Transcript #144

Obama's Tax Plan: The Good, The Bad And The Right-Wing (Including Hannity's Biggest Lie Ever)

 

Partially hyperlinked to sources.  For all sources, see the data resources page.

 

 

Your sources today include: the New York Times, mediamatters.org, Fairness and Accuracy in Reporting, taxpolicycenter.org, newsmax.com, cnn.com, and the Gallup polling organization.

 

President Obama recently presented some fairly detailed proposals to make changes in the tax code.  This is sure to be a major subject of controversy in the months ahead.

 

Here's a road map for you of today's show:

 

First, I'll give you some historical background about where we stand economic justice-wise.

 

Next, the details of Obama's plan.  Knowing exactly what's in there is crucial, because it's already being distorted big-time by the right.

 

Following that, my evaluation of Obama's proposal.

 

Then onto debunking what you've come to expect, a campaign of lies from the right.

 

Finally, saving perhaps the best for last, you'll hear about a proposed financial transactions tax.  It would raise hundreds of billions of dollars almost effortlessly, with actually beneficial effect.

 

Now, you'll be seeing that parts of this podcast unavoidably involve lots of numbers and percentages.  Just let the information wash over you and get the general gestalt.  If you later want to memorize a couple of numbers to use in your water cooler debates, you can go back and check the transcript of the show. I'll post it for you as usual from a link off the main podcast home page.

 

The background:  FDR to Ronald Reagan to George Bush.

 

Since World War II you can say that there have been two major economic periods.

 

One saw economic inequality rapidly decline.  Economic justice.  A good thing. That would be the 1940's through the 1970's.  You can call this the FDR progressive economics period.

 

The highest marginal income tax rate ranged from 70% to 94%.

 

The other time period saw dramatically increased economic inequality.  Economic injustice.   A bad thing. This would be from the election of Ronald Reagan until the present day.  Call it the Reagan right-wing economics period.

 

Here, the highest marginal income tax rates were drastically cut, ranging from 50% all the way down to 28%.

 

For the last several years under George W. Bush, the number has been 35%.

 

So what do we have?

 

Remember, the prime directive of all right-wing action, is to transfer wealth from everyone else, to the already rich.

 

And boy have they succeeded in the last 30 some-odd years.

 

Present day taxes on the wealthy are at just about at their lowest point since World War II.

 

And economic inequality is at its worst since the Great Depression.

 

Get a load of this.

 

From 1981 to 2006, the richest 1% of Americans more than doubled their share of the national income, from about 8½ to 22 percent.

 

Yet their share of the tax burden fell relative to everyone else.  

 

Don't let a right-winger tell you, oh, but the economic pie grew larger, so everyone has benefited.

 

Not so.

 

Just in the last 7 years, the median household income has dropped $2000.

 

And not just the middle class has suffered.

 

Poverty went up during the Bush administration, both in absolute numbers, and as a percentage of the population.

 

Shamefully, we in the United States now suffer from the greatest economic inequality of any developed nation on the face of the earth.

 

With this background, the practical and moral imperative is clear.  All Obama's plan does is shift more of the tax burden of running our country back to where it was, and belongs -- on the wealthy.

 

Details in a moment.  Stay tuned.

 

 

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Here's what Obama has proposed, in fact, most of which he's been proposing since he began his presidential campaign:

 

Obama will let George Bush's tax cuts expire for individuals making over $200,000 a year, couples making over $250,000 a year.

 

This is the top 2, 3% of the population.

 

Obama will extend Bush's tax cuts for everyone else.  Everyone else will keep their Bush tax cuts.  And then some.

 

So from the git-go, if a right-winger starts ranting and raving to you about "Obama's going to roll back Bush's tax cuts," you have to provide them a critical bit of information: only for those making over $200 or $250,000 a year.  A tiny sliver at the top.

 

How much will this elite 3% suffer?  Not very much.

 

The top rate will increase from 35 to 39.6%.   Big deal.  Remember, in the pre-Reagan era, the top rate was anywhere from 70 to 94%.

