Fiscal Cliff: Rich Tax Should Repay Federal Debt [Op-Ed]
Commentary | President Obama and the Democrats want higher taxes on the rich in order to avoid the Fiscal Cliff deadline. If they get their desire, Republicans should require as a middle ground that the increase in revenue go directly to repaying Federal debts. In addition, any tax increases must be separated categorically in order to prevent harm to small businesses.
As previously reported by The Inquisitr, Republicans are getting the 53 percent majority (which happens to the percentage who voted for Obama) of the blame if we go over the Fiscal Cliff. We have analyzed the likely Democratic party political strategy, and, as things stand, Republicans are in a lose-lose scenario when it comes to public opinion. So how could they turn the tables?
Republicans have already fielded several alternatives in Fiscal Cliff negotiations. They suggested that the rich be taxed more in other ways besides the Democrat’s wish of increasing the top marginal tax rate, which also has the negative side effect of harming 48 percent of small businesses. There’s even been talk about find a middle ground between 35 percent and 39.6 percent. But so far Democrats have stood their ground, shooting down all ideas, even though their original plan called for raising taxes only on those making more than $1 million, not $250,000 as currently planned. They probably feel that the lack of change from the 2012 Elections and the Obama presidency entitles them to a stronger negotiating position.
In the past, we’ve fielded the suggestion that Republicans should create a new top-bracket marginal income tax rate specifically designed for the ultra rich. In addition, let us say the only reason Republicans should cave into the Democrat’s current plan is if the extra percentage of revenue is declared by law to be only for paying off the national debt. Historically, this only makes sense. Governments have a long history of raising taxes to fix their budget woes by increasing revenue only to increase their spending beyond the new revenue increase.
Obama’s budget plan for 2013 calls for $3.67 trillion in spending, but seven percent of that is reserved for paying off Federal debt. Republicans should pressure the Democrats by going on live TV to say that they agree to the new tax on the rich but only if it repays Federal debt. Democrats would look bad if they disagree.
This action would require the rich tax increase to be separate from the marginal tax brackets, but that’s good because of small businesses. Small businesses account for 99.7 percent of employment in the US and create more than 50 percent of GDP. Because 48 percent of small business income flows through to personal income taxes, the tax code would need to make a distinction and separate these 48 percent from this new tax on the rich that pays off debt.
While this idea would not solve the long term Federal budget problems, it may serve as a middle ground for Fiscal Cliff negotiations. What do you think about this idea?