Today, Secretary of the Treasury Timothy Geithner delivered a speech at the Center for American Progress, laying out the case for the Obama Administration’s tax hike proposals. Americans for Tax Reform has released a point-by-point rebuttal, below:
GEITHNER CLAIM #1: "The debate we now confront is whether to extend tax cuts for the middle class, which are due to expire at the end of the year; and whether to allow tax cuts for the top two percent of Americans, those with annual household incomes of at least $250,000, to expire, as scheduled."
FACT: Actually, current law calls for a tax hike on everybody.
President Obama has had 18 months to stop tax increases on working families. Why hasn't he done it, and why should we believe him when he's already raised taxes on the "middle class" in Obamacare?
GEITHNER CLAIM #2: "Now some have argued that even if only a few percent of small business owners make over $250,000, these few make up a vast amount of supposedly small business income. This argument apparently counts anyone who receives any type of partnership or business income as if they were a small business. By this standard, every partner in a major law firm and every principal in a major financial institution would count as a separate small business. A CEO who has board fees or speech fees would also count as a small business owner under this overly broad definition."
FACT: There are eight million partners and S-corporation shareholders in America. Are they all "fake entrepreneurs?"
GEITHNER CLAIM #3: "We believe the best way to do that is by allowing the tax rate for the top two percent to go back to levels seen at the end of the 1990s, a time of remarkable growth and economic strength."
FACT: Both current law and the Obama budget call for higher taxes than those seen in the 1990s.
GEITHNER CLAIM #4: “[Extending tax cuts for the top 2 percent would be among the least effective forms of stimulus]because the top 2 percent are the least likely to spend those tax cuts, certainly not in comparison to the 98 percent of Americans who make less than $250,000 per year. While they would surely welcome an extended tax cuts, it's not likely to change their spending habits.”
FACT: In fact, as the New York Times reports, “the top 5 percent in income earners — those households earning $210,000 or more — account for about one-third of consumer outlays, including spending on goods and services, interest payments on consumer debt and cash gifts, according to an analysis of Federal Reserve data by Moody’s Analytics. That means the purchasing decisions of the rich have an outsize effect on economic data”.
GEITHNER CLAIM #5: "And America is a less equal country today than it was ten years ago, in part because of the tax cuts for the top 2 percent put in place in 2001 and 2003. The most affluent 400 earners in 2007 – who earned an average of more than $340 million dollars each that year – paid only 17 percent of their income in tax, a lower rate than many middle class families."
FACT: Actually, the IRS reports that the top 1 and 5 percent of income earners paid a larger share of total income taxes at the end of the decade than at the beginning. The top 1 percent (those earning more than $400,000) paid 37 percent of all income taxes in 2000, but 40 percent in 2007 (latest data year). The top 5 percent (those earning more than $160,000) paid 56 percent of all income taxes in 2000, but 61 percent in 2007.
In other words, the tax code got more progressive over the past decade, not less. The top income earners in America (which includes a majority of small business profits) are paying a higher share of income taxes than ever before. The bottom half of earners pay virtually no income tax whatsoever (less than 3 percent of income taxes paid.