 

Next:

 

On capital gains -- profits from the sale of stocks and other investments -- the top rate will increase from 15 to 20 percent, but only for those in the top two income tax brackets.  Middle class people would still pay 15 percent.

 

Here's one I love:

 

Those who make their money at hedge funds or private equity firms now pay only a 15 percent capital gains tax on the mega millions they take home.  Under the Obama plan, these earnings would be taxed as ordinary income.  Most of these people will now be paying the new top rate, 39.6%.

 

Another part of Obama's plan:

 

Those at the top of the income scale would have the value of their itemized income tax deductions reduced, to the level as if they were in a middle income tax bracket.  I won't get into the numbers here, but you can be sure the right will be screaming about this.  Here's one lie already, from Georgia Republican Representative Tom Price:

 

audio: Rep. Tom Price

[T]he budget that he has put on the table will change the very character of the nation because it will remove the ability to make charitable contributions deductible. That means that churches across this nation and synagogues across this nation and community groups all across this nation will not be receiving the same kind of support from their citizens in their communities. That's not the kind of change that the American people desire.

Despite Pryce's hyperventilating, it doesn't "remove the ability to make charitable contributions deductible."  It somewhat reduces the tax benefit of doing so.

 

Keep in mind: this is merely restoring a tax provision previously in effect, and then repealed by George W.  And can you guess which radical socialist America-hating loon, had first put it in place? George W.'s father, the first President Bush.

 

Another feature of Obama's tax plan certain to raise right-wing hackles is this:

 

It will make permanent the "Making Work Pay" tax cut.  It currently provides a refundable tax credit to working individuals of up to $400, and married couples up to $800.  Obama wants to raise it to $500 and $1000.   

 

Even if a working person or couple have no federal income tax liability, they get the credit by a reduction in their Social Security and Medicare taxes.

 

Obama proposes to pay for this aspect of his plan, with revenues from his pollution permit system.

 

Ok, let me tell you what this all adds up to.

 

The median American household would have its take home pay increased by about $800 a year.  The richest 1% would pay on average an additional $100,000 a year.

 

You may be wondering, what kind of total amounts of money are we talking about here.

 

A lot.

 

The wealthy would pay about $100 billion dollars a year more in taxes, everyone else $50 billion less.

 

Over the ten year span of Obama's plan, this would mean $1 trillion more from those making more than a quarter million dollars a year.

 

So here's a trillion dollar figure we can be happy about.

 

 

Now let me give you my evaluation of Obama's tax plan.

 

I'm not happy that these changes don't take effect until 2011.

 

This is basically a political hedge by Obama.  Conventional wisdom is, that you don't raise taxes in a recession.

 

So the Obama team figures that the recession will be over by 2011, and the right won't be able to make that accusation.

 

But I worry that by not being effective until 2011, these good changes could be more easily reversed after the 2010 or 2012 elections, should the Republicans regain some power.

 

At least if the changes took effect now, they will have done some good, reversed some economic injustice in the meantime.

 

And they'd be harder to reverse if they'd been in effect a while, and the sky hadn't fallen in.

 

I'm also not that happy with, or at least not overly impressed by, the amount of the increase of taxes on the wealthy.

 

But still, Obama's plan does at least reverse Bush's tax cuts for the wealthy.  It actually goes a bit beyond that.  Taxes on the wealthy will be higher than under Clinton. Taxes on everyone else will be lower than under Clinton or Bush.

 

And as the New York Times' David Sanger put it in a news analysis piece:

 

If Johnson’s rallying cry [he's referring to Lyndon Johnson] was an end to poverty in the world’s richest nation, Mr. Obama’s is an end to the Reagan Revolution. With the proposed tax increases on couples making more than $250,000, Mr. Obama has declared that trickle-down economics — the theory that the entire country benefits as the nation’s richest amass and spend — was a fantasy. He denounced it in moral terms, declaring in his budget that “there is something wrong when we allow the playing field to be tilted so far in the favor of so few.”

So Obama's plan is a terrific, explicit reversal of direction.

