Dec 4, 2012 Comments Off Dinah Tellya
(CNNMoney) – President Obama’s proposal to let the Bush tax cuts expire for top earners would hit small businesses, and it includes nearly 1 million companies that employ people.
That’s according to an IRS study, which counted more than 20 million enterprises as small businesses.
Excerpted from The New York Times: President Obama flatly rejected on Tuesday a Republican proposal to avoid an end-of-the-year fiscal crisis through spending cuts and limiting tax deductions, insisting that he would agree to no deal that did not include an increase in marginal tax rates on the wealthy.
“We’re going to have to see the rates on the top 2 percent go up,” Mr. Obama told Bloomberg Television in his first television interview since his re-election last month, “and we’re not going to be able to get a deal without it.”
Mr. Obama’s unbending demand for higher tax rates on income over $200,000 a year per individual or $250,000 per family was in keeping with what the White House has been saying in recent weeks, but it reflected a marked evolution in the president’s own public statements.
Just last month, at a post-election news conference, he signaled openness to raising taxes by closing loopholes and limiting deductions rather than raising rates themselves. “With respect to the tax rates, I just want to emphasize I am open to new ideas,” he said then. “If Republican counterparts or some Democrats have a great idea for us to raise revenue, maintain progressivity, make sure the middle class isn’t getting hit, reduces our deficit, encourages growth, I’m not going to just slam the door in their face.”
Now the door appears shut as Mr. Obama and advisers make the case that there is no politically palatable way to generate the amount of revenue he wants to help reduce the deficit without raising rates. However, in the interview, he did not say he would require that rates have to go all the way back up to where they were before the tax cuts enacted under President George W. Bush.
If Mr. Obama and Congress do not reach an agreement by the end of the year, tax rates would go up on all taxpayers. Mr. Obama has proposed keeping them the same on middle-class taxpayers and letting them expire for the top two brackets. If that happened, the top bracket would revert to 39.6 percent and the second highest bracket would revert to 36 percent.
Mr. Obama declined to say whether they had to rise all the way to those levels to satisfy him. But he outlined a two-stage process where they could go all the way up to their pre-Bush levels and then the next year could be spent working on a more comprehensive overhaul of the tax code that could eventually allow them to fall somewhat again at the end of 2013.
“It’s possible that we may be able to lower rates by broadening the base at that point,” he said. “And I’m happy to work with them. In fact, I do believe that we can simplify the tax system and by closing some loopholes and deductions, and cleaning out some of the underbrush in the tax code that we can have a fairer, more efficient system.”
Mr. Obama’s opening proposal in the fiscal negotiations would raise $1.6 trillion from the wealthy, most of it by allowing the rates to rise again. House Speaker John A. Boehner and other Republicans proposed in their opening bid to raise taxes by $800 billion through limiting deductions and closing loopholes. The Republican plan included more spending cuts than the president’s.
In his interview, Mr. Obama said Mr. Boehner’s plan was unacceptable. “Unfortunately, the speaker’s proposal right now is still out of balance,” he said. “You know, he talks, for example, about $800 billion worth of revenues, but he says he’s going to do that by lowering rates. And when you look at the math, it doesn’t work.”
Mr. Boehner retorted later in the day that Mr. Obama’s plan as currently formulated would not pass either the House or Senate. “With our latest offer, we have demonstrated that there is a middle-ground solution that can cut spending and bring in revenue without hurting American small businesses,” Mr. Boehner said. “The president now has an obligation to respond with a proposal that does the same and can pass both chambers of Congress.”