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Robert Reich
NationofChange / Op-Ed
Published: Wednesday 11 July 2012
“Everyone gets a one-year extension of the Bush tax cut on the first $250,000 of income.”

The Truth About Obama’s Tax Proposal (And the Lies the Regressives are Telling About It)

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To hear the media report it, President Obama is proposing a tax increase on wealthy Americans. That’s misleading at best. He’s proposing that everyone receive a continuation of the Bush tax cuts on the first $250,000 of their incomes. Any dollars they earn in excess of $250,000 will be taxed at the old Clinton-era rates.

Get it? Everyone is treated exactly the same. Everyone gets a one-year extension of the Bush tax cut on the first $250,000 of income. No “class warfare.”

Yet regressive Republicans want Americans to believe differently. The editorial writers of the Wall Street Journal say the President wants to extend the Bush tax cuts only “for some taxpayers.” They urge House Republicans to extend the Bush tax cuts for “everyone” and thereby put Senate Democrats on the spot by “forcing them to choose between extending rates for everyone and accepting Mr. Obama’s tax increase.”

Pure demagoguery. 

Regressives also want Americans to think the President’s proposal would hurt “tens of thousands of job-creating businesses,” as the Journal puts it.

 More baloney.

A small business owner earning $251,000 would pay the Bush rate on the first $250,000 and the old Clinton rate on just $1,000.

Congress’s Joint Tax Committee estimates that in 2013 about 940,000 taxpayers would have enough business income to break through the $250,000 ceiling – and, again, they’d pay additional taxes only on dollars earned above $250,000.

All told, fewer than 3 percent of small business owners would even reach the $250,000 threshold.

A third lie is Obama’s proposal will “increase uncertainly and further retard investment and job creation,” as the Journal puts it.

Don’t believe it.

The real reason businesses aren’t creating more jobs is American consumers — whose purchases constitute 70 percent of U.S. economic activity — don’t have the money to buy more, and they can no longer borrow as before. Businesses won’t invest and hire without consumers. Even as executive pay keeps rising, the median wage keeps dropping — largely because businesses keep whacking payrolls. 

The only people who’d have to pay substantially more taxes under Obama’s proposal are those earning far in excess of $250,000 — and they aren’t small businesses. They’re the fattest of corpulent felines. Their spending will not be affected if their official tax rate rises from the Bush 35 percent to the Bill Clinton 39.6 percent. 

In fact, most of these people’s income is unearned — capital gains and dividends that are now taxed at only 15 percent. If the Bush tax cuts expire on schedule, the capital gains rate would return to the same 20 percent it was under Bill Clinton (the Affordable Care Act would add a 3.8 percent surcharge).

Funny, I don’t remember the economy suffering under Bill Clinton’s taxes. I was in Clinton’s cabinet, so perhaps my memory is self-serving. But I seem to recall that the economy generated 22 million net new jobs during those years, unemployment fell dramatically, almost everyone’s income grew, poverty dropped, and the economy soared. In fact, it was the strongest and best economy we’ve had in anyone’s memory.

In sum: Don’t fall for these big lies — Obama wants to extend the Bush tax cut “only for some people,” small businesses will be badly hit, businesses won’t hire because of uncertainty this proposal would create, or the Clinton-era tax levels crippled the economy, 

A ton of corporate and billionaire money is behind these lies and others like them, as well as formidable mouthpieces of the regressive right such as Rupert Murdoch’s Wall Street Journal editorial page.

The truth is already a casualty of this election year. That’s why it’s so important for you to spread it.

This article was originally posted on Robert Reich's blog.

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ABOUT Robert Reich


ROBERT B. REICH, one of the nation’s leading experts on work and the economy, is Chancellor’s Professor of Public Policy at the Goldman School of Public Policy at the University of California at Berkeley. He has served in three national administrations, most recently as secretary of labor under President Bill Clinton. Time Magazine has named him one of the ten most effective cabinet secretaries of the last century. He has written thirteen books, including his latest best-seller, “Aftershock: The Next Economy and America’s Future;” “The Work of Nations,” which has been translated into 22 languages; and his newest, an e-book, “Beyond Outrage.” His syndicated columns, television appearances, and public radio commentaries reach millions of people each week. He is also a founding editor of the American Prospect magazine, and Chairman of the citizen’s group Common Cause. His widely-read blog can be found at Robert Reich's new film, "Inequality for All" is available on DVD
and blu-ray, and on Netflix in February.

Per Belleville's comment, I

Per Belleville's comment, I don't know why President Obama, or somebody with a straightforward way of thinking, doesn't call the Republicans' bluff on the ancient idea of "Tax Freedom Day." For you fuzzy-cheeked newcomers, that's the day of the year when the "average taxpayer" gets done working for the government (i.e., pays off the annual income tax bill).

That's looking at reality in the rear view mirror. Most taxpayers pay NO net federal tax until they earn well into double digits and pay far less than half of every dollar earned in taxes from that point on. Looking at it that way, it is clear that we ALL keep most of what we earn throughout our entire lives, and the rich keep getting the lion's share.

If we had a 79% bracket, then the super-rich would finally reach a point where they earn more to support the government than they do to line their own pockets. What would you call that? Maybe "patriotism"?

hey Olaf, Agreed, "They're

hey Olaf,

Agreed, "They're dumb" is not a/the reason. "They're greedy, and beyond selfish" is.

The police and firefighters in Scranton are now being paid $7.25 per hour, because there's "no money" left. Whose will be the first home allowed to simply burn to the ground?

When will this tax-cut madness end? What kind of a nation do the wealth-mongers want to end up with? Russia, early 1900s?

