STRAIGHT POLITICS - THE BUSH TAX CUTS

 

 

 

November 15, 2010

 

President Barack Obama

The Honorable Dianne Feinstein

The Honorable Barbara Boxer

The Honorable Harry Reid

The Honorable Nancy Pelosi

The Honorable Brad Sherman

RE: Bush Tax Cuts

See Chart!
 http://voices.washingtonpost.com/ezra-klein/2010/08/the_bush_tax_plan_vs_the_obama.html

Dear President Obama and Senate and House Members:

I am writing this letter to give all of you my opinion on the whole “Bush Tax Cuts” issue.  As a supporter and volunteer for the Democratic Party in California, and given my background as a Hearing Officer/Mediator and auditor for the State of California, Department of Health Services, I hope you will consider the following common sense, strategic approach to this crucial issue.

Without restating all the facts and figures pertaining to the financial status of the wealthy versus the middle class and poor over the last one to two decades, the deficit, or the reported minimal effect that a tax cut for the wealthy would have on job creation, you must stand firm on your goal of a middle class/working poor tax cut.  Despite Republican rhetoric and false statements in support of a tax cut for the wealthy, this must be done without negotiating too far away from the position that the wealthy do not require a tax cut and that such a tax cut would be detrimental for the economy and the deficit.

Strategically, if any compromise is discussed, it can only be regarding the floor amount for tax cuts but not the duration of any tax cuts above $250,000.  For example, one could agree that increasing the floor to $375,000 or even $500,000 could be viewed as a compromise that gives a benefit to almost every small business, a standard Republican yelping point.

Such a compromise would be viewed as being reasonable, show that you are willing to negotiate, but also show that you are steadfast, based on firm economic ground, in not giving tax breaks to the super wealthy who neither need or deserve a tax cut. Such a compromise would not save the projected $70 billion per year, but certainly a good portion of it.  Part of your negotiation could be that half the savings goes to paying down the deficit and half goes to job stimulation in the form of state aid or infrastructure spending.

However, you cannot agree to any across the board tax cut for all income earners for any period of time, even a year or two.  Not only would such a compromise cast doubt on your original position, it would result in the rich getting richer, increase or prevent a decrease in the deficit, not provide any additional funds for job stimulation, and given past history not result in any job creation in itself.  Further, it will allow the Republicans both sides of the argument.  If the economy grows and the job market improves, as it might from the other actions you have taken including the proposed middle class tax cut, the Republicans will argue that the key factor was the tax cut for the rich and they will propose extending it again.  If the economy doesn’t grow and the job market doesn’t improve, the Republicans will argue that the one or two year cut for the rich was not long enough or that the defined period of the cuts created “uncertainty” which prevented investment in the economy or job creation.  There is no point in unnecessarily giving the Republicans this opportunity when there is no perceived value to the country as a whole.  They are going to lobby for tax cuts for the rich regardless because that is their constituency.

The bottom line is no tax cut for those with incomes possibly over $375,000 or even $500,000. But if you have to compromise to those limits – okay, but no tax cut above those limits for any time period.  As you have done, hammer home the points that middle class tax cuts are what the public elected you to do, and that those tax cuts, along with the other programs you have enacted and/or have proposed are the best plan for stimulating jobs, reducing the deficit, and growing the economy.  No one has substantiated that continuing tax breaks for the wealthy will accomplish anything other than making the wealthy wealthier.

Similarly, you cannot agree to a discontinuation of the inheritance (estate) tax.  Again, compromise can possibly be made on the tax-free floor although it cannot be raised so high as to defeat the philosophical and practical basis of the tax; that is, the free passage of wealth from one generation to another resulting in a permanent wealthy ruling class a la historical Europe.  Under no circumstances should the tax rate, regardless of the floor, be less than the corresponding personal income tax rate for the amount in question.

It is also possible that compromise can be made pertaining to the tax on non-liquid assets such as inherited businesses or farms.  Although I have heard that there are certain special provisions for dealing with these types of assets, it would not be difficult to establish some tax waiver process for those who could demonstrate a financial hardship if required to pay the inheritance tax

upon receipt of the non-liquid asset.  This is currently done as a state administrative function for Medicaid Estate Recovery matters.

Of course, the Republicans, backed by the wealthy, want to repeal the inheritance tax in full.  And again, their arguments are bogus.  Speaking bluntly but simply, the person who died and left the assets is not being penalized or taxed, he or she is dead.  The heirs who might be getting a “free” million and somewhat more even after imposition of the inheritance tax certainly have nothing to complain about.  Also, there is no basis for the argument that the assets should not be taxed because that constitutes double taxation.  In general, when funds are paid from one individual or entity to another, the funds are taxed at each level.  When I am paid at my job, I pay taxes.  When I pay my dentist with my after tax funds, the dentist pays taxes on money received from me, which was already taxed.  And so on.  So again, someone inheriting a couple of million dollars or more has essentially been paid for doing nothing other than having a wealthy relative.  These funds should be taxed.

Last, I have read that the prior “Bush Tax Cut” package included provisions that allowed certain hedge fund executives or managers, with enormous incomes, to have their incomes taxed at a capital gains rate that is lower than the normal personal income rate for their income.  This is preposterous, and I am sure that the American people, in addition to myself, would support any attempt to reverse this policy.  The “Main Street” worker in a factory, a warehouse or a retail outlet doesn’t get this advantage, so why should a Wall Street manager or executive.  Talk about unfair.

You have a winning position on the issue of the “Bush Tax Cuts” as it relates to cuts for the middle class/working poor.  Even with measured compromises that I have outlined, I think you still have a winning position.  However, if you give in to the Republicans and accept major tax cuts for the wealthy in any of the aforementioned areas, your position will be diminished among your supporters as well as among the population as a whole.  Further, you wouldn’t be doing the right thing for the country.

Good luck.