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President Obama will soon meet with the congressional leadership of both parties to reach some agreement about whether or not several critical tax rates will suddenly increase on Jan. 1. He says his "first priority is to make the middle-class tax cuts permanent." Those words conceal a well-crafted trap for Republicans.
The president can't possibly make any tax change permanent, since his term of office ends in two years. The lame-duck Congress can't possibly bind even the next Congress, much less all future ones.
Huge changes in tax policy have been enacted every few years — in 1981, 1986, 1990, 1993, 1997, 2001 and 2003. Chanting the magic word "permanent" won't change that. It is quixotic and oddly unambitious for Republicans to keep talking as though 2003 tax policy should be enshrined for all time — as if that is the best tax reform that anyone could possibly imagine.
Personally, I'd prefer individual tax rates of 15%, 20%, 25% and 30% with a low flat rate on dividends, capital gains and estates and a 25% rate on corporate profits. But even such a modest move in the right direction would be ruled out if current law could somehow be made permanent.
By partially co-opting the banal Republican talking point about "making the Bush tax cuts permanent" Obama is really trying to cram through his own tax policy proposals from the moribund 2011 budget. He is belatedly pushing the same proposals from the same budget that Obama and a Democrat-controlled Congress have totally ignored since February.
It's Welfare
By postponing his proposed tax hikes until the end of the year, which is unconscionable and dangerous, the president has surrendered all credibility on next year's tax policy. He is in no position to suddenly insist, after 10 months of doing nothing, that it's his way or the highway.
When Obama talks about "permanent tax cuts for the middle class," he surely plans to include a permanent extension of his budget-busting "Making Work Pay" tax credits (up to $800 per couple) that he snuck into the stimulus bill.
The credits operate like a payroll tax refund to relieve couples earning up to $150,000 from paying for their own Social Security benefits. Because these irresponsible tax credits are refundable, many among the half of Americans who pay no income tax received a welfare check disguised as a tax credit. Calling such proliferating giveaways a "tax cut" is part of the president's bait-and-switch marketing.
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