January 12, 2011
Dear Attorney Holland,
I am voting no on the tax deal agreed to by President Obama and the Republicans. I do not think it is consistent with the focus that we should have on reducing the deficit in ways that are economically responsible; and I think that it is motivated in part by people who profess to be concerned about the deficit but in fact are hostile instead to efforts to improve the environment, enhance transportation, and provide important support for state and local government functions.
I voted for the bill that came forward that would have continued the 36% tax rate for people making less than $250 thousand, and would have raised it to 39% for that part of income above $250 thousand – it is of course the case that the first $250 thousand for anybody's income would have stayed at 36%. I voted for the 39% rate for higher income people in 1993 when Bill Clinton asked us to do so, and the evidence is very clear: predictions that this would be economically disastrous were simply untrue. The economy in the years following that increase at the upper levels of an amount of less than 10% of the tax owed on that income was followed by one of the best economic periods in our history.
Even if people do not believe that the one caused the other, although I think it contributed by allowing us to do more expansive monetary policy, the fact is that the increase to 39% from 36% had no negative impact. I believe that that would be the case if we were to have done the same this year. That is, I do not think that telling people who are making $400 thousand or $500 thousand a year that they will be taxed an additional $3 thousand per $100 thousand of income above $250 thousand will have any measurable effect on their spending habits. And the price we pay for this is a substantial reduction in government revenues -- $700 billion over a ten year period.
I know there are those who argue that reducing taxes will reap more government revenue. My view on that was best expressed by Alan Greenspan – who told a Member of Congress who asked him if it wasn't true that reducing rates would mean higher revenues that "this is theoretically possible, but it has never happened in my (Greenspan's) lifetime." In fact, when President Reagan persuaded Congress to make a very substantial reduction in taxes in 1981, he partially reversed himself by supporting a tax increase in 1982, and as David Stockman, then Budget Director, has acknowledged, the notion that the drastic rate reduction would cause an increase in revenues was not borne out.
I also disagreed with the estate tax compromise. I voted for a bill that would have raised the $1 million exemption that had previously existed to $3.5 million per person, that is $7 million for a couple, and had a maximum rate of 45%. Instead this compromise makes $5 million the cutoff point and has a maximum rate of 35%. This affects only a tiny handful of estates, but costs the government significant revenues because it is estates in the hundreds of millions that will benefit enormously from this and it is there that significant revenue loss will happen.
Because I believe that it adds substantially to the deficit without any consequent economic improvement, I opposed allowing a continuation of the 36% rate and I favored allowing current law to stay in effect, which would have been to bring it to 39%. That is why I voted against the package.
As to the unemployment, I believe it is a complete disgrace that right-wing Republican ideologues have blocked extension of this vital compensation. I will continue to support legislative efforts to extend unemployment benefits until we are successful.
I believe that President Obama ought to promise a veto of any tax bill that would drive the Federal deficit up (including a tax bill extending tax breaks to the rich), because a few hundred dollars just doesn't make that much difference when you're driving a Mercedes and have a undocumented immigration cleaning your house and raising your children for you.
It's clear as day that the Republicans want to create massive Federal deficits so that they can have a reason to cut social programs, like Social Security, medical assistance and even help for veterans of the Iraq/Iran/Pakistan war.
If, as they old white men in the US Congress insist, the country is spending itself into a hole, then why not increase taxes on the richest Americans in order to get out of that hole? The Republicans and too many of the Democratic Party Republicrats are not being honest with the public. They want to blow a hole in the budget by giving tax breaks to the rich and then "fix" the hole by discontinuing life support benefits from the 15 or 40% of Americans who are unemployed or underemployed right now.
Once again, I believe Obama should veto any tax bill that does not include added taxes on the rich. The uncertainty around continued unemployment benefits and other Govenment programs would put pressure on the Republicans to explain compellingly why they want to give money to the rich while taking it from the poor.