With President Barack Obama proposing to increase the top income tax rates for wealthy Americans, Republicans are engaging in an orgy of hyperbole.
Michael Gerson, a Washington Post columnist who was a speechwriter for former President George W. Bush, wrote Wednesday that Obama's proposed budget is "politically ruthless and radical to its core."
Gerson complained that Obama is proposing "a massive increase in progressivity" in tax rates, a "10-year, trillion-dollar haul from the rich, already being punished by the stock market collapse and the housing market decline."
The fact is, the wealthy have been enjoying low tax rates by modern-day historical standards as a result of the Bush tax cuts enacted in his first term. Obama is proposing to raise the top two income tax rates back to what they were in the 1990s during the Clinton administration, when America enjoyed exceptional job growth, a rising stock market and the first federal budget surpluses since 1969.
If Obama gets his way, the top rates will rise from the current 33 percent and 35 percent to 36 percent and 39.6 percent, but not until 2011. The tax increase would primarily affect households earning $250,000 or more per year. Obama plans to retain the current tax rates of 10, 15, 25 and 28 percent on lesser levels of income. The president also would put a reasonable cap on some tax deductions allowed for high-income earners.
So Gerson thinks that Obamas proposal is "politically ruthless and radical to its core"? Do Republicans now screaming about "socialism" and "redistribution of wealth" realize that, for several decades prior to the mid-1980s, the top income tax rate was either 50, 70, 77 or 91 percent?
I don't think we should return to such high rates, but there's no call for falsely portraying Obama as an extremist because he calls for top marginal tax rates of 36 and 39.6 percent to help pay for improvements in healthcare and rein in budget deficits.
Obama also proposes to raise the tax rate on capital gains on most investments from 15 to 20 percent, still below the rate of some earlier years.
Currently, managers of private equity funds and hedge funds benefit from a tax loophole that allows them to pay only a 15 percent tax rate on their share of profits from fund investments made by others. Obama proposes to tax the fund managers some of whom have enjoyed multimillion-dollar incomes in recent years at ordinary income tax rates, as they should be.
Why weren't Republicans screaming about "redistribution of wealth" when George W. Bush, as president, was redistributing wealth upward via a series of tax cuts disproportionately benefiting the affluent? In that same period, Bush refused to support Democrats' proposals to boost the federal minimum wage for low-income workers above a paltry $5.15 an hour. Now that's "politically ruthless," Mr. Gerson.
Many wealthy Americans, just as many middle-class Americans, have been jarred by the current economic meltdown. But the incomes of the wealthiest Americans have risen sharply over the past two to three decades. The top 1 percent of income earners in 2006 (those with adjusted gross incomes of $388,806 or more) accounted for 22 percent of all Americans' income in that year. A decade earlier, the top 1 percent accounted for only 16 percent of total income.
Contrastingly, many middle-income and lower-income Americans have seen little or no gain in real, inflation-adjusted income in recent years, while experiencing huge increases in healthcare costs and diminished retirement security as companies abandon traditional pension plans.
Obama became president less than seven weeks ago.
He inherited a nightmarish situation from Bush record federal budget deficits, two costly wars and an exceptionally brutal recession featuring rapidly escalating unemployment, the worst housing crisis since the Great Depression, a severe credit crunch, a U.S. auto industry in free-fall and a decimated stock market.
Whew, it's a good thing that Bush wasn't like Obama, isn't it? Otherwise, Bush might have left us in a real pickle.