A new deficit narrative?
April 6, 2011 — Over the last few months, the debate over the 2011 budget has been focused on two questions: how much to cut, and from where? In February, Republicans in the House of Representatives approved $61 billion in cuts; Senate Democrats countered in March with $6.5 billion in cuts; by last week, $33 billion had become the magic number on the Hill. Then yesterday, House Speaker John Boehner insisted that $33 billion would not be enough.
House Democrats have been, for the most part, on the defensive, not challenging the fundamental premise that budget cutting is in fact necessary at this time. Recently, however, Representative Jan Schakowsky (D-IL) introduced a bill that would shrink the deficit by more than the $61 billion insisted on by House Republicans, but would not rely on program cuts to achieve that reduction.
Tax brackets under proposed
“Fairness in Taxation Act”
This table reflects the difference between current and proposed marginal income tax rates for married couples filing jointly. The Fairness in Taxation Act would add five additional marginal rates to be applied to income in excess of $1 million.
|$0 - 17,000||10%||10%|
|$17,000 - 69,000||15%||15%|
|$69,000 - 139,350||25%||25%|
|$139,350 - 212,300||28%||28%|
|$212,300 - 379,150||33%||33%|
|$379,150 - 1 million||35%||35%|
|$1 - 10 million||35%||45%|
|$10 - 20 million||35%||46%|
|$20 - 100 million||35%||47%|
|$100 million - $1 billion||35%||48%|
|$1 billion and over||35%||49%|
The proposed bill, called the Fairness in Taxation Act, would create five additional income tax brackets, starting at 45 percent for married couples making over $1 million dollars a year and increasing to 49 percent for people making $1 billion and over (see sidebar). The current top tax rate is 35 percent for people making $379,150 a year or more.
“I want to show that there’s a way to tackle the deficit without doing it on the backs of people who had nothing to do with this fiscal crisis,” Schakowsky said last week in an interview with Remapping Debate.
The Institute for Taxation and Economic Policy (ITEP) estimates that the proposed bill would raise $78 billion if enacted in 2011. “It would probably raise more than that in future years, as the economy improves,” said Steve Wamhoff, a policy analyst at ITEP.
That’s $17 billion more than House Republicans would achieve by cutting or eliminating funding for programs such as Pell Grants, Head Start, National Public Radio and high speed rail.
“People pay lip service to ‘shared sacrifice,’” Schakowsky said, “but the wealthiest have done absolutely nothing to sacrifice. I think it’s apparent to all that we have this problem of growing income inequality and the disappearing middle class, which I think is a problem of greater magnitude at this moment than the problem of the debt and the deficit.”
Schakowsky was referring to the fact that, over the last thirty years, income gains have been concentrated at the very top, while wages for the majority of Americans have largely remained stagnant. Currently, one percent of the population owns 34 percent of the country’s wealth, while the bottom 90 percent owns only twenty-nine percent of the wealth, according to the Economic Policy Institute.
“Income inequality is worse than it’s been since the Great Depression,” Schakowsky said. “The ones who sacrifice should be the ones who are most prepared to do so.”
Schakowsky said that she had no illusions that the proposed bill would actually pass, but she is trying to add co-sponsors and raise the bill’s visibility in an effort to make revenue part of the discussion about deficit reduction.
“Republicans have worked very hard for the last two years of the Obama Administration to create the perception that it has to be done through cuts alone,” Schakowsky said.
According to Wamhoff, Democrats are at least partly to blame for Republicans’ success in framing the deficit-reduction narrative around budget cuts.
“Republicans have been hi-jacked by an extreme anti-tax ideology,” he said, “but the Democrats are all over the place. There are a few [Democrats] on the Hill that are talking about raising revenue, but there are also some that are taking a much more conservative approach.”
Mike Lux, a strategist at the political consulting firm Progressive Strategies, L.L.C., agreed. “Democrats haven’t had much of a strategy on the deficit,” he said. “It’s just been reacting to things the Republicans are proposing and opposing the cuts. [The Fairness in Taxation Act] is the single strongest example of Democrats going on the offense when we’re talking about the deficit.”
Currently, the proposed bill has only 10 co-sponsors, most of whom, like Schakowsky, are members of the Progressive Caucus. Several other Progressive Caucus members said that, while they had not had a chance to read the proposed bill, they supported the concept of taxing millionaires and billionaires at higher rates.
High-ranking House Republicans have said that any revenue increase is “off the table,” though the deficit-reduction proposal set out last year by President Obama’s bi-partisan National Commission on Fiscal Responsibility and Reform relied on raising new revenue to account for one-third of a $4 trillion, 10-year, deficit cutting package. Schakowsky, who was a member of the commission, voted against the proposal and issued her own, which proposed to reduce the deficit by $441 billion by 2015 using new revenue for two-thirds of the reductions and keeping entitlement programs intact.