Jobs plan paid for . . . but with tax hikes in years to come
At its root, President Obama’s jobs stimulus plan pays for spending and tax cuts now by promising tax increases that wouldn’t kick in until 2013 — after next year’s elections — and would last through the rest of the decade.
His bill, which the White House submitted to Congress on Sept. 12, amounts to $194 billion in spending and $253 billion in tax cuts in the next couple of years, all of which is funded by raising taxes by $467 billion over the rest of the decade.
Combined, it amounts to a net tax increase of $214 billion to pay for the spending.
Although many of the spending and tax-cut items have had bipartisan support in the past, the tax increases Mr. Obama proposed instead have faced bipartisan opposition and have been rejected by Congress even when it was controlled by Mr. Obama’s own party.
The White House said that this year is different because the economy needs a boost, and the need opens the path for proposals that just a few years ago seemed impossible on the tax-increase side.
“We have choices to make. In order to invest in jobs and growth, we’re going to have to pay for it. And we’re going to have to look at quite a few things that we’ve looked at before and ask the question: Should we do this in order to add to growth and create jobs?” said Jacob J. Lew, director of the White House Office of Management and Budget.
Mr. Obama said the spending and the tax cuts he proposes in the 155-page bill are items that have had bipartisan support in the past.
But the ways he offsets those benefits have faced bipartisan opposition.
The bill calls for $467 billion in tax increases overall over 10 years, which would fund $447 billion in spending and tax cuts in 2012.
Most of the tax increases — $400 billion — would come from limiting tax deductions to the 28 percent level, which hits those who fall into higher income-tax brackets.
Mr. Obama has proposed that tax increase in previous budgets only to have it stripped out by Congress.
His bill also would remove tax breaks for oil companies, rewrite rules on taxes for corporate jets and tax some investment earnings at income-tax rates, rather than as capital gains.
“This would literally be tax and spend. That’s what this is — literally raise $450 billion and spend it,” said Douglas HoltzEakin, a former director of the Congressional Budget Office who now runs the conservative-leaning American Action Forum. “It’s one thing to say they’re paid for. It’s another thing to say I’m going to spend it now and pay for it after the election.”
Mr. Holtz-Eakin said the president’s plan appears to go after politically vulnerable targets such as oil companies and highincome taxpayers, but does not take a thought-out approach to a pro-growth tax policy.
“It’s an incoherent mishmash — it has no philosophy other than, ‘Let’s get some money,’ “ Mr. Holtz-Eakin said.
The White House, though, said the plan could spur job growth now while putting off the pain until after 2013, when the economy could be in better shape.
“In terms of timing, these provisions don’t take effect till Jan- uary 2013,” Mr. Lew said. “Between the fact that they’re not provisions that substantively should have that impact and they won’t even be on the books till January 2013, it’s very consistent in terms of paying for an immediate jobs and growth package.”
Liberal activists cheered the details, saying the bill hits the right targets.
“If President Obama focuses fully on taxing the rich and big corporations, that will be great news for America. The middle class has sacrificed enough, and it’s time for the rich and big corporations to finally pay their fair share,” said Adam Green, cofounder of the Progressive Change Campaign Committee.
Republicans said they will wait to see how the Congressional Budget Office evaluates the bill, but that some of the proposed tax increases are unlikely to fare any better than they did when debated in the past.
House Majority Leader Eric Cantor, Virginia Republican, said exchanging temporary tax breaks for permanent tax increases in future years is a bad deal for the economy.
“You look at what the president is proposing now with temporary relief for businesses on the tax side, as well as working people and the payroll tax, you look at the elimination of the existing tax rates at the end of next year according to the president’s plan, and you are creating a huge cliff and a tax increase that will go into effect,” he said.
President Obama presents a copy of his American Jobs Act bill on Sept. 12, challenging Congress to pass it quickly.