Reich writes: "To hear the media report it, President Obama is proposing a tax increase on wealthy Americans. That's misleading at best."



Portrait, Robert Reich, 08/16/09. (photo: Perian Flaherty)

Obama's Tax Plan and the Lies of the Regressives

By Robert Reich, Robert Reich's Blog

o 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.

Robert B. Reich, Chancellor's Professor of Public Policy at the University of California at Berkeley, was Secretary of Labor in the Clinton administration. Time Magazine named him one of the ten most effective cabinet secretaries of the last century. He has written thirteen books, including the best sellers "Aftershock" and "The Work of Nations." His latest is an e-book, "Beyond Outrage." He is also a founding editor of the American Prospect magazine and chairman of Common Cause.