The President released yesterday the explanation on how he suggests paying for his jobs program of $447 billion. No surprise here, it is all taxes and it is not just tax increases but tax increases that have been suggested before by the Administration and for the most part rejected by Congress in the past.
The President’s new taxes proposed are designed to raise $467 billion over a ten-year period but are not designed to take effect until 2013 where the “Stimulus Junior” program spends it money in the very short term.
The primary pieces are as follows:
Reduce the ability of higher income taxpayers to fully use itemized deductions—This proposal is the centerpiece of the relentless effort of the Administration to the increase taxes for a person having over $200,000 of income or that magic $250,000 for a household. It is not clear to me how this integrates with the scheduled increase in tax rates unless Congress acts. I assume it is a double hit for this group.
As I have stated many times, there needs to be an examination of the entire tax structure but this type of ad hoc move is not the way to proceed.
Reduced and change the tax treatment on oil and gas companies— This is old stuff, already rejected by the Senate. A previous piece entitled “Kicking the Taxes out Big Oil” sets forth the issues here. The fact the Administration suggests a change in the treatment of Intangible Drilling Costs shows a complete ignorance of the industry and it is viewed as merely a political punching bag.
Tax on investment fund managers—This is the “carried interest” provision. Again, I have detailed this in an earlier piece. Interestingly enough, the tax treatment for this group of getting capital gain treatment instead of ordinary income has been due to liberal Democrats who raise tons of political money from hedge fund mangers and other Wall Street types.
Change the tax treatment on corporate jets—By changing the depreciation schedule from 5 to 7 years, thus equalizing commercial and corporate jets, the Administration hope to raise $3 billion over 10 years. I have written 2 prior pieces on this, so again it is not new but a symbol. It is an obsessive symbol at that. The Administration, of course, forgets that it was supportive of the prior change in depreciation and the extension of the bonus depreciation allowances. The Administration misses the point here but no one really cares about this.
There are more details and nuances in these and other proposals but not worth the effort here to spend the time. This is a political announcement by the Administration. It is not serious and will not be taken as such. It is a continuation of the White House effort to blame whatever ails the country on the opposition. Needless to point out, the President’s proposal has not been well received by Republicans. The only ones who are cheering seem to be the teacher unions.
The Administration intends to make further suggestions to the Super Commission on deficit reduction, cannot wait for that. It shows there are so many moving parts to all of this—jobs programs, deficit reduction, appropriation bills to pass, plus there are a number of expiring tax provisions coming up. This is all wrapped up in the election season well underway now.
No reason to really grade these proposals. There were an F initially because of their stand-alone tax raiser nature, not as part of reforming the tax system and in the context of the politics of the moment; ho well, let;s give them an F minus if such a level exists.