By Jessica Chau
We have a very interesting development today on taxes as we hear from Senator Schumer, and there is a report that Congressional Republicans might let the Bush tax cuts expire for the wealthy.
New York Times, David Firestone, 10/9/2012
As his fellow Democrats in Congress consider negotiating away the enormous advantage they now have on tax rates, Senator Charles Schumer of New York said today he wouldn’t go along. Speaking up for equity and rationality in the tax code, he said taxes for the rich have to go up, as scheduled, on Jan. 1, and cannot be tied to some kind of amorphous tax-reform package.
For weeks, Democrats and Republicans have been holding informal talks to see if an agreement is possible, along the lines of the Simpson-Bowles deficit committee, to prevent the year-end combination of tax increases and spending cuts known as the fiscal cliff. A major topic under discussion is the Republican idea of lowering rates while eliminating deductions and loopholes, hoping to achieve a flatter, less complex tax system.
In a speech at the National Press Club, Mr. Schumer argued that it can’t be done, and it shouldn’t be done.
It can’t be done, as independent analysts have been saying about Mitt Romney’s similar plan, because there aren’t enough deductions to balance out the rate cuts at the high end. (Mr. Romney claims, without evidence, that his tax plan would be revenue neutral, while Mr. Schumer argues that tax code changes must raise revenue to reduce the deficit.)
It shouldn’t be done because of basic fairness. For 12 years, wealthy taxpayers have benefited the most from the Bush tax cuts, three times as much for those with million-dollar incomes than for those making $50,000.
“Over time, our tax code has widened the nation’s wealth gap,” he said. “Reversing this trend ought to be a top goal of tax reform; at a minimum, we certainly should not make the tax code any less progressive than it would be if the high-income tax cuts expired.” There is no evidence, he said, that such tax hikes stifle economic growth.
Wall Street Journal, John D. McKinnon, 10/9/2012
Sen. Charles Schumer, the Senate’s third-ranking Democrat, will offer a tax rewrite that includes tightening tax breaks – but no across-the-board rate cuts – in exchange for an overhaul of entitlement programs.
The New York lawmaker proposes that Congress “scrap” a long-discussed approach to overhauling the tax code that would cut rates for all and limit tax breaks to make up the lost revenue, according to excerpts of a speech scheduled for delivery Tuesday morning.
Instead, Mr. Schumer proposes that Congress curb tax breaks and use the additional revenue to reduce projected budget deficits.
Mr. Schumer acknowledges that such a move would be unpopular with congressional Republicans, who generally oppose tax increases and have long advocated an overhaul of the tax code that includes rate cuts as well as loophole closures.
The Huffington Post, Bonnie Kavoussi, 10/09/2012
After years of relentless opposition, some Republican Congressmen may be willing to allow the high-income Bush tax cuts to finally expire, the Financial Times reports.
Yes, certain Republican Congressmen have begun privately arguing that it would be best for the party to succumb to Democratic demands and allow the Bush tax cuts to expire on income above $250,000 if President Barack Obama wins reelection, which the aide acknowledges would leave Republican Congressmen with not “much leverage,” a senior Republican Congressional aide told the FT.
Democratic politicians have hammered Republicans over their refusal to budge on the issue. Obama, who has proposed a one-year extension of the Bush tax cuts for income up to $250,000, has made well known his willingness to raise taxes on the rich. Senator Charles Schumer (D-New York) agrees, saying on Tuesday that any tax compromise maintaining the Bush tax cuts for the rich upfront “is almost guaranteed to give middle-income earners the short end of the stick.”