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Akron
Beacon Journal
Defining
the deal
July 10,
2012
Almost
every word that emerges from the camps of Mitt Romney and Barack Obama
must be
filtered through the prism of campaign tactics. Yet there also are
moments when
a candidate lands on a defining issue, for the contest and the country.
On
Monday, President Obama did just that in proposing a one-year extension
of the
Bush-era tax cuts for those households with annual incomes below
$250,000. That
translates into a tax increase for those households above the
threshold, or 2
percent of taxpayers.
The Bush
tax cuts are set to expire at year’s end, along with other measures
promising a
substantial impact on the country’s finances. The president’s proposal
is
nothing new. It dates to the last campaign. What remains true is that
if the
country is going to tackle its deficit problem during the next decade,
it must
increase taxes as part of a balanced approach. And a smart place to
turn for
additional revenue are the households that have fared well the past two
decades, their incomes rising sharply compared to the stagnant incomes
of
others.
The top
marginal tax rate for those households at $250,000 and above has
declined
dramatically since 1980, from roughly 60 percent (in real dollars) to
35 percent
today. The president proposes taking the rate to 39.6 percent, or an
additional
4.6 cents on every dollar above $250,000. That hardly presents an
unacceptable
burden. The rate would return to the level of the prosperous Clinton
years.
The Romney
campaign responded predictably, arguing its candidate “understands that
the
last thing we need to do in this economy is to raise taxes on anyone.”
Yes, the
economy is fragile, and would benefit from another strong dose of
stimulus. Yet
Romney also points to the importance of dealing with the deficit, even
as he
proposes additional tax cuts and increased defense spending.
What the
evidence shows is that a modest tax increase at the upper income levels
poses
little harm to the economy, the impact minimal to consumer spending and
private
investment. What about small business? Again, the evidence reveals that
just
2.5 percent of small business owners fall into top two income tax
brackets, and
they account for less than one-third of small business income.
More, the
evidence just doesn’t show that tax breaks for small businesses (minus
start-ups) trigger growth and job creation. If anything, a failure to
raise
sufficient revenue for public investment, in such areas as education,
research
and public works, diminishes growth and jobs.
All of this
isn’t to cast aside the role of spending reductions. They are
essential, too,
especially in the area of entitlement programs, their size crowding key
priorities. Yet this actually is an area of agreement. What the
president
proposes is a realistic balancing of needs. He presents the making of a
compromise, of real governing — something worth emphasis in this
election year.
Read this
and other articles at the Akron Beacon Journal
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