With the election just months away, President Obama is yet again putting “laser-like” focus on jobs and the economy – this time by pushing for an extension of Bush-era tax cuts for middle class Americans.
His proposal is a reboot of previously failed attempts to extend tax cuts to those making under $250,000 and increasing taxes on top earners.
The President likes to use tax issues to wage class warfare. Unfortunately, his ideas threaten economic growth at a time when our country faces certain recession.
Here are three tax reforms the President can implement if he is truly serious about helping the middle class and restoring economic growth.
1) Stop Waging Class Warfare on Small Business Owners
Small business creates 90 percent of new jobs in our country. So why would we saddle them with higher taxes?
Though small business owners may look rich on paper, these companies must file as individuals. Obama’s tax plan will leave small businesses with higher tax bills at a time when our economy desperately needs new jobs.
Even those within the President’s own party realize his tax proposal is a bad idea. Senate Democrats have already blocked a vote on his plan and Sen. Chuck Schumer and House Minority Leader Nancy Pelosi want to up the threshold for those getting tax cuts to $1 million.
Consider we did as the President wanted and raised taxes on the rich. That would only solve five percent of our current deficit problem. That means that 95 percent of deficit costs would need to be borne by middle and low-income earners. Sound fair to you?
If the President wants to help the middle class he would extend Bush-era tax rates for all income brackets for at least another year. This would be a boon to small business and the growing number of Latino entrepreneurs entering the market place.
2) Prevent Dividend Tax Increases for All Americans
Taxes on income aren’t the only things scheduled to increase at the end of the year. Come 2013, the current federal tax rates on dividends and capital gains will also expire. Dividend rates alone will go up a staggering 190 percent.
The rise in these rates is alarming, considering that many seniors supplement their retirement incomes with earnings gained through mutual funds, pension funds, life insurance policies and 401(k) plans.
And if you think the increase in dividend rates is just a problem for the One Percent, think again.
According to IRS data from 2009, 70 percent of all tax returns with qualified dividends were filed by those with an adjusted gross income of $100,000 or less. Sixty-two percent of those filing dividend returns were age 50 and older. This means that a majority of people that will be hit with higher taxes are those that need extra income the most – the poor and the elderly.
Lowering dividend rates won’t only be good news for these investors, but it will also make it easier for American companies to raise the capital they need to fund investment and grow their companies.
3) Replace ObamaCare
The biggest threat to the middle class comes in the form of new taxes that are necessary to support the President’s health care reform bill.
Not even taking the tax penalty into account, there will be a slew of tax increases in the next three years just to pay for the $2.6 trillion debt the Affordable Care Act adds to the budget.
We all want health care for every American. But the reality is that someone has to pay for reform and one percent of the population cannot possibly shoulder all the costs – which means the middle class will end up paying a bulk of the tab when the President’s reform bill comes due.
President Obama knows that he can’t win reelection with a weak economy. Instead of pushing for workable tax solutions he is depending on class warfare to distract voters from his dismal record on job creation. Come November he will find that Americans are not so easily fooled.