Yes You Can, No You Can't - Obama's Shifting Position on Tax Reform, Hiking Tax Rates

December 5, 2012 - 4:22 PM

Obama Fiscal Cliff

President Barack Obama pauses as he speaks about the fiscal cliff at the Business Roundtable, an association of chief executive officers, in Washington, Wednesday, Dec. 5, 2012.  (AP Photo/Charles Dharapak)

(CNSNews.com) – The White House on Wednesday sought to explain why President Barack Obama, who previously said that closing tax loopholes and deductions could raise sufficient revenue, now insists that only raising tax rates will do.

On July 22, Obama was clear when he said at a press conference during negotiations on raising the nation's  the debt ceiling:

“What we said was, give us $1.2 trillion in additional revenues, which could be accomplished without hiking taxes -- tax rates, but could simply be accomplished by eliminating loopholes, eliminating some deductions and engaging in a tax reform process that could have lowered rates generally while broadening the base.”

On Monday, House Speaker John Boehner (R-Ohio) seemed to do just what Obama had mentioned, offering a proposal that would increase taxes by $800 billion through doing away with certain loopholes and deductions. The proposal includes deficit reduction and entitlement reform.

But Obama has rejected the GOP proposal, saying Wednesday that there “was the belief that either, A) We could balance our budgets entirely on spending cuts, or a variation that has emerged is, is that we can do so while still lowering rates simply by closing loopholes and deductions.”

“And you’ve heard from my team -- but let me just repeat -- we don't have any objection to tax reform, tax simplification, closing loopholes, closing deductions, but there is a bottom-line amount of revenue that is required in order for us to get a real, meaningful deficit reduction plan that hits the numbers that are required for us to stabilize our debt and deficits.” Obama said in remarks to the Business Roundtable Wednesday.

“And all the math that we've done -- and we analyzed this stuff pretty carefully -- shows that it is not possible for us to raise the amount of revenue that's required for a balanced package if all you are relying on is closing deductions and loopholes.”

During Wednesday’s daily press briefing, Jason Furman, deputy director of the White House National Economic Council, said there was no contradiction between the president’s July position and now.

“First of all there was a different context for the discussions then and the discussions now,” Furman said.

“Second of all, let’s look at how that agreement was struck. They had offered that, on Jan. 1, 2013, the middle class tax cuts would be made permanent and the high income taxes would go back to the Clinton era rates if tax reform didn’t succeed,” Furman said.

“Under that plan then, we would have had the decoupling the president is talking about. It would have happened on the same time-scale the president is calling for. The last point I’d make is that all argument centers around the plausibility and the desirability of the tax reform. Is it politically plausible to raise taxes on the middle class, to limit the charitable deduction? Is it economically desirable to do those things?” Furman said.

Furman said “97 percent of households in the top 1 percent of income would lose any tax incentive for additional charitable giving.”

However, Obama, in a March 24, 2009 press conference said that he favored limiting tax deductions for the wealthy, including the charitable tax deduction.

A reporter asked: “But it's not the well-to-do people, it's the charities. Given what you just said, are you confident the charities are wrong when they contend that this would discourage giving?”

Obama replied: “Yes, I am. I mean, if you look at the evidence, there's very little evidence that this has a significant impact on charitable giving,” Obama said in 2009. “I'll tell you what has a significant impact on charitable giving, is a financial crisis in an economy that's contracting.”

Obama’s plan would hike taxes by $1.6 trillion through increased rates and no budget cuts.

House Republican Conference Chairwoman Cathy McMorris Rodgers (R-Wash.) said this would harm the economy.

“This will only hurt our economy. [The accounting firm of] Ernst & Young has done an analysis of the president’s proposal and said that it would cost 700,000 jobs, at a time when our economy continues to struggle,” McMorris Rodgers said in a press conference Wednesday. “There’s a better way and the Speaker has laid it out.  It is an approach that calls for tax reform, by reforming the tax code, and passing responsible spending cuts in order to get our fiscal house in order.”

The Hill newspaper reported that moderate Democratic Sens. Mark Warner and James Webb of Virginia, Mary Landrieu of Louisiana, Jon Tester of Montana, Claire McCaskill of Missouri and Mark Pryor of Arkansas have refrained from endorsing the president’s plan.

Senate Minority Leader Mitch McConnell (R-Ky.) said Obama should act more like a “steward of the nation’s finances.”

“The only reason Democrats are insisting on raising rates is because raising rates on the so-called ‘rich’ is the holy grail of liberalism,