The Daily Rundown | April 10, 2012
>>> lot of rhetoric about taxes this week, whenever it's the week before tax day . so in today's "deep dive," he wanted to take a look at who is telling the truth about what's on the way. president obama , few people if anyone have seen their taxes go up, basically if you enjoy tanning booths . most people have seen a tax cut , either through the stimulus, the payroll tax cut holiday or the extension of the bush tax cuts , although he doesn't want to call them that. '01 and '03. the president made the argument in order to balance out those cuts, the wealthiest americans need to kick in more. enter, the buffett rule.
>> simple concept. if you make more than $1 million a year, not that you have $1 million, if you make more than $1 million annually, then you should pay at least the same percentage of your income in taxes as middle class families do.
>> truth is, if you're making $1 million from your wages, your tax rate is 35%. but that's for regular income. if, on the other hand, your money comes from investments, you're taxed at a different rate, at about 15%. the president wants to eliminate that distinction forrel millionaires and tax it all at a rate that could be even higher if the bush tax cuts basically don't get extended. the fate of those cuts will go a long way towards determining tax rates going forward. the president would prefer to preserve cuts for the middle class and let the cuts for the rich expire. to $50,000 or higher. that would require another last-minute deal in congress . mitt romney , for his part, has proposed keeping the bush tax cuts in place, slashing tax rates for people at every income level, and eliminating the capital gains tax for people making under $250,000. now, in february, romney hinted he would probably try to squeeze more money out of the top 1% to pay for it all but didn't say how.
>> i want to make sure you understand. for the middle income families, charitable contributions, those things will continue. but for high-income folks, we're going to cut back on that so we make sure the top 1% keeps paying the current share they're paying or more.
>> the tax policy center says under romney 's plan, only 3 in 4 americans would see taxes go down and revenue to the government would drop, as well. but all of this discussion may be ignoring the elephant in the room . it's a tax burden that is set to explode at the beginning of 2013 . some are calling it a tax code astrophy, a string of tax cuts that would kick in on january 1st , 2013 . the tax holiday is scheduled to run out. the estate tax would rise. the child tax credit would shrink and a string of tax provisions related to the president's health care reform law would also kick in. one of them, the tax on indoor tanning has been in place for two years. looking at a worst-case scenario, taxpayers could be on the hook for a half trillion dollars for 2013 alone that would equal more than $3,000 for every american household but that wouldn't be spread evenly. it's a confusing argument. joining me now, jim tanker, economic correspondent for "the national journal ." want to separate a little of this rhetoric from reality. a simple question. has anybody's individual taxes gone up under this first term of the obama presidency?
>> if we're talking individual tax rates , no. it sure doesn't look like -- again, if you own a tanning booth , or a tanning salon, yes, you're paying more. but if you're talking about your individual income tax rates, like you and i and most americans who are about to file on their tax forms, no. in fact, most people have seen, as you were noting earlier, taxes go down because of things like the payroll tax cut.
>> so their tax bill to the federal government has gone down. for some people, their state property taxes have skyrocketed because you have local and state governments desperate for revenue.
>> right. and remember also, the reason taxes haven't gone up, we have borrowed a lot of money. borrowing money now, as milton friedman famously said, is taxing later. so this is eventually someone is going to have to pay, either in reduced government spending or higher taxes for the tax -- the lower taxes we have enjoyed right now.
>> one of the things i always like to say, if congress truly were do nothing, we would probably solve this deficit crisis a lot sooner. because when they fix things, they put off basically they're putting off a tax hike. so in this case, what's happening at the end of this year, you have the expiration of the bush tax cuts .
>> you have the expiration of the payroll tax holiday, the expiration of an increased income tax credit for folks with children living at home. if all of those get eliminated, we go a long way to dealing with this deficit, do we not?
>> yeah, deals with the deficit a lot. but also, probably destroys the recovery. if you look at almost any independent projection from like wall street analysts or what not, of what the economy is going to do next year, if you assume that all of those things expire, nothing gets extended, basically congress grid locks in the lame duck session , you are looking at very slow to maybe no growth at all next year, because of the huge wallop that is pulling that consumption out of the economy because of higher taxes.
>> all right. looking at the romney plan, one thing is we don't seem to know -- president obama has talked about tax reform , but he put out a budget that just simply such simply assumed that the upper income tax rates would be put up. but he does talk about -- he doesn't talk specifics. romney puts out a tax plan that, again, doesn't deal with -- he talks about deductions he's going to eliminate, but doesn't deal with specifics. paul ryan did the same thing, and he said, oh, i'm not on the ways and means . i'm not in charge of ways and means , i'll let somebody else deal with that. what taxes are going to go up on people, even if mitt romney is president of the united states ?
>> of look, if -- look at it a different way. if you really want to raise enough revenue to have -- even a revenue-neutral tax reform , where you lower rates by a lot, there's only a few really big pots of money and tax expenditures . the biggest are the home mortgage interest deduction and health care deduction.
>> and both of those are something mitt romney doesn't want to talk about.
>> well, nobody does. those are very politically popular tax -- in fact, i was saying for a while, with paul ryan , it's interesting he has the courage to talk about medicare and entitlement programs , but not the courage to talk about mortgage interest. right?
>> or even talk about raising -- raising taxes on anybody.
>> right. that's the amazing part of this. yeah, those are -- those are tax -- credits or deductions that economists would say are distortionnary and hurt the economy. and we want to simplify the tax code . but when you have them be so politically popular, it is very, very hard to get rid.
>> on november 7th , who is in charge of getting this -- we're going to have this tax code armagedd armageddon. the whole thing is going to get shrunk down into this five-week window right after the election. obviously, what happens in the election will influence the debate about where this is going. is congress capable of this?
>> well, i mean, it depends -- this is congress , right?
>> there are tax plans all over the place.
>> ready to go.
>> if you assume that this election is going to solve everything, and send a clear message from the american public about what they want done with entitlements, tax rates and whatever, yeah, congress has an easy time. i don't think that's going to happen. i think you get a mixed message and a big fight and then the question becomes, do they actually sort of come up with some grand compromise to keep this big macro shock from happening, or do they just punt and extend everything by like six more months and the next president and next congress deal with it.
>> jim tankersley, i wanted clarity. the problem is there is no clarity.