Responding to a We the People petition, White House policy advisor David Plouffe said that the President would veto any effort to extend tax breaks for wealthy individuals, one of the more forceful promises made in the tax debate. This goes further than the President’s speech yesterday announcing his support for extending the Bush tax cuts only on the first $250,000 of income.
As many have pointed out, this would cut taxes for people making over that amount too, because of our marginal tax system. Someone making $300,000 a year would get Bush-era tax rates on the first $250,000 of their income, and then Clinton-era rates on the additional $50,000. But they’d still see a tax cut. In fact, viewed in isolation, the Obama plan for tax cuts would accrue more to the rich, because they would benefit from cuts on that first $250,000, whereas someone making less would only see tax cuts on their full salary, which is below $250,000.
Nevertheless, the phasing out of the Bush-era rates for the top two brackets does generate $850 billion in revenue over a 10-year period, and despite extending those rates in 2010, the President and his team are staking out a more forceful policy this time around. First of all, they are making the case that tax cuts for the rich do not lead to any tangible economic benefits, as the President said yesterday:
Moreover, we’ve tried it their way. It didn’t work. At the beginning of the last decade, Congress passed trillions of dollars in tax cuts that benefited the wealthiest Americans more than anybody else. And we were told that it would lead to more jobs and higher incomes for everybody, and that prosperity would start at the top but then trickle down.
And what happened? The wealthy got wealthier, but most Americans struggled. Instead of creating more jobs, we had the slowest job growth in half a century. Instead of widespread prosperity, the typical family saw its income fall. And in just a few years, we went from record surpluses under Bill Clinton to record deficits that we are now still struggling to pay off today.
Furthermore, from a political standpoint, at no point in 2010 did the President threaten a veto. But here’s David Plouffe today:
The President also believes that the top 2% should return to Clinton-era income tax rates — when the United States created 23 million jobs and ran the biggest budget surplus in history — and will veto any legislation that extends the unaffordable Bush tax cuts for the wealthiest in our country.
It’s true that the President’s credibility is suspect on this issue. And it’s true that the outcome of the elections will factor heavily in what transpires, particularly in 2013 if the Bush tax cuts all expire due to gridlock. But the veto threat is new, so it ought to be pointed out.