Report Validates Toomey Budget Stand
FOR IMMEDIATE RELEASE: March 27, 2013
Contact: E.R. Anderson (202) 224-8609
or Bill Rivers (202) 228-6837
WSJ CITES KEY REPORT AGREEING WITH SEN. TOOMEY:
DEMOCRAT BUDGET IMPOSSIBLE WITHOUT HIGHER TAXES
WASHINGTON, D.C. – In case you missed it, yesterday’s Wall Street Journal highlights a Congressional report that makes a case similar to a point made by Senator Pat Toomey during the recent budget debate that the Democrats’ fiscal plans and increased spending appear impossible to achieve without raising taxes on the middle class.
Sen. Toomey said, "Our friends who are introducing this budget are suggesting that all of this is not enough: we need yet another big tax increase, in fact, we need a giant one of 1.5 trillion dollars over the next 10 years in new, additional taxes. I’ve got news for you: I don’t see how this can be done without significant tax increases on middle-income Americans."
The Wall Street Journal says, "Mr. Obama’s plan would have to be changed to target many more Americans, reaching the middle classes — a group he has repeatedly vowed to protect. Otherwise, Mr. Obama would have to look elsewhere for revenue."
The complete article is below.
The Wall Street Journal
Tax Panel: Democrats’ Budget Needs to Cut More Tax Breaks
By Siobhan Hughes
A congressional tax report found that President Barack Obama’s strategy for raising taxes won’t fly on its own since it couldn’t raise the $975 billion called for under the Senate Democratic budget.
The Senate early Saturday passed a Democratic-written budget that would raise $1 trillion over 10 years. The problem is that President Obama’s idea for raising taxes by curbing certain individual breaks — an idea that gained attention last year when GOP nominee Mitt Romney advanced a similar plan — would not produce that much.
How could Mr. Obama’s proposal be modified to raise about $1 trillion? The Joint Committee on Taxation answered that question in response to a query from an unnamed lawmaker who raised the issue. The short answer is that Mr. Obama’s plan would have to be changed to target many more Americans, reaching the middle classes — a group he has repeatedly vowed to protect. Otherwise, Mr. Obama would have to look elsewhere for revenue.
The tax analysts studied Mr. Obama’s budget plan from last year in which the president proposed limiting the value of itemized deductions and exclusions to 28% of the value of total tax breaks claimed. If a taxpayer with $1 million in income claimed $100,000 in deductions, those deductions would be worth $28,000 instead of the $39,600 that is effective starting this year.
Mr. Obama’s plan also applied to benefits and other items that typically enjoy tax exclusions. For example, money put aside for retirement in a 401(k) plan would be newly subject to taxes, with a deduction of 28% replacing a policy that allows people to contribute to retirement accounts tax-free. The maximum contribution to a 401(k) plan for this year is $17,500.
The Joint Committee on Taxation concluded that the maximum amount for itemized deductions would have to be lowered to 26.5% from 28%. Put another way, tax breaks would be less generous than Mr. Obama proposed.
Mr. Obama also had another safeguard to protect the middle classes from tax hikes. His plan would have shielded households making less than $250,000 or individuals making less than $200,000 from the tax increases.
The tax analysts found that Democrats would have to get rid of that protection and expose lower earners to tax increases, if they relied on individual tax breaks alone. For the 2012 tax year, households making as little as $122,300 a year in taxable income and individuals making as little as $85,650 fall into the 28% tax bracket. These taxpayers would have to start paying higher taxes to raise $1 trillion and stick within the broader budget framework proposed by Mr. Obama.
Mr. Obama is expected to release his fiscal 2014 budget early next month, testing whether he wants to more closely align his plans with the Senate Democratic budget. In the meantime, Senate Democrats have decided not to get specific about how they would raise $1 trillion. Senate Democrats aren’t limited to raising taxes on individuals, and could also use other strategies, such as raising taxes on corporations or proposing other ways to raise revenue. But they haven’t said what mix of tax increases they expect to use.
"That’s for a good reason," Sen. Ben Cardin (D., Md.) told reporters last week. "Because that becomes the story and we don’t want that to be the story at this point. I don’t think that’s healthy."
Senator Pat Toomey
502 Hart Senate Office Building
Washington, D.C. 20510