Obama: The Wealthiest Must Pay Too

Yesterday Barack Obama announced a new U.S. rescue plan. It is his second during these last few days. This time he wants to impose a tax on the wealthiest Americans. The 2012 presidential campaign has started in earnest.

The president began his speech by addressing the American Jobs Act, which he submitted to Congress last week. It stipulates that there be more public works and tax relief for companies hiring the unemployed. This will cost $450 billion next year.

Obama repeated that the battle against unemployment will not increase the astronomical public debt (almost $15 trillion). He described how, in the next 10 years, to lower this debt by $3 trillion and restore justice in America. His plan assumes that $1.5 trillion will come from savings made in budget expenditures and another $1.5 trillion will come from tax increases.

It will most strongly affect wealthy people, who for decades have been paying the lowest taxes based on lower real tax rates than the rest of Americans (the average tax is 23.5 percent, but, for example, 22,000 millionaires, who are subject to various tax reliefs, pay [taxes at the rate of] 15 percent or even lower). “Warren Buffett’s secretary shouldn’t pay a higher tax rate than Warren Buffett. There is no justification for it,” said Mr. Obama (quoting Buffett himself, who is the second richest person in America).

The president is for adopting the so-called “Buffett Rule”, which says that the wealthiest Americans (i.e., those whose annual income is $1 million or more) cannot pay lower tax rates than the average.

Even though there is a strong possibility that the plan for the battle against unemployment will be accepted by Congress, the “Buffett Rule” stands no such chance. “Class warfare may make for good politics, but it makes for rotten economics,” claimed Paul Ryan, chairman of the Committee on the Budget in the U.S. House of Representatives.

“This is not class warfare. It’s math,” responded Obama. “Now, this isn’t to punish success. All I’m saying is, if you’ve done well — I’ve done well — then you should do a little something to give something back. And I will veto any bill that changes benefits for those who rely on Medicare but does not raise serious revenues by asking the wealthiest Americans or biggest corporations to pay their fair share.”

Even though Mr. Obama cites mathematics, he uses its rules in a creative way when he calculates $1.5 trillion in savings. His main point on the list is $1 trillion in savings made thanks to the termination of the Iraq and Afghanistan wars, which was a foregone conclusion long ago (the president “saves” money that no one even planned to spend).

All of the commentators are sure that Mr. Obama’s speech marks the beginning of the 2012 presidential campaign, which the president starts with the lowest ratings in his career — only about 40 percent of Americans support him.

Apart from unemployment and economic stagnation, the dispute about American public finance is definitely going to be one of the campaign’s main topics. Democrats claim that in the period between 2002 and 2007, just before the present crisis, the income received by 1 percent of the wealthiest Americans was annually increasing by 10 percent. The income of the rest of the citizens was increasing 1.3 percent per year. This resulted in today’s record social discrepancies, which are comparable to those present in the Great Depression era. The Forbes 400 Richest Americans accumulated greater fortunes than the 186 million least well-off citizens (60 percent of the American population).

Republicans’ response is that half of the households in the U.S. do not pay any income tax due to various tax reliefs and aid programs. “Half of Americans use governmental money but they don’t pay any taxes!”* said Rep. Ryan.

The political war also has a linguistic angle. Republicans refrain from using words such as “millionaire” or “billionaire.” They prefer the euphemistic term “job creators.” Public opinion polls differ, depending on who conducts them. If asked: “Do you think that millionaires, who have been paying the lowest taxes for decades, should now pay higher tax rates?” two-thirds of Americans answer “yes.” But if the same people are asked: “With regard to the record unemployment, do you think that job creators should now pay higher tax rates?” most of them say “no.”

Huge corporations are to pay a killer tax rate — 35 percent. But most of them use thousands of legal loopholes and tax reliefs that were created thanks to many lobbyists in Congress (hired, of course, by the corporations themselves). General Electric, one of the biggest companies in the U.S., despite having a multi-billion dollar income, did not pay any taxes at all. Other corporations constantly avoid paying taxes by entering their expenses in the books in the U.S. but entering profits in the books outside the country.

“Now, I am also ready to work with Democrats and Republicans to reform our entire tax code, to get rid of the decades of accumulated loopholes, special interest carve-outs and other tax expenditures that stack the deck against small business owners and ordinary families who can’t afford Washington lobbyists or fancy accountants,” said Mr. Obama yesterday.

*Translator’s Note: This quotation could not be verified.