Wish someone told us

Wish someone told us when/where the next Great Giveaway will take place? Twelve years of Bush’s Tax Cuts have handed trillions to the Romney-likes so far. Their coffers are bursting and, per GOP, more cuts for the 1%, more jobs and wealth for us. Rumors run our neighborhood billionaires will hand out us $1000-bills and jobs. Just curios. When’s the Giveaway? Where’s the jobs? Anybody know???

EVERY Republican, and a fair

EVERY Republican, and a fair share of Blue Dog Democrats, serving in Congress in both "01 and '03, AGREED to the "discontinuation" of the Bush tax cuts in 2010. Every one out there with half a functioning brain KNEW that when that date arrived the re-installment of the previous rates would be framed in the context of a "tax increase." President Obama had the defenders of the cut EXACTLY where the hair was short in December of '10. Conservatives would have been forced to deny unemployment insurance to 3 MILLION recipients, in the icy grip of winter, at Xmas time no less or acquiesce to the "original" deal, many of them still serving had PROMISED to do. Once Obama rolled over and played dead at this critical juncture his "progressive" credentials have taken a well deserved beating. Tax collection in this country is a joke. Millions with millions pay little to nothing. Many others wave the flag whilst simultaneously off-shoring their enormous fortunes. Meanwhile, Mr. and Mrs. Big Gulp continue to pay at a rate that is increasingly difficult for them because of reduced wages, lost jobs, health care prices, paying for ever higher educational costs for their kids and substantial real estate depreciation of the one damn thing they actually had of value; their home. Now our choice is between "Romney the Curse" or "Obama...less Worse." Yes...I'm voting for "less worse." If one recalls "candidate Obama" from '08, it's pointedly clear that the GOP don't have a exclusive patent on "breaking promises."

In 2013 about 940,000

In 2013 about 940,000 taxpayers would have enough business income to break through the $250,000 ceiling – and, again, they’d pay additional taxes only on dollars earned above $250,000. All told, fewer than 3 percent of small business owners would even reach the $250,000 threshold. A third lie is Obama’s proposal will “increase uncertainly and further retard investment and job creation,” as the Journal puts it.

Remember one simple FACT when the TAX RATE on the 1.0% of the very Wealthiest individuals in the United States of America was 88% or higher the Contry had its greatest Economic Gains. Every Class benefited; the RICH, the MIDDLE-CLASS and the POOR, but it was a more evenly share BENEFIT.

Honestly this sounds at best

Honestly this sounds at best like 'preaching to the choir' and at worst like propaganda. I wonder what it would take to get a complete and honest debate about tax policy. Is that even possible?

To be clear, I don't disagree with your points, but the way you present them makes you seem like a preacher, a person on one side of a discussion, not someone interested in a deeper consideration of what tax policy is for and how it should be implemented. The people on the other side of the discussion are fools in your mouth. There must be reasons they believe what they believe and "they're dumb" isn't a reason.

I think it would be interesting to hear what you think a fair and sustainable tax structure looks like for the long-term well being of our society.

Dr Reich: Yes, we need to

Dr Reich: Yes, we need to spread the truth to those who actually believe that the government needs to be drowned in a bathtub. What this really means for those who use lots of money to convince Joe and Jane Lunch-pail that he/she should vote for the tea party is that part of the government whose activities and spending does not benefit these big spenders needs to be trimmed away. I doubt that the super rich really think that their self interest is served by abolishing the Air Force, the Army, the Marines, and the Navy or by getting rid of federal or state maintenance of infra structures like airports, dams, ports and roads. On the other hand their interests are quite definitely served when typical members of general population that must populate armies, navies or be workers have very low expectations about their wages and about government aide. This after all does reduce the cost of doing business. The problem with your always interesting articles is that few if any member of this general either read or understand them. After all they are taught from birth that if the boss says that milk is black, then should believe and act as if milk is black.

Robert Livermore

I don't understand why

I don't understand why President Obama doesn't compare the Tax Rates of the 1930's, 1940's, 1950's, 1960's, 1970's, and early 1980's to today's low rates and minimal 6 Brackets. In 1938 we had 33 Tax Brackets to cover all amounts of income that ranged from 4% for all income up to $64,000. (Adjusted for inflation) all the way through 32 more brackets to a top marginal rate of 79% for income over $79,Million. Now that is "Fair & Balanced". This what we need today. I don't think we will ever get those great rates back into effect, but if everyone knew about them, the people would understand how the Great Leaders of the past took care of business. This Do-Nothing Congress needs to be called on this, and the Republican Deception of the people needs to be known. We need more brackets as well as higher rates on the top.

It would be nice to call the

It would be nice to call the congress out on this but they would just repeat their well crafted lies once again. I don't think I could stand to hear them one more time.

I've long wondered what it

I've long wondered what it was that conservatives were trying to conserve. I think it's the gilded age. Or maybe their intentions are more modest. Perhaps they just want a nation that looks like, as former congress mook Tom Delay put it while visiting the island sweatshop/prison of Saipan, (I'm paraphrasing here), this is the model we (meaning republicators) want to install in America. Sweatshops, near slave labor, lousy working conditions, forced abortions, and the investors syphon off the bulk of the profits to enhance their personal fortunes. That's conservative America folks. I think REgressive is not an unfair characterization.

Norman Allen's picture

Dr. Reich: you are confusing

Dr. Reich: you are confusing the GOP with facts. If it not in the fictitious book, they will not believe you. You are talking to Ignacio Loyola's mentality who said "If your eyes sees the milk to be white and the church says it is black, believe the church, not your eyes"! GOP is using sheer force to impose their WILL of their masters on the 99%. They will use any chicanery to save a few more dollars (remember the movie?) for their benefactors/beneficiaries no matter what the costs/consequences are for the 99%.

Chicanery is a good choice of

Chicanery is a good choice of words.

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