The Democrats have postponed a vote on the expiring tax rates until after the election. The reason is simply because they can’t agree on extending all of the current rates that are about to increase, and they aren’t crazy enough to raise taxes right before an election. But the tax increases are likely coming, no matter how they try to spin this for the election.
What the Democrats are trying to do is use the previously higher tax rates as a baseline, and they want to do this for two main reasons. One is so that they can claim that keeping the current rates would cost the government tax revenue and would supposedly increase the deficit (nevermind that Bush’s tax cuts increased tax revenue or that spending could be cut to decrease the deficit). The second is so that they can claim that keeping the current income tax rates for the middle class would be a tax cut. This is, of course, completely dishonest since there is no tax cut on the table, only a tax increase.
The deficit argument is particularly misleading. This Congress has had no problem adding debt, but right before a midterm in which the Democrats figure to lose big, they are making claims about decreasing the deficit. Interesting timing, isn’t it? Notice that they don’t say anything about spending levels, which are the main reason for deficits. One could increase taxes, and perhaps tax revenues, but the deficit only shrinks if the government takes in more than what it spends. Who believes that the spend-crazy Democrats in this Congress are going to use any extra tax revenue to pay off debt instead of simply spending more?
No, the Democrats’ argument isn’t really about decreasing the deficit, no matter what they say. What it is really about is fairness, as Barack Obama told us in a presidential primary debate:
GIBSON: All right. You have, however, said you would favor an increase in the capital gains tax. As a matter of fact, you said on CNBC, and I quote, “I certainly would not go above what existed under Bill Clinton,” which was 28 percent. It’s now 15 percent. That’s almost a doubling, if you went to 28 percent.
But actually, Bill Clinton, in 1997, signed legislation that dropped the capital gains tax to 20 percent.
OBAMA: Right.
GIBSON: And George Bush has taken it down to 15 percent.
OBAMA: Right.
GIBSON: And in each instance, when the rate dropped, revenues from the tax increased; the government took in more money. And in the 1980s, when the tax was increased to 28 percent, the revenues went down.
So why raise it at all, especially given the fact that 100 million people in this country own stock and would be affected?
OBAMA: Well, Charlie, what I’ve said is that I would look at raising the capital gains tax for purposes of fairness.
We saw an article today which showed that the top 50 hedge fund managers made $29 billion last year — $29 billion for 50 individuals. And part of what has happened is that those who are able to work the stock market and amass huge fortunes on capital gains are paying a lower tax rate than their secretaries. That’s not fair.
And what I want is not oppressive taxation. I want businesses to thrive, and I want people to be rewarded for their success. But what I also want to make sure is that our tax system is fair and that we are able to finance health care for Americans who currently don’t have it and that we’re able to invest in our infrastructure and invest in our schools.
And you can’t do that for free.
Why won’t President Obama and the Democrats repeat this to explain why they haven’t extended the Bush tax rates? The answer is obvious, and it’s sad that they won’t be honest with us.
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