President Obama wants the Bush tax cuts to expire, thus ending tax breaks for the wealthiest two percent of Americans. Republican leaders, however, argue that these tax cuts would encourage small businesses, stimulate the economy, and create jobs. They are wrong for several key reasons.
First, the average small business income is around $40,000, and therefore, extending the tax cuts for rich individuals making more than $250,000 isn't going to do much for small businesses. Instead, Obama has proposed the Small Business Jobs and Credit Act, which would offer tax incentives for these businesses (who create more than half of all new jobs in America) and save taxpayers $1 billion over the next 10 years. However, the constant filibustering by Republicans has made it difficult for the Senate to pass such a job creating measure. Strike #1
Second, to truly stimulate the economy, you need to provide benefits to those who are out of work and looking for a job. Long-term growth requires widely spread prosperity, not an ever increasing concentration of wealth at the top and an increasing gap between the rich and poor. That’s why Obama has extended unemployment benefits for millions of Americans. As I mentioned in my blog post “Unconstructive Criticism”, just as the Bush tax cut puts more money in the pockets of the wealthy, unemployment insurance gives more money to the unemployed (who are likelier to spend it). But again, Republicans have argued against it. Strike #2.
Third, Republicans argue that by transferring more money to the wealthiest, we would entice them to invest more in the economy. But let us not forget that the rich have had this tax cut since 2003 and, instead of investing and creating jobs, they paid large corporate bonuses, laid-off millions of workers, and outsourced manufacturing jobs. Strike #3.
By allowing these unnecessary tax cuts to expire, the tax rate for the wealthiest will go back to Clinton-era levels. During the Clinton administration, the rich paid a high individual income tax rate of 39%. However, the economy still created more than 23 million jobs (about 90% in the private sector) in less than eight years -- the most jobs ever created under a single administration. He also left office with a huge surplus.
When Bush took office, he lowered the top individual tax rate down to 35%. But, compared to the prior administration, he only created about 3 million jobs during his 8 years in office. In addition, Bush took a $230 billion surplus and turned it into a $1.4 trillion deficit. If the tax cuts are not left to expire, they will cost us an additional $3 trillion in the next 10 years through lost revenue.
Compare that to Obama administration, which has already created and/or saved more jobs in his first two years as president than Bush did in 8 years! By investing in our future, Obama has created jobs in almost every major sector of our economy, including construction, education, healthcare, clean energy, and the auto-industry.
As the Democratic leadership has put it: when you are driving a car, you push “D” to go forward, and “R” to go backward. So, where do you want to go?