Jobs plan paid for . . . but with tax hikes in years to come

The Washington Times Weekly - - Politics - BY STEPHEN DI­NAN

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.

AS­SO­CI­ATED PRESS

Pres­i­dent Obama presents a copy of his Amer­i­can Jobs Act bill on Sept. 12, chal­leng­ing Congress to pass it quickly.

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