To Clinton, and beyond!

The president’s statement that ‘these tax cuts for the wealthiest Americans are also the tax cuts that are least likely to promote growth’ has no validity unless ‘growth’ is defined as short-run business cycle improvement.

In his remarks on Monday, President Obama reignited the debate about the fate of the 2001 and 2003 tax cuts. The president reiterated his support for letting the high-income rate reductions included in the tax cuts expire at the end of this year, ignoring the economic damage that higher marginal tax rates will do to saving and investment. The president touted raising high-income tax rates as a way to reduce the deficit, even as he reaffirmed his support for more costly middle-class tax cuts and ignored the even more costly growth of entitlement spending.

As he has in the past, President Obama asserted that he is merely calling for high-income taxpayers to "go back to the income tax rates we were paying under Bill Clinton." In reality, though, the president's proposal will leave high-income households facing additional levies that did not exist during the Clinton years. Pursuant to the healthcare law, they will pay a new 3.8 percent Unearned Income Medicare Contribution tax on their interest, dividends, and capital gains, as well as a 0.9-percentage-point increase in the Medicare payroll tax on their wages and self-employment earnings.

President Obama also emphasized that we "can't afford" the high-income rate reductions, labeling them a "major driver" of the deficit. Yet, while highlighting the $850 billion revenue loss from these rate reductions over the next decade, the president reiterated his support for the middle-class portion of the 2001 and 2003 tax cuts, which will cost $2.1 trillion over the same time period.  And he said not a word about the relentless growth of Medicare, Medicaid, and Social Security spending, which is the real driver of the long-term fiscal imbalance. Numerous economists and other commentators across the ideological spectrum have recognized that raising taxes on the rich will not be enough, by itself, to close the long-run fiscal gap.

Read the full article at The American website.

Alan Viard is a resident scholar at AEI.

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About the Author

 

Alan D.
Viard
  • Alan D. Viard is a resident scholar at the American Enterprise Institute (AEI), where he studies federal tax and budget policy.

    Prior to joining AEI, Viard was a senior economist at the Federal Reserve Bank of Dallas and an assistant professor of economics at Ohio State University. He has also been a visiting scholar at the US Department of the Treasury's Office of Tax Analysis, a senior economist at the White House's Council of Economic Advisers, and a staff economist at the Joint Committee on Taxation of the US Congress. While at AEI, Viard has also taught public finance at Georgetown University’s Public Policy Institute. Earlier in his career, Viard spent time in Japan as a visiting scholar at Osaka University’s Institute of Social and Economic Research.

    A prolific writer, Viard is a frequent contributor to AEI’s “On the Margin” column in Tax Notes and was nominated for Tax Notes’s 2009 Tax Person of the Year. He has also testified before Congress, and his work has been featured in a wide range of publications, including Room for Debate in The New York Times, TheAtlantic.com, Bloomberg, NPR’s Planet Money, and The Hill. Viard is the coauthor of “Progressive Consumption Taxation: The X Tax Revisited” (2012) and “The Real Tax Burden: Beyond Dollars and Cents” (2011), and the editor of “Tax Policy Lessons from the 2000s” (2009).

    Viard received his Ph.D. in economics from Harvard University and a B.A. in economics from Yale University. He also completed the first year of the J.D. program at the University of Chicago Law School, where he qualified for law review and was awarded the Joseph Henry Beale prize for legal research and writing.
  • Phone: 202-419-5202
    Email: aviard@aei.org
  • Assistant Info

    Name: Regan Kuchan
    Phone: 202-862-5903
    Email: regan.kuchan@aei.org

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