In the long game of tax reform, Obama’s just getting warmed up.
The nation woke up to a new era this morning – Republicans have turned a corner and voted to raise taxes – something many of them have said they would never do.
By raising taxes from 35 percent to 39.6 percent on households earning more than $450,000 and individuals earning more than $400,000, the government will raise an estimated $620 billion in revenue over 10 years. No entitlement cuts were part of the deal.
The progressives who are criticizing President Obama for “giving away” too much are failing to recognize that the fiscal cliff deal is a watershed moment. After a year of hard campaigning to raise taxes on the rich, and months of strained negotiations with obstinate Republican leaders, Obama has cracked open the revenue dam Republicans have so viciously guarded.
And the President wasted no time making clear that he will continue to seek increased taxes on the wealthy in further deficit-reduction negotiations coming down the pike.
After last night’s House of Representatives vote to pass the deal, Obama said:
As we move forward to address our ongoing fiscal challenges, both spending cuts and continuing to ask the wealthy to do a little more will be part of a balanced approach… We can’t simply cut our way to prosperity. Cutting spending has to go hand-in-hand with further reforms to our tax code, so that the wealthiest corporations and individuals can’t take advantage of loopholes and deductions that aren’t available to most Americans.
(Watch the full video of Obama’s remarks.)
Obama didn’t even wait until the House passed the deal to signal that he’ll be seeking more tax increases on the wealthy this year. After the Senate voted to pass the deal Vice President Joe Biden helped broker, the White House released a fact sheet entitled, “The Tax Agreement: A Victory for Middle-Class Families & the Economy,” which said:
[The fiscal cliff deal] establishes a foundation for additional balanced, pro-growth deficit reduction through tax and entitlement reform: The agreement leaves substantial scope for reducing tax expenditures for high-income households, reforming corporate taxes to broaden the base and cut the rate to make America more competitive, and to take further steps to reform entitlements.
Conservatives are already fussing. The conservative-leaning Daily Caller complained:
The administration’s demand for ‘reducing tax expenditure’ is progressive shorthand for extending tax laws to incomes and investments not covered by current taxes.
As far as what may come next, Obama may seek to raise taxes on incomes over $250,000 (his initial tax reform goal) and/or further increase tax hikes on dividends and capital gains income, which went from 15 to 20 percent for high-income earners as part of the Jan. 1, 2013 bill (for a total effective rate of 23.8 percent, including the additional healthcare reform tax).
Of course, deficit reduction is not pain-free for either side of the political aisle. Entitlement reform will be on the table as a “balanced” deficit reduction package – but, given Obama’s governing style, cuts to benefits are likely to be minimal.
I don’t know about you, but the fact that Obama came right out of the gate after the fiscal cliff deal saying he plans to raise taxes on the wealthy – yet again – makes me proud of the guy. If it had happened hours earlier, I could have added it to the list of the Top 10 Ways Obama Made Liberals Proud in 2012.