The "Deal"

Regarding President Obama's purported deal with Republicans over the Bush-era tax cuts on the wealthy, I think we as a nation are heading down a very dimly-lit alley. Raising taxes on 2% of Americans, the richest 2%, i.e. the ones who can go from a 36% to a 39% tax rate, is not a socialist, or evil or "job-killing" move. It is one of the only ways to claw out of the deficit hole we are in. That said, however, extending -- temporarily or permanently -- the Bush-era tax cuts for the middle class, i.e. 98% of Americans, also busts a hole in the deficit and does not help our long-term financial solvency. But it does begin to address a few class warfare elements seemingly embedded in our tax code; class warfare against the middle class that is. You see the rich don't pay remotely close to the rate they're supposed to pay. They have tax lawyers, and tax shelters and tax loopholes that the other 98% of Americans either don't have or can't afford to hire specialists to find. So the upper-class routinely pays a lower rate than the middle class. That is fundamentally unfair.

So I would be more inclined to support Obama's tax deal if we also agree to enforce the existing tax code like never before. No longer can Warren Buffet famously pay a lower tax rate than his middle-class secretary. No longer should there be such a lucrative business in tax law and obfuscation. If we allow the megarich to pay a lower tax rate of 36%, then let's actually make them pay 36% instead of 20% or lower once their hired help figure out all the loopholes they can jump through.

Since the Obama tax cut proposal earlier this year is actually a tax cut on everyone and not, as you would likely believe, only on people making less than $200,000 year as an individual and $250,000 a year as a family, people making from $250,000 - $500,000 a year actually would only pay $400 extra in taxes should the tax cuts for the wealthiest Americans expire. Even Bill Gates would get a tax cut, just on the first $250,000 he makes. Since 98% of Americans makes less than $250,000 a year, their whole incomes fall below the threshold, but once you make $250,001 a year, you fall into a separate class. That first $250,000 gets taxed at a lower rate, while that extra $1 gets taxed at the higher rate. That's how Obama's original plan would have worked, and it's completely reasonable. Even if you make $500,000 a year, you can afford $400 extra dollars a year in taxes. It's mindblowing that Obama, who was heralded as the Communicator of the Millenium, or might as well have been, can't seem to get this across. His Administration is shockingly pathetic at communicating and backs away from any kind of coordinated messaging. On the flip side, it is far easier to be in the minority opposition, because you can come up with pithy, catchy, two-word phrases that, irrespective of the truth, carve through the white noise. Nothing about the last two years is "job-killing" but that is the vogue phrase in American politics. So be it.

Back to Obama's tax cut deal with the Republicans, I am very sympathetic to Paul Krugman's column from yesterday, before the breaking tax news of last night, attempting, in vain, to implore the Congress to let the tax cuts expire -- for everyone -- as opposed to give in to the blackmail of the Republicans:

...if Democrats give in to the blackmailers now, they'll just face more demands in the future. As long as Republicans believe that Mr. Obama will do anything to avoid short-term pain, they'll have every incentive to keep taking hostages. If the president will endanger America's fiscal future to avoid a tax increase, what will he give to avoid a government shutdown?

So Mr. Obama should draw a line in the sand, right here, right now. If Republicans hold out, and taxes go up, he should tell the nation the truth, and denounce the blackmail attempt for what it is.

Yes, letting taxes go up would be politically risky. But giving in would be risky, too — especially for a president whom voters are starting to write off as a man too timid to take a stand. Now is the time for him to prove them wrong.