GOP: Raise Taxes on Middle Class

By Robert Reich

Every 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.

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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.

But 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.

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

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