Dear Mr. President:
Seeing that YouTube video of you choking up while thanking your campaign volunteers in Chicago reminded me of how much we have in common, even though we are from different political parties. You sometimes cry; I sometimes cry. You like golf and cigarettes; I like golf and cigarettes. You just got re-elected; I just got re-elected, too. Congratulations, partner.
I was also happy to hear your remarks when you said that the American people want cooperation and consensus, not dysfunction. It sounds like what you are interested in is a replay of the relatively cordial deal we cut in December 2010 to extend the Bush tax cuts for two more years, not a do-over of the knock-down, drag-out fight we had over the debt-limit increase in May, June, and July of 2011. That’s my preference, too.
I heard you when you said over the weekend, “I will not ask students or seniors or middle-class families to pay down the entire deficit while people making over $250,000 aren’t asked to pay a dime more in taxes.”
So here’s where we’re at on that, just for the record. The Affordable Care Act — Obamacare — applies a new 3.8 percent Medicare tax on investment income for couples earning $250,000 a year or more. That goes into effect Jan. 1, 2013, and while I have the votes in the House to repeal it, Republicans don’t have the votes in the Senate to repeal it, much less to override your veto of a repeal. So the truth is, you’ve already won this point — people over $250,000 are going to be asked to pay more in taxes.
Not just “asked,” either — they are going to owe additional taxes on non-payroll income such as dividends, capital gains, annuities, royalties, and rents that previously had not been subject to the Medicare tax.
This is not “a dime,” it’s about $30 billion a year, according to the Congressional Budget Office. (And since you and your new best friend Bill Clinton so often refer to the Clinton administration as the era of tax-rate perfection, let’s remember that state income tax rates have soared since President Clinton left office. In Connecticut the top rate went to 6.7 percent in 2012 from 4.5 percent in 2000. In California, it’s headed to 13.3 percent in 2013 from 9.3 percent in 2000. In New York state, the top income tax rate went to 8.82 percent from the 6.85 percent it was at the end of the Clinton administration. New York City applies its own income tax, which has also gone up, on top of that. If you really want to bring back the Clinton-era tax rates, go talk to those Democratic governors about rate reductions.)
But we’ll go even further than the Obamacare tax. We’ll offer up something that Mitt Romney was talking about in the presidential campaign, which was limiting the value of tax deductions for upper-income taxpayers.
As Greg Mankiw, the chairman of the economics department at Harvard and a Romney campaign adviser, pointed out over the weekend, capping itemized deductions at $50,000 for each filer and keeping tax rates where they are today would raise $749 billion in tax revenue over ten years, with 79.9 percent of that coming from the top 1 percent of taxpayers.
And if the Obamacare Medicare tax, the increase in state income taxes, and a new limit on deductions aren’t enough for you, we’ll go even further in the direction of balancing the budget on the backs of the rich by doing something the Senate Republican leader, Mitch McConnell, talked about in his interview with The Wall Street Journal published this past weekend. McConnell “wants means-testing for programs like Medicare. Warren Buffett’s always complaining about not paying enough in taxes,” the Journal quoted Mr. McConnell as saying. “What really irritates me is I’m paying for his Medicare.”
So those are my “gives.” Let’s get to the “asks.” All the other rates — income, capital gains, dividends, payroll — stay the same for another four years as they were in 2012.
I would go down to two years on this if you want to make the 2014 midterm elections about this issue, but I think it’s better for reduction of uncertainty to go at least four years out.
The one exception is the corporate tax rate, where even you’ve said that for international competitiveness reasons we need to bring the rate down.
My people are going to be annoyed by these increases in the Medicare tax and by the ceiling on deductions. But since the corporate taxes are really paid in the end by the shareholders, a cut in the corporate tax rate would allow me to say to Republican donors that on a net basis they’re coming out unscathed, while you can go to the Democratic base and say, “We finally forced those rich bastards to pay more taxes — I mean ‘asked people like me to pay a little more.’” It’s a win-win.
Piggyback an immigration reform bill and a Hurricane Sandy supplemental on top of this piece of must-pass legislation, the same way you did student loans on Obamacare.
Every Republican will vote for the entire package and explain to their constituents that it was a vote for extending the Bush tax cuts, for entitlement reform, for corporate tax cuts, and for avoiding the defense cuts that would have been part of the sequester. Sound like a deal?