The President’s State of the Union speech is tonight and we will not only be hosting our live chat, but also the speech itself, both here in the Open Thread (in the video box below) and in the chat thread.
The White House has already let it be known that the President is going to call for a tax on the wealthy to fund middle class tax breaks. John Nichols at the Nation lays out the plan, which I think the GOP is going to have a hard time fighting. They will of course, but I don’t envy them.
With an eye toward addressing income inequality, the president will use his State of the Union Address to propose new taxes and fees on very rich people and very big banks. In any historical context, the tax hikes and fees are “modest.” But after a period of absurd austerity and slow-growth economics (in which all the sacrifices were made by working families, while all the advantages accrued to very rich families and very big banks), Obama’s move is as important as it is necessary.
At a point when there is broadening recognition of the social and economic perils posed by income inequality, the president is talking about taking simple steps in the right direction. Congress is unlikely go along with him, but the American people will—Gallup polling finds that 67 percent of likely voters are dissatisfied with income and wealth distribution in the United States. And as this country prepares for the critical presidential and congressional elections of 2016, the president’s clarifying of the terms of debate on taxes becomes vital.
According to Obama aides, the president will on Tuesday propose to alter a “trust-fund loophole” provision that, according to The New York Times, “shields hundreds of billions of dollars from taxation each year.” Obama also wants to raise the highest capital-gains tax rate from 23.8 percent to 28 percent for couples with incomes above $500,000 annually.
The president will, in addition, propose a new fee on huge financial firms—those with more than $50 billion in assets—in order to discourage risky borrowing. Under the plan, a fee of seven basis points would be imposed on the liabilities of the biggest banks.
The White House calculus says these initiatives would raise roughly $320 billion over the next ten years. Most of the money would be used to provide tax breaks and benefits for working families: a $500 credit for families with two working spouses, improved structures for retirement saving, a tripling of the tax credit for childcare to $3,000 per child. In addition, the revenues would cover costs associated with the president’s recently-announced plan for free tuition at community colleges.
Michael Hiltzik explains further on the taxing the wealthy aspect:
The capital gains preference, however, is uncapped [unlike the mortgage deduction]. The larger the gain one reports, the greater the tax break–that differential between the 20% top cap gains rate and the 39.6% top marginal rate is gold, pure gold. In 2011, according to the IRS, the average net capital gain reported by those in the $75,000-to-$100,000 income range was $761. For those just at the millionaire level, it was $137,755. For those earning $5 million to $10 million, it was $1.8 million. And for those with income of $10 million or more, the average reported taxable capital gain was $12.6 million. That’s the income club, remember, that claimed an average of only $13,898 in average annual mortgage deductions. […]
Then comes the biggest loophole of all, the so-called trust fund loophole. This allows capital assets to be passed on to one’s heirs at their appreciated value: if you bought a share of stock for $100 decades ago and it’s now worth $1,000, it’s valued at the higher figure when your heirs inherit it. In other words, the accumulated capital gains tax liability is utterly extinguished. That’s virtually unique in the tax world, where taxes typically can be deferred, but not eliminated.
This is not a radical plan. It redistributes a very small amount of wealth, and most of that wealth will be steered right back into the economy by working families, who truly drive the economy. Indeed, to get a sense of how far we have fallen in the previous three decades in the desire to fellate our billionaire masters, this Obama proposal will only return the capital gains tax rate to the level it was when Ronald Reagan was President. Tim Mak looks at the brilliant politics of this:
A Republican refusal to consider taxing the 1% and the things they say in the process can be used against them in future elections. He can try to influence a direction for his party and, simultaneously, define an advocacy role for himself in the years ahead,” said Wayne Fields, author of a book on presidential speechwriting, ‘Union of Words: A History of Presidential Eloquence.’
And in previous State of the Union addresses, argued Greenberg, President Obama has laid out points of potential compromise—only to find the negotiating window shifting to the right when Republicans made stronger demands.“Obama has made the mistake a lot over his initial years by opening with a compromise bid, and Republicans would counter with their maximum bid,” he said. “Obama may have finally figured out that it’s better to open with your maximum bid.”
Poor Jason and I have been pounded our heads into our desks over the past 6 years if not longer over President Obama’s and national Democrat’s weak negotiating skills with the Republicans. Finally, at long last, that might be changing….
Finally, today, Booman looks at how President Obama is certainly different from the last two term Democratic President saddled with a hostile and Republican Congress in the last years of his Presidency.
This is what I want the president to do, not because I think it is “serious” in the sense that it demonstrates that the president is interested in signing legislation, but because it indicates that he is serious about not passing a Republican agenda. If he can’t do what he’d like to do, he can at least block the Republicans from doing what they’d like to do.
It might seem like a small thing, but this is not what Clinton did when faced with a similarly hostile Congress in the last two years of his crippled presidency. Here’s what Clinton did. He signed the:
Balanced Budget Act of 1997
Taxpayer Relief Act of 1997
Iraq Liberation Act
Securities Litigation Uniform Standards Act
Gramm–Leach–Bliley Act
Commodity Futures Modernization Act of 2000You might want to familiarize yourself with this list of legislation because it all combined to set the stage for the war in Iraq and the Great Recession. That’s what being “serious” about working with a Republican Congress looked like, and history doesn’t look kindly on the results.
So, I’m pretty grateful that our president has no intention of going out and giving a State of the Union address where he will explain how he is going to meet John Boehner and Mitch McConnell halfway. I’m glad he isn’t reacting to the midterm elections as if they give the Republicans a mandate to do anything.
Yes, it’s true, these proposals are transparently political and designed to make the Republicans squirm and look bad. Yes, he might have proposed these policies when he had a friendlier Congress and some prospect of seeing them enacted (although, thanks to Bush and Clinton, he had a pile of shit to clean up first).
I wish the Republicans could come up with something worth signing, but they can’t. And I’m glad that we elected a president who knows better than to try to score points inside the Beltway by being the kind of “serious” they expect him to be.