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November 15, 2012

Grand Bargain Gambit Also Seeks to Make Others Pay for the Sins of Elites

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The President’s meeting with CEOs played out just as expected, as they offered support for any kind of a deal that averted the fiscal slope and a flood of austerity in 2013. Obviously they have a very particular perspective, grounded in cuts to their own corporate tax rates while the elderly and poor bear the costs of debt reduction.

Meanwhile, the White House is already playing a game of inches with the Bush-era tax rates:

Obama flatly rejected Republican calls to let the top rate remain at 35 percent, where it has stood for more than a decade under legislation adopted during the George W. Bush administration. And he shot down a GOP proposal to cap deductions for mortgage interest, charitable giving and other expenses in return for extending the Bush-era tax rates for the wealthy.

But in a break with the position he took on the campaign trail, Obama said he would not insist on drawing “red lines” around 39.6 percent, the rate in effect for top earners during the Clinton administration. Democrats familiar with White House thinking said Obama is willing to set the top rate somewhat lower — around 37 percent or 38 percent — as long as the overall burden grows for families earning more than $250,000 a year.

This actually looks to me a lot like the way banks paid off substantial chunks of the foreclosure fraud settlement with other people’s money. In this case, the wealthy and big corporations got tax cuts for a decade. Now they’ve decided that the bill has come due – it hasn’t, but that’s another story – and they want the middle class, the poor, the elderly and the sick to pay up.

I actually think we will see no deal of consequence in the lame duck session, and the tax rates are very likely to revert back to the Clinton-era baseline. But spare me this fake desire on the part of wealthy CEOs to “fix the debt” for future generations. They want to fix the country’s fiscal policy in their favor, and that’s pretty much it.

There are certainly ways to make the tax code more equitable; converting deductions into nonrefundable credits looks like a promising place to start. But there are a load of limits on deductions at the high end that would come BACK into play if the Bush tax cuts expired, that would raise revenue in a targeted way. Playing footsie with this “lower the rate, broaden the base” game makes little sense.

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