Republicans Should Support Obama’s Budget If They Truly Care About Income Inequality
President Obama unveiled his annual budget on Monday, touting a number of proposals to put “more money in middle-class pockets,” including a tax hike on the wealthy and tax credits for working families. Republicans in Congress are likely to scrap most of his proposals. But if the party is sincere about shrinking income inequality — as prominent politicians have claimed ahead of the 2016 election — the president’s policies deserve a closer look.
“The Obamanomics that we’re practicing now have exacerbated inequality,” House Ways and Means Committee Chairman Rep. Paul Ryan (R-WI) said in an interview on NBC’s Meet the Press. “They’ve exacerbated stagnation. They’re made things worse.”
Ryan’s response to the budget echoes the chorus of conservatives who have asserted that Obama’s policies have created the current income gap. “Frankly, the president’s policies have made income inequality worse,” House Speaker John Boehner (R-OH) said on CBS’s 60 Minutes recently. Sen. Rand Paul (R-KY) also said last weekend that “the reason… the economy is getting better is despite the president, and despite the president’s policies,” while likely 2016 candidate Jeb Bush noted that “while the last eight years have been pretty good ones for top earners, they’ve been a lost decade for the rest of America.”
But each of the proposals included in Obama’s new budget are actually likely to decrease the gap and help working-class and poor families.
One of Obama’s major budget proposals would generate $320 billion in taxes over the next ten years by raising the capital gains tax and the tax rate on Americans making more than $500,000 a year. Research has shown that the low capital gains tax rate has been one of the biggest drivers of inequality. The proposal also calls for higher taxes on large financial institutions and a new tax on inheritances.
As Obama has argued, higher taxes on the wealthy could pay for subsidies and programs to help those on the other end of the wage spectrum. Obama’s earlier tax policy changes are proof of this; the income gap between the rich and the poor narrowed significantly more than under George W. Bush’s tax code. The gap between the rich and the middle class also narrowed, according to a Washington Post and Tax Policy Center analysis.
Obama’s new budget also calls for expanded access to the earned income tax credit for workers without children, a $500 second earner tax credit and a $3,000 childcare tax credit. All three of these initiatives would help alleviate the burden of working class individuals and families, no matter what their family structure may be.
The Treasury Department estimates that those proposals would benefit more than 44 million households with an average benefit of $600 a year – a crucial amount for a family struggling to pay rent or put food on the table.
The budget also includes measures to help workers and keep the unemployment rate on the decline, including a 1.3 percent pay raise to military and federal employees — slightly higher than the raise granted for the last two years. According to the Office of Management and Budget, the unemployment rate should fall to 5.4 percent by the end of the year.
Obama’s proposals aim to continue the successful job growth that has occurred during most of his two terms, leading to the largest annual unemployment rate drop in the last 30 years. “American businesses set a new record for the most consecutive months of job growth: 58 straight months and a total of 11.2 million new jobs, and counting,” the budget proposal states.
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This has been reposted from Think Progress.
