REVISED: How to Avoid Being a Principled Republican on Taxes

republicans and taxesEvery time I try to make sense of Republican tax doctrine I get lost.

For example, rank-and-file House Republicans are willing to increase taxes on the middle class starting in a few weeks in order to avoid a tax increase the very rich.

Here are the details: The payroll tax will increase 2 percent starting January 1 – costing most working Americans about $1,000 next year – unless the employee part of the tax cut is extended for another year.

Democrats want to pay for this with a temporary – not permanent – surtax on any earnings over $1 million, according to their most recent proposal. The surtax would be 1.9 percent, for ten years. (Democrats would also increase the fees Fannie Mae and Freddie Mac charge lenders.)

This means someone who earns $1,000,001 would pay just under two cents extra next year, and 19 cents over ten years.

Relatively few Americans earn more than a million dollars, to begin with. An exquisitely tiny number earn so much that a 1.9 percent surtax on their earnings in excess of a million would amount to much. Most of these people are on Wall Street. It’s hard to find a small business “job creator” among them.

Nonetheless, Republicans say no to the surtax. “The surtax is something that could very much hurt small businesses and job creation,” says John Kyl of Arizona, the Senate’s second-ranking Republican.

This puts Republicans in the awkward position of allowing taxes to increase on most Americans in order to avoid a small, temporary tax only on earnings in excess of a million dollars — mostly hitting a tiny group of financiers.

Not even a resolute, doctrinaire follower of GOP president Grover Norquist has any basis for preferring millionaires over the rest of us.

To say the least, this position is also difficult to explain to average Americans flattened by an economy that’s taken away their jobs, wages, and homes but continues to confer record profits to corporations and unprecedented pay to CEOs and Wall Street’s top executives.

So Republican leaders are trying to get rank-and-file Republicans to go along with an extended payroll tax holiday — but by paying for it without raising taxes on the very rich.

According to their latest proposal, they want to pay for it mainly by extending the pay freeze on federal workers for another four years — in effect, cutting federal employees’ pay even more deeply — and increasing Medicare premiums on wealthy beneficiaries over time.

robert reichBut even this proposal seems odd, given what Republicans say they believe about taxes.

For years, Republicans have been telling us tax cuts pay for themselves by promoting growth. That was their argument in favor of the Bush tax cuts, remember?

So if they believe what they say, why should they worry about paying for a one-year extension of the payroll tax holiday? Surely it will pay for itself.

Robert Reich
Robert Reich’s Blog 

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Comments

  1. Jon Williams says

    Here’s the deal: Republican legislators are dung beetles living off the droppings of America’s uber-wealthy so they’re going to do whatever they can for the one-tenth of one percent who really keep them in cow patties. And while they don’t for a minute believe that lower taxes on billionaire “clients” will help bring prosperity to the masses, the lie appears to be working for enough American voters to scare most Democratic lawmakers out of pushing hard for truly progressive economic reforms.

    Also, because we have a pay-to-play Congress with a corporate/defense revolving door, most Democratic legislators can also be found in the pocket of big business. So don’t look for that side of the aisle to push for genuine change, either. We get lies from the right and excuses from the left. Only by taking the money out of politics will we ever see true popular representation.

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