July 8, 2012

Obama Reignites a Tax Battle

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Victory on either side of the isle could very well serve as a harbinger of legislative supremacy in the years to come.

If President Obama is reelected, I imagine that the political scene will most likely look similar to its present form. It is likely that the Democrats will win a few Congressional districts (hopefully Cornell’s own Nate Shinagawa ’05 will lead the charge), but they will most likely not regain a majority in the House. The Senate will, in the event of an Obama win, remain Democratic, but not by a 60 seat filibuster-proof majority.

The stagnant political conditions, given an Obama victory, are what has made President Obama’s decision to fight Republicans on extending the Bush Tax Cuts so interesting to me. Victory on either side of the isle could very well serve as a harbinger of legislative supremacy in the years to come.

The President is proposing a one-year extension of the cuts for people making less than $250,000, which means that everyone below the 96th income percentile will have their tax breaks extended. It’s important to remember that $250,000 is calculated taxable family income, not gross income. After taking into account the mortgage interest tax credit, the child tax credit, tax credits for charity, the Hope and Lifetime Learning Credit, and many more credits typically used – the amount of income a taxpayer needs to have in order to see their tax rate increase can actually exceed $250,000 by a fair margin.

The last time the President attempted to let the Bush Tax Cuts expire for high-earners, Congressional Republicans blocked him. The GOP even refused to pass a bill making the tax cuts for people earning below $250,000 permanent, demanding that the high-earners be included in any extension, essentially holding the bottom 96th percentiles’ tax cuts hostage in order to ensure that the top 4 percent get theirs. In the end, Congress bullied the President into extending all the tax-cuts for one year. That year has passed.

The Republicans want to make all the tax cuts permanent, and President Obama argues that we cannot afford to do that, given the country’s perilous fiscal situation.

The President knows he is wading into a fight, and I’m excited to see how he handles it. If he emerges victorious, the President might be able to send a signal to unenthused Democrats that his second term will yield far more legislative victories, and fewer acquiescences to Republican intransigence.

Original Author: Noah Karr-Kaitin