Turning the Tide on Reaganomics: Obama's Budget Raises $1 Trillion in Additional Taxes from the Rich
The Affordable Care Act, which provides the largest middle class tax credits for health insurance in history, is paid for by raising taxes and fees on the wealthy and corporations. The Dodd-Frank Wall Street Reform, the most significant banking regulations and consumer financial protections reforms since the Great Depression and designed to protect the average consumer, is paid for by charging higher fees to big banks. Student loan reform is paid for by shutting out the banks as the middlemen. In the 2013 fiscal cliff deal, Obama forced Republicans to raise taxes on the wealthiest Americans so that tax cuts for the middle class and poor could be made permanent.
If you are seeing a pattern here, you are not alone. One of the defining progressive characteristis of Barack Obama has been to keep up the pressure to turn the tide from the Reagan years' severe shifting of the tax burden from the rich to the poor and the middle class. Obama has steadily taken the country in the opposite direction. With his proposed 2015 budget, the president has proposed yet another step in that direction: he would significantly expand the Earned Income Tax Credit, cancel the rest of the sequester cuts, invest heavily in infrastructure and renewable energy, and rebuild our education system to give the middle class and the working class a fighting chance.
And he'd do it by extracting nearly $1 trillion over 10 years in increased tax revenues from the rich. Here is exactly how the big items on that list pan out:
Let me explain some of the items in short:
- Agra-business subsidies: in the name of "family farms", large agrabusiness that is putting actual family farmers out of business claim billions in federal subsidies. The president wants the farm subsidy formula revised to take these agrabusinesses out of the federal dough. This would make the agrabusinesses pay an additional $14 billion in taxes over 10 years.
- Multimillion-dollar IRAs: At the inception, IRAs were designed to help working and middle class individuals save for retirement on a tax-deferred basis - especially those who do not have access to retirement savings through work. But over the years, the super rich have begun to use IRAs as a tax shelter. The president's budget would cut off tax deductions on IRAs for accounts that are capable of generating retirement income of $200,00 a year or more (IRA value of $3.5 million plus). This would cost people with multimillion-dollar retirement accounts an additional $28 billion over 10 years.
- Tax deductions for the wealthiest limited to 28%: the super rich would no longer be allowed to use charitable donations or mortgage payments (e.g. donations to super-wealthy churches or their 12th mortgages) to bring their tax rates to ridiculously low. They will still be allowed to take deductions, but only enough to lower their income tax rate to 28%. Exposing how big a loophole this is, making the rich pay the fair rate would an additional almost $600 billion.
- Buffett Rule: No matter how one makes their income, the president's plan would impose a minimum 30% income tax rate for individuals making $1 million or more a year. This brings in $53 billion.
- Estate tax increase: the largest component of this change would take the estate tax rate to 45% with a $3.5 million exemption, from the current 35% with a $5 million exemption. Changes in estate tax provisions will result in an additional $131 billion in revenue.
- Financial Crisis Responsibility fee: this is a 0.17% fee for certain risky liabilities that financial institutions hold - and the fee would apply to banks and non-bank financial institutions alike. This will raise $56 billion.
The president's budget is unapologetic in its demand that the American middle and working classes be put above the interests of the wealthy and corporations. If progressives cannot celebrate and get behind a $1 trillion tax revenue hike from the rich to make the investments we need in America, the progressive movement may as well cease exsiting.
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