AMERICA REJECTS TAX CUTS FOR THE RICH


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Charges that Progressive Taxes Are "Socialism" Fail to Rally Support for Candidate McCain

Senator Barack Obama, who ran for president partly on a platform of ending George W. Bush's policies of cutting taxes for the wealthiest Americans, will be our new president starting January 20, 2009. He will have the support of a House of Representatives and Senate led by opponents of the Bush tax cuts.

His opponent, Senator John McCain, tried several times to frame the tax debate in a way that would lead average Americans to support tax cuts for the very wealthiest taxpayers. None of these attempts succeeded. At one point, the McCain campaign tried to get the public to pay more attention to Obama's vote for a non-binding budget resolution than Obama's actual tax plan. Later, a McCain surrogate argued that allowing the expiration of tax cuts for the richest 1.4 million taxpayers would be a tax increase on 23 million business owners. Near the end, McCain made an argument implying that the EITC, and really any progressive income tax, was socialism. Americans were not impressed with these arguments.

The 2008 election has important lessons for lawmakers regarding taxes. Arguments that taxes must be lowered for even the richest Americans simply do not work. Americans don't buy it. Nor do Americans buy it when proponents of tax cuts attempt to blur the details about who would benefit the most. There has always been polling that shows Americans do not support any and all tax cuts, but it took an election to make this real for many lawmakers.

The Path Ahead

Some people may speculate about whether the new President will muster the support needed to enact the proposals dear to them. We also feel this uncertainty, but it is mitigated by the crucial fact that the Bush tax cuts expire at the end of 2010. To put it a different way, if Congress simply does nothing, we will return to the tax policies in effect during the Clinton years, when the economy performed better than it does now, and when Americans were generally more positive about the direction of the country. That would be fine with us.

We know that Congress is not likely to do nothing. Congress, with President Obama's leadership, may enact tax cuts, including extending the Bush tax cuts for those who are not rich. (Since such a gigantic share of the Bush tax cuts currently goes to the rich, Obama's proposal will lose much less revenue than would candidate McCain's proposal to extend them for even the richest families.) And Congress is likely to act on at least some of President Obama's proposals to enact brand new tax cuts for low- and middle-income Americans.

But those lawmakers who insist on extending the Bush tax cuts for the even the richest Americans have no cards left to play. Their cherished handouts for the rich expire in a couple years and the new president is not likely to sign any bill that extends this party for the most privileged.

Of course, a great many details must be worked out. Obama wants to repeal the Bush tax cuts before they expire for the very richest families, and some lawmakers will dig in their heels to oppose this. Another question is the extent to which new tax cuts will be paid for. While most analysts agree that balancing the budget is not a priority during a severe economic downturn, we certainly hope that Congress will not enact huge, permanent tax cuts without replacing most of the revenue -- revenue needed to fund health care initiatives and other investments that have been short-changed during the Bush administration. There are ways that Congress can raise revenue that go beyond what is included in Obama's tax plan, and we will be making these suggestions to the new administration. And of course there are some tax cuts that Obama supports that would benefit the wealthy -- like a partial extension of the Bush tax cuts for dividends and estates -- and we're going to have an interesting conversation about that.

But the most salient fact is that the surreal era of leaders telling us that taxes must be cut most dramatically for the wealthy is over. This is a sea change. We may have trouble explaining to future generations how such a bizarre ideology ever took hold. But we will have no trouble explaining that on Tuesday Americans looked at the long list of problems facing this country and decided that cutting taxes for the rich should not be considered a priority.

For eight years we have had a White House fixated on tax cuts for the rich, at the expense of all other priorities. Now, the millions of Americans who lack health insurance or who are underinsured, the newly unemployed, the families losing their homes, and Americans serving their nation in the armed forces all know that their struggles are finally back at the top of the agenda in Washington.

Thank you for visiting Tax Justice Blog. CTJ and ITEP staff will soon retire this domain. But ITEP staff are still blogging! You can find the same level of insight and analysis and select Tax Justice Blog archives at our new blog, http://www.justtaxesblog.org/

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