President Obama’s claim that the cliff deal reduced the deficit by $737 billion earned only one Pinocchio from the Washington Post’s Glenn Kessler. The fact is that the deal cost $3.8 billion in lost revenue over ten years, and middle class families––who supposedly didn’t have their taxes raised––are losing the payroll tax break which the President claimed as part of his tax cut during the campaign.
But Obama deserves at least one more Pinocchio for pretending the tax rate hike truly impacts the wealthiest 2 percent of Americans. In fact, it only impacts to any meaningful extent high salary wage earners (like pro athletes). As Rush Limbaugh and others have pointed out, the deal doesn’t impact Warren Buffet and the truly wealthy whose income is derived from capital gains or carried interest (which is income that is treated as a capital gain). Warren’s rate will only go from 15% to 20%––which is still less than his secretary will pay if she earns more than $36,250 (assuming she’s single or she and her husband earn more than $72,500.)
Here’s Kessler’s conclusion: “In effect, Obama is arguing that eliminating the tax cuts for the wealthy reduces the projected deficit, but keeping tax cuts for all other Americans…has no impact on the deficit.” Further, the end of the tax holiday is not a tax increase because it was deemed to be temporary. Got it?!
Why is any of this important? If we’re not used to Washington truthspeak by now, we haven’t been paying attention, right? The point is that Obama and the Democrats can’t and won’t stop with this victory. They will need more revenue in order to implement their agenda. Therefore, like the Communist Party of the Soviet Union, which claimed they had gotten rid of all the capitalists until they needed to impose some new harsh measure and therefore found some vestiges of capitalism that had escaped their prior house cleaning, the Democrats are suddenly going to discover that the wealthy still aren’t paying their fair share––only this time, they’re going to have to include more people in the “wealthy” category in order to meet their spending needs.
Limbaugh argues the Democrats can’t touch the truly wealthy because they are dependent on them for campaign contributions. So, look for wage earners in the $250,000 to $450,000 category to be the sacrificial lambs in the next Democratic Party tax deal. How many Pinocchios would you give them?