Worrying about Obama's tax agenda
One of the things that most heartened me about Obama's victory last November was his promise to make progressive changes to the federal tax laws. Under his administration, he said, the most egregious of the Bush tax cuts for the wealthy would be rolled back or allowed to expire. Particularly for taxpayers making more than $250,000 a year, we were told, taxes were going to go up. The estate tax on wealthy Americans was going to be reinstated on a permanent basis, and several key loopholes in that tax were going to be closed.
I fully support these principles. Under Bush the Younger, the rich made out like bandits. Take the income tax rate on dividends on corporate stock, for example. Before Bush stole the 2000 election, the top rate on that kind of income -- for the $350,000-and-up crowd -- was 39.6 percent. Within a few years, Bush and his pals in Congress had whacked it down to 15 percent. That's a nice deal for those fortunate enough to be able to live off dividends and never go to work -- you know, some of the same people who are now suddenly screaming about the deficit as the reason to do nothing toward health care reform....
Forgive the digression. The point is that Obama was going to make important changes to the revenue laws and set the tax system on a new course.
But now we have a problem, Houston. It's the end of August, and Congress doesn't seem to be anywhere near discussing the nuts and bolts of tax reform. Washington is completely engrossed in the health care war, and it doesn't seem to have an attention span for anything else. By the time there's room on their plate for taxes, the folks in Congress will be racing to get a budget passed, and who knows what else they'll be dealing with -- a swine flu scare or worse, maybe a bomb going off somewhere, another banking crisis -- the parade of horribles is long.
The murmurs we hear are to the effect that there isn't going to be any major, permanent tax reform this year -- that a set of gimmicky one-year "patches" will be enacted, extending a bunch of tax giveaways that are about to expire for another year, and maybe taking a bigger bite out of the rich, but only on a temporary basis. And according to some, even this weak a law won't pass until so late in the year that it will wreak havoc at the IRS, who will have an impossible task getting the tax forms published in time for tax season. The IRS might have to rewrite some of the forms even after they've been distributed because Congress may act so late. A serious, long-term tax bill, some tax pundits are saying, will have to wait until next year.
Now, that's a real problem. Next year will be an election year for the entire House and more than a third of the Senate. It's not impossible, but it's awfully hard, to get serious tax reform measures passed in election years. For example, Bush was smart enough to get his tax cuts passed in 2001 and 2003, when new Congresses were sitting. And this time we're talking tax increases, not decreases. By the time we get into 2010, there will be blood on the Capitol floor from the health care throwdown, and you can bet that out on the hustings this year's death panel screamers will be next year's tax increase screamers. In short, from a political standpoint, 2009 would be a better bet than 2010 for Obama's tax legislation, but the opportunity may be slipping away.
The month of September will tell us a lot. But if we wind up with crumbs on health care and little on taxes this year, a lot of people who worked really hard for change a year ago are going to be mighty disappointed, if not downright angry.