 

And it's also heartening, if not almost unbelievable, to now hear US government officials citing the same economic justice stats I and other progressives have been screaming about for years.

 

For example, Obama's budget

 

noted that from 2000 to 2007, the heart of the Bush presidency, “median income among households headed by those under 65” fell by about $2,000.

Another singing from the same page moment.  Peter Orszag -- I don't know how you pronounce that -- is Obama's director of the Office of Management and Budget.  He said in a briefing to reporters:

 

Over the past two or three decades, the top 1 percent of Americans have experienced a dramatic increase from 10 percent to more than 20 percent in the share of national income that’s accruing to them. So we are asking them to pitch in a bit more.”

Actually, he kind of softened that stat.  As I told you earlier today, the numbers aren't 10 to 20, but 8½ to 22, closer to triple.  But who am I to quibble?  He's still singing essentially the same tune.

 

Also in our chorus now, a most unexpected guy, given his reputation.  None other than Larry Summers, Obama's head economic advisor.

 

Before becoming Mr. Obama’s top economic adviser, Lawrence H. Summers liked to tell a hypothetical story to distill the trend. The increase in inequality, Mr. Summers would say, meant that each family in the bottom 80 percent of the income distribution was effectively sending a $10,000 check, every year, to the top 1 percent of earners.

Wow.  Larry of "don't regulate derivatives" pedigree. Didn't know you had it in you, Lar.

 

All that being said, I actually think $357,000 a year and 39.6% shouldn’t be the highest bracket in the tax code.  That's not the super rich.  How about an additional 1% tax on every additional million or ten million dollars or something like that.  Anyone know of a website that easily lets you calculate revenue from such modifications, please get in touch with me.

 

So overall, you get the picture?

 

The top 1% went from 8% to grabbing 22% of the national income pie.  We simply need to take some of that back to keep the country running.

 

Up next: how the right is responding to Obama's tax plans.  Hint: there's a four letter word involved that begins with "l", ends with "s", and has an "ie" in the middle.

 

Stick around.

 

 

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Ok, how is the right responding to Obama's plan?

 

You heard earlier that Georgia Republican lying about tax deductions being eliminated.

 

A more frequently heard lie is about how small businesses will be horrifically impacted.

 

This misrepresentation has a history.  Back in the '08 campaign,

John McCain falsely said:

 

audio: John McCain

Senator Obama's tax increases will hurt the economy even more, and destroy jobs across the country. If you are one of the 23 million small business owners in America who files as an individual rate payer, Senator Obama is going to raise your tax rates.

And present-day GOP'ers are continuing to echo the same.

 

Some just imply that it's all small businesses that'll be affected.

 

Here's Senator Judd Gregg, Republican of New Hampshire (who if you'll recall, amazingly enough was at one time Obama's choice for Commerce Secretary.  Go figure):

 

audio: Sen. Judd Gregg

So, if you've got a restaurant or you have a small business, then you're getting hit now with a tax rate that's gonna jump from 35 percent up to 41 percent. Well, where do you pay for that? You lay people off.

How about Representative Paul Ryan, Republican of Wisconsin, cited by CNN's Dana Bash:

 

audio: Dana Bash/Rep. Paul Ryan

BASH: Republicans standing on the other side of a deep philosophical divide argue it will cripple small business owners.

REP. RYAN: The notion that you raise taxes on the people who are most likely to create jobs in a recession -- it just boggles our mind that they would actually try and pursue this sort of an economic agenda at this very time.

Some right-wingers like to explicitly lie. You can always count on Sean Hannity to do just that, as when he spoke to former Republican governor Mitt Romney:

 

audio: Sean Hannity

What do you make of this aspect though of it, Governor, and that is that when he talks about this top 2 percent that he's gonna tax, well, that's 80 percent of small business owners in America. Eighty percent -- the top 2 percent -- that's 80 percent of businesspeople. How is that going to impact them, and how does that impact jobs? 

The fact is, that according to the Tax Policy Center, only 2 percent of small business owners earn enough to be affected by the Obama tax change.  Not Hannity's 80 percent.

 

To repeat, as the New York Times said:

 

Most sole proprietors and other small-business owners do not make anywhere near a quarter-of-a-million dollars a year.

Now you can easily debunk this right-wing lie about small businesses.  Unfortunately, much of the mass media simply repeat the lie without debunking it.

 

The major right-wing propaganda ploy is screaming "class warfare" and the like.

 

Here are excerpts from former Republican governor of Maryland Robert Ehrlich being questioned by Chris Matthews:

 

audio: Chris Matthews/former Gov. Robert Ehrlich

MATTHEWS: Governor Ehrlich, your assessment of this fiscal decision to go to higher taxes for the wealthy -- well off, I should say -- and use it to put together a trust fund to begin to accumulate enough money to fund a real national health care system. 

…

EHRLICH: This is all about class warfare. It's all about punishing success. It's anti-small business.

And the mainstream media pick this up and uncritically repeat it:

 

Conservative MSNBC political analyst Michelle Bernard said Obama's speech to Congress "was almost declaring class warfare."

 

CNBC's Carlos Quintanilla said, "I don't want to call it class warfare, although that's what it may end up being in the end, this debate over wealth redistribution."

 

How do you like AP's Jennifer Loven, who asked White House press secretary Robert Gibbs, "Are you all worried at all that that kind of argument, that 'class warfare' argument could sink the ability to get some of these big priorities through?"

 

Politico reporter Jeanne Cummings wrote an article with the headline "Class warfare returns to DC."

 

MSNBC ran a segment which asked: "Is there a war against the wealthy? Do we have a class war developing?"

 

The cohort phrase of class warfare is "redistribution" of income and wealth.

 

Even the New York Times nonchalantly recently ran a hard news article that says "President Obama has just announced a budget that…makes an effort to redistribute income."   Another Times story described Obama's plan as a "pronounced move to redistribute wealth."

 

The problem with all this is, virtually every tax or spending policy will in some way redistribute wealth.  Sometimes it will be upward, sometimes, downward.  But the media only uses the terms class warfare and redistribute wealth, when discussing a downward transfer.

 

The progressive media watchdog group FAIR --  Fairness and Accuracy in Reporting -- couldn't find  any example of similar language being used by the New York Times when discussing Bush's tax proposals, which -- as we discussed earlier -- redistributed income and wealth upward, to the already rich.

 

As a resident blogger at FAIR put it:

 

[T]he media pretend this is a one-sided war -- as though the wealthy are being unfairly assaulted by an army of bullying waitresses and janitors and farmers and teachers.  

You want to talk about class warfare, how about the richest 1% increasing their share of the national income pie from 8 to 22%.  As billionaire investor Warren Buffet lamented -- he's a progressive economically --

 

If class warfare is being waged in America, my class is clearly winning.

Happy to say, the class warfare, redistribution of wealth scare tactics probably won't work any more.

 

A Gallup poll found 68% of Americans agreeing with the proposition, that wealth in this country is unfairly distributed. 

 

51% wanted the rich taxed heavily to redistribute wealth.  That's the highest number since the question was first asked in the Great Depression.

 

As I mentioned earlier, Obama's tax increases are quite modest, not even heavy at all.

 

And of course, Obama campaigned on this tax platform, and was maligned during the campaign repeatedly for embracing class warfare and redistribution.   He was elected anyway in a landslide.

 

Even those making more than $200,000 a year voted for Obama over McCain, 52 to 46 percent.

 

So it's hard to see who this class warfare, redistribution attack is going to resonate with, other than a very small minority of hard core right-wingers.

 

Perhaps your friendly local right-winger is one of them.

 

PS:  You should know that another attack line is "Socialism!"  I dealt with that one in detail in podcast 135.

 

In a moment, your financial transaction tax offensive weapon, and some closing comments.  Keep it right here.

 

 

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Ok, the best defense is a good offense.  Last show I told you about FDR's proposed Second Bill of Rights, economic rights, which went far beyond the New Deal.  This way you could tell right-wingers criticizing the New Deal, that it actually didn't go far enough, that you favor implementing FDR's Second Bill of Rights.

