Some of President Obama’s most unsung accomplishments are in the areas of taxes and deficit reduction. What appears to be little known is that the 2009 Recovery Act included a $275 billion tax cut for the middle class and working poor. It was the largest middle class tax cut in U.S. history.
Another virtually unknown accomplishment is the progress President Obama has made reducing the deficit. When President Obama took office, the deficit was $1.3 trillion and 9.8% of GDP. By fiscal year 2015, the deficit had been reduced to $450 billion or 2.6% of GDP. It is the fastest rate of deficit reduction since the late 1940s.
The top three finishers in the Iowa GOP caucuses would destroy President Obama’s progress on the deficit with multi-trillion tax cut schemes that would provide a huge windfall for large corporations and the super wealthy. The rest of the country would be required to finance these regressive tax plans in the form of much higher deficits or even higher taxes for the poor and the middle class.
GOP front runner Ted Cruz’s radical tax scheme contains a huge tax increase on senior citizens, the middle class and the poor. This is because the Cruz plan has a 19% national sales tax that would apply to all purchases of goods and services made in the United States. Under the Cruz plan, something that costs $1 today would start to cost $1.19.
Cruz uses this tax increase on the poor and middle class to (partially) finance a big tax cut for the super wealthy and the corporations. Cruz would reduce the top individual rate from 39.6% to 10%. Moreover, the GOP front runner’s plan would eliminate all taxes on corporations and estates. This radical plan would add $3.7 trillion to the deficit over the next ten years.
The cost of the Cruz plan is relatively “cheap” when it is compared to Trump’s plan. The billionaire entertainer’s plan would add $9.5 trillion to the deficit over the next ten years. Trump would borrow trillions of dollars to finance a reduction in the top individual rate from 39.6% to 20%, reduce the top corporate rate from 35% to 20% and to completely eliminate the estate tax. In order to keep his promise to balance the budget, Trump would need to cut spending by 20%.
Rubio has been described by many in the mainstream press as a “moderate’ but there is nothing moderate about his risky tax scheme. Rubio would essentially exempt the super wealthy from all federal taxation by eliminating taxes on capital gains, dividends and estates. The average top 1 percenter would receive an annual tax cut in the amount of $224,000.00. These huge tax cuts for the wealthy would increase the deficit by $11.8 trillion over the next decade.
All of these Republican tax plans contain provisions in which the middle class and the poor would get a small tax break. Those modest tax cuts provide political cover for the windfall for the wealthy and was a tactic that George W. Bush used to market his tax cuts for the wealthy.
Hillary Clinton’s and Bernie Sanders’ plans for taxes are very different from those proposed by the leading GOP Presidential contenders. The Democratic tax plans would cut taxes for the middle class and the working poor. At the same time, their plans would pay for themselves by increasing taxes on the super wealthy.
Modern history indicates that if the country has a Democratic President, we have lower deficits, middle class tax cuts and a stronger economy. In contrast, GOP Presidents blow up the deficit with tax cuts for the wealthy and increased military spending. Increased deficits is a feature of GOP Presidents due to their support for borrow and spend fiscal policies.
The choice in 2016 is clear. We can have continued progress and prosperity with a Democratic President. On the other hand, if the Republicans are returned to power, they will they blow up the deficit and destroy the economy – like they did in 2008. We Democrats must work hard to elect a Democratic President. The stakes couldn’t be much higher. Let’s get it done!