Extending All Tax Cuts: "I Don't Have the Math"
President Obama repeated his central position on taxes Monday, saying that Bush-era, income-tax cuts should be extended for the middle class—"the people whose wages didn't rise"—but not the top earners because doing so would cost the federal government $700 billion in lost revenue.
"It is an irresponsible thing to do," he said, adding "I can't give tax cuts to the top 2 percent of Americans...and lower the deficit at the same time, I don't have the math. I would love to do it."
Taxes—particularly those on personal income—are the hot-button issue of the midterm election, with current and former Washington leaders weighing in on a daily basis.
The president made his remarks during aliveone-hour town hall program on CNBC Monday.
Republicans are pushing for a two-year extension of the Bush tax cuts, applying to all income groups, while the Democrats want to exclude the two top-income brackets. Essentially, that affects incomes starting at $200,000 (individuals) and $250,000 (couples).
A CNBC poll ( conducted by Public Opinion Strategies/Hart Research) shows 55 percent think increasing taxes will slow the economy and kill jobs. Only 40 percent, however, believe tax cuts should be cancelled for higher-income Americans.
The issue has already spurred some high-level jousting, such as that between President Obama and Congressional Republicans, House leader John Boehner of Ohio, and Senate Majority Leader Mitch McConnell.
Former Fed chief Alan Greenspan jumped into the debate last week, saying taxes must be raised to pay down the budget deficit.
In an effort to put taxes in a positive context, the President, pointing his finger as he is wont to do, said, "Our tax rates are lower now than they were under Ronald Reagan.”
Under the planned sunsetting of Bush tax cuts, six percentile brackets for income (10, 25, 25, 28, 33, 35) with be consolidated into to five with mostly higher rates (15, 28, 31, 36, 39.8).
Other income taxes would also rise. Those on long-term capital gains would increase from 15 percent to 20 percent, and 0 percent to 10 percent, depending on income levels. Dividends would increase from 15 percent to 28 percent in most cases.
The president Monday once again said capital gains taxes would not exceed 20 percent.
There's also been some speculation that the White House is considering a value-added tax, or a national sales tax, which is common in Europe. A rate of 15 to 20 percent is usual in many countries, but any US VAT would be in the 10-percent range.
Though much of the focus has been on revenue raising, some have zeroed in on the need to have tax policy spark private-sector growth in an economy that is expanding more slowly than expected some 16 months after the recession ended.
"The hole was so deep, some people out there are still hurting," Obama explained about the recovery.
“First thing you do when you’re in a hole is not dig it deeper," he added, connecting the economic pain with the deficit challenge:" That’s why this tax debate is important,” he said. “We can’t give $700 billion dollars away to America’s wealthiest people -- We’ve got to make sure that we are responsible stewards for our budget.”
The White and Congressional Democrats just managed to push through a $30-billion aid package for small business, which combines a number of tax measures, designed to stimulate private sector job growth.
"Small businesses are the ones that have been hardest hit," the president said in the town hall.
Some Republicans are pushing for a reduction in payroll taxes, which has been used in the past to stir new hiring.
When asked about a cut or even a holiday in that area, Obama said only, "We’re going to be working with businesses to see if does it makes sense for us to initiate some additional incentives in order to hire."
The president moved easily from one subject to the next during the CNBC town hall, whose audience—a cross section of voters—union workers, CEOs, students, small business owners—applauded the president frequently during the opening session.
Nevertheless, their discontent and concern were evident
One woman, who identified herself as a chief financial officer, mother and veteran, talked about her family's financial struggle—using words like "exhausted" and "disappointed" to describe a declining standard of living, asked the president, "Is this my new reality?"
The president admitted, "Everything is not where it needs to be," but added the administration was working hard to improve the lives of middle-class voters, citing achievements like his health care program.