 

Along those same lines, to any right-wingers criticizing Obama's tax plans, go on the offensive, and say Obama doesn't go far enough.  Tell them you advocate a financial transactions tax.

 

Such a concept has been discussed many places.  Much of what follows is from a piece Ralph Nader wrote.

 

This would be a minscule one-tenth to one quarter of a percent tax on financial market transactions.  It could be stock trades, currency trades, derivatives trades, or some combination of them.

 

Those investing for the medium and long-term wouldn't even notice it.  But short-term speculators would, having to pay the tax over and over again, each time they want to buy and quickly sell, buy and quickly sell.

 

Back in 1936 John Maynard Keynes himself said such a tax would be useful in "mitigating the predominance of speculation over enterprise."

 

Economics Professor Robert Pollin of the University of Massachusetts recently wrote that

 

A small tax on all financial-market transactions, comparable to a sales tax, would raise the costs on short-term speculative trading while having negligible effect on people who trade infrequently. It would thus discourage speculation and channel funds toward productive investment.

The amounts that could thus be painlessly and even beneficially raised are humungous.

 

Estimates range from $100 to $500 billion dollars a year!

 

Yes, $100 to $500 billion dollars a year.

 

I ask you, Would not it only be fair, as Nader put it,

 

to make the Wall Street crooks and gamblers pay for their own Washington bailout.

Lest you be worried that this can be denounced as some crazy idea, no it cannot be.

 

Such a tax was actually used to help fund the Civil War and, unfortunately, the terrible Spanish-American War. 

 

The US implemented such a tax again from 1914-1966.

 

And after the stock market crash in 1987, according to Professor Pollin, financial transactions taxes "or similar measures" were supported by Bob Dole, and -- here he is again -- President George H.W. Bush.

 

Presently about 40 countries have some kind of tax on securities trading, including those communist nations of Japan and Great Britain.

 

There's a worldwide effort among activist groups to pass such laws in more nations.

 

Unfortunately, there's not much support in Congress yet for this idea.

 

So we progressives need to advocate it.

 

 

So there you have it.

 

To review:

 

Obama is trying to draw the curtain on the Ronald Reagan era of right-wing economics, and return to policies more akin to those of the FDR progressive economics era.

 

The need to do so is clear, because taxes on the wealthy are near an all-time low, and economic inequality is at a long-time high.

 

There's so much wealth concentrated at the top, that there's just not enough left for the rest of the country to get by.

 

Obama's proposal is modest, considering the problem.  All it does it return to Bill Clinton-era taxes, maybe a little more progressive than that.

 

Most Americans will see their taxes cut.  Only the top 2-3% or so will pay more.

 

And not that much more.  Did the rich really suffer so terribly during the Clinton years?

 

Right-wing cries about eliminating tax deductions, crippling small businesses, and class warfare and income/wealth redistribution, are as hollow as all other right-wing propaganda claims.

 

And an ace in the progressive sleeve would be a financial transactions tax.  It, combined with Obama's tax proposal, could raise $4-6 trillion over the next ten years.

 

Considering the magnitude of our problems, this would be totally appropriate.  Just to fix our infrastructure alone would take $2.2 trillion dollars, according to the American Society of Civil Engineers.

 

Bottom line: Obama's tax proposal to raise taxes on the wealthy is not to give out welfare checks.  It's to finance health care, education energy initiatives.

 

If our country is broken in so many ways, to quote New York Times columnist Nicholas Kristof, "is it really so awful that we increase taxes for the wealthiest Americans to make repairs?"

 

One final thing for you:

 

As the right-winger you're conversing with hems and haws, and makes up excuse after excuse, and changes the topic and calls you names and pulls every right-wing trick out of the bag to avoid your facts and logic, just tell them you understand their bottom line, as memorably stated by the late John Kenneth Galbraith:

 

The modern conservative is engaged in one of man's oldest exercises in moral philosophy; that is, the search for a superior moral justification for selfishness.

Challenge them to prove that false.

 

 

 

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