere, a 鈥渟impler, fairer and more efficient鈥� system. Know anybody against those principles?
There are plenty of proposals to end corporate tax breaks, but when it comes to individual taxes, the Obama budget is the Oakland of tax policy. To borrow from Gertrude Stein, there is no there there.
Yes, he鈥檚 proposed taxing dividends at ordinary income rates and found聽a new way to tax investment firm partners so they could no longer treat their compensation as capital gains. Talking to you, Mitt Romney. 聽But otherwise, the White House has done little more than rehash some Golden Goodies鈥攁llowing the 2001/2003/2010 tax cuts to expire for those making more than $200,000, and capping the economic value of itemized deductions at 28 percent.
This adds up to little more than raising taxes on 鈥渢he fella behind the tree鈥� and ignores those deductions, exclusions, and credits that benefit middle-income households, pervert the tax code, and keep聽tax rates high.
Even the much-ballyhooed 鈥淏uffett tax鈥� is an empty vessel. After making a major fuss in his State of the Union address about requiring those making a million dollars a year to pay their 鈥渇air share鈥� in income taxes, President Obama has proposed鈥othing.
As a result, the only plan on the table is one by Senator Sheldon Whitehouse (D-RI). With all respect to the senator, a plan by Whitehouse is not the same as a bill from the White House.
Obama鈥檚 unwillingness to get down and dirty with legislative specifics seems ingrained in his DNA. He did the same thing with the health reform law, which Congress turned into a mess. And he did it with financial reregulation which, despite whining from Wall Street and the banks, has done little to prevent a rerun of the financial abuses of the past decade.
Still, pay attention to Obama鈥檚 principles for tax reform. They set the stage for what could become an epic battle, if Obama gets reelected and is serious about pursuing tax reform (I wouldn鈥檛 bet on either at the moment).
Obama laid out聽five principles. Three鈥搇owering rates, increasing job creation and growth, and cutting 鈥渋nefficient and unfair tax breaks鈥� 鈥揳re the mom and apple pie of tax reform. 聽It鈥檚 just that nobody聽can agree on what inefficient and unfair means.
But numbers 3 and 5 will generate a political donnybrook. Number 5 is the Buffett rule. Number 3 is to use tax reform to cut the deficit by $1.5 trillion over the next 10 years.
The last one will do the most to separate Obama from聽his GOP challenger. Rather than shying from the charge that he鈥檚 a tax-hiking Democrat, 聽Obama explicitly vows to use reform to raise revenues鈥攂ut says he鈥檇 get the money almost entirely from rich people. This promise alone will make for an interesting campaign.
