Obama's Tax Plan: The Good, The Bad And The
Right-Wing (Including Hannity's Biggest Lie Ever)
hyperlinked to sources. For all
sources, see the data
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
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
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.
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
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 8˝ 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.
Just in the last 7 years, the median
household income has dropped
And not just the middle class has
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.
Here's what Obama has proposed, in
fact, most of which he's been proposing since he began his presidential
Obama will let George Bush's tax cuts
for individuals making over $200,000 a year, couples making over $250,000 a
This is the top 2, 3% of the
Obama will extend Bush's tax cuts for
everyone else. Everyone else will
keep their Bush tax cuts. And then
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
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:
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.
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
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
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
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
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
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
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 8˝ 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.
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.
Ok, how is the right responding to
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:
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
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:
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:
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:
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
Conservative MSNBC political analyst
Michelle Bernard said Obama's speech to Congress "was almost declaring
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
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
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.
should know that another attack line is "Socialism!" I
dealt with that one in detail in podcast
In a moment, your financial
transaction tax offensive weapon, and some closing comments.
Keep it right here.
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.
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.
concept has been discussed many places. Much
of what follows is from a piece
Ralph Nader wrote.
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.
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.
in 1936 John Maynard Keynes himself said such a tax would be useful in
"mitigating the predominance of speculation over enterprise."
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
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
you be worried that this can be denounced as some crazy idea, no it cannot be.
tax was actually used to help fund the Civil War and, unfortunately, the
terrible Spanish-American War.
implemented such a tax again from 1914-1966.
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.
about 40 countries have some kind of tax on securities trading, including those
communist nations of Japan and Great Britain.
a worldwide effort
among activist groups to pass such laws in more nations.
there's not much support in Congress yet for this idea.
progressives need to advocate it.
So there you have it.
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
There's so much wealth concentrated
at the top, that there's just not enough left for the rest of the country to get
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
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
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.