Senator Pat Toomey (R-PA), a member of the 12 lawmakers on the “super-committee,” charged with finding a long-term debt solution, has come up with a plan to raise from $300 to $350 billion in revenue over ten years. Democrats have rejected the deal outright.
The Center for Budget and Policy Priorities (CBPP) has found that the plan would cut the top-tier tax rate enormously and preserve preferences for capital gains and dividend income, while penalizing lower- and moderate-income taxpayers by eliminating their preferences.
The CBPP has found that taxpayers earning more than $200,000 a year would receive tax cuts under the Toomey plan which are far more generous than they would get if Congress merely renewed the Bush tax cuts once again.
The Toomey plan would further reduce the estate tax for the top one-quarter of one percent with an extra gift of more than a million dollars.
Democrats on the super-committee have said that there must first be a commitment to raising significant more revenue before they will even consider cuts to Social Security, Medicare and Medicaid. This is a scary position, as Senator Bernie Sanders and others have pointed out that Social Security doesn’t contribute a dime to the current deficit. Sanders has argued that by the single action of raising the FICA cap to $250,000, Social Security could pay full benefits for 75 years.
Another scary proposal surfacing again is that there be a two-step process by which spending cuts be done now and any increases in taxes be deferred to a later date. This proposal is very similar to the one that was made during the debt ceiling wrangle. The worry is that Democrats on the 12-member committee agree to it and get suckered out in the end.
Speaking of scary, we should all be very concerned with President Obama’s role in this matter. He again is saying that the wealthy should pay “a little bit more” before any cuts are considered in the signature social programs. The wealthy should pay “a whole lot more,” because the top one percent control about a third of the nation’s wealth; the top five percent control over 60 percent; and the top 20 percent control over 80 percent The bottom 80 percent control seven percent of the wealth, according to the Congressional Budget Office.
President Obama is doing a great public disservice by setting the bar for the top marginal tax rate so low, thus locking in a top rate of no more than 39 percent for many years to come. I proposed a tax rate schedule in an earlier blog that goes from 16 to 60 percent. The schedule is not solely designed to “soak the rich,” as it would raise taxes pretty much across the board. Instead of trying to find excuses for the 47 percent of American households that don’t currently pay federal income taxes, we should try to lower that percentage, on the grounds that “we’re all in this together.”
Robert Reich wants to go to a top marginal tax rate of 70 percent. Politically, that may be a bridge too far; however, it could be used as a starting point and then settle at 60 percent.
Given the very strong resistance of Republican lawmakers to any tax increases and the vow of senators McCain and Graham to scuttle the budget deal if there are any cuts in military spending, it might be for the good to have the 12-member committee fail. Perhaps we can get back to the old-fashioned way of having committee hearings to hammer out the pros and cons of major legislative proposals and allow for public input also.