The next part of President Obama’s approach to the budget deficit, outlined in his April 13 speech, addressed what he called “tax expenditures” and “spending in the tax code.” At the outset, he said he regretted agreeing to extend “tax cuts for the wealthiest Americans” only a few months ago, but explained that he did so “because it was the only way I could prevent a tax hike on middle-class Americans.” He added that “we cannot afford $1 trillion worth of tax cuts for every millionaire and billionaire in our society” and declared: “I refuse to renew them again.”
The President next said the tax code is “loaded up with spending on things like itemized deductions.” He agrees with “the goals of many of these deductions, from homeownership to charitable giving,” but “we can’t ignore the fact that they provide millionaires an average tax break of $75,000 but do nothing for the typical middle-class family that doesn’t itemize.” He then called for “limiting itemized deductions for the wealthiest 2 percent of Americans.”
Finally, he said “we should go further,” and Congress should “reform our individual tax code so that it is fair and simple — so that the amount of taxes you pay isn’t determined by what kind of accountant you can afford.” The White House fact sheet that UJ linked to recently phrases the issue more bluntly — it says: ” the President is calling for individual tax reform that closes loopholes and produces a system which is simpler, fairer and not rigged in favor of those who can afford lawyers and accountants to game it.” (The emphasis is in the fact sheet itself.)
These remarks are, commendably, more specific than the President’s remarks on spending and health care. He wants to raise the current tax rates on high income earners (by not “extending” those rates) and he wants to “limit” deductions for the wealthiest 2 percent of Americans. It is interesting that the President now regrets a decision he made only a few months ago, but it is even more interesting that he seems to equate “income” with “wealth.” The federal income tax only addresses “wealth” if the wealth produces taxable income. The notion that individuals who are taxed at the highest tax brackets are all “millionaires and billionaires,” as the President suggested, is preposterous. Instead, many of those people are simply productive workers in two-income families — small business owners, professionals, and so forth — who are reaching the peaks of their earnings potential while at the same time they are putting their kids through college and trying to save for retirement. The notion that such people are “the wealthiest Americans” who have somehow gamed the system is ludicrous.
I’m all for making the tax code simpler and fairer — but does anyone really think President Obama is well positioned to do so? His health care legislation is already producing volumes of regulations that are of breathtaking complexity. And this is not a President who has shied away from advocating tax breaks and incentives for causes that he agrees with — like green energy. A better course, I think, would be to get away from deductions altogether. I’d like to see an end to special tax treatment of donations to charitable and religious organizations and the non-profit political groups, right and left, whose vile advertising makes TV watching during the election season so revolting. Our tax policy should not encourage such groups.
And consider the intemperate language of the White House fact sheet quoted above. It actually suggests that our federal tax system is “rigged in favor of those who can afford lawyers and accountants to game it.” Does the President honestly believe that the federal tax system that he has presided over for two years is “rigged” and “gamed” by “lawyers and accountants”? If so, why hasn’t he done something about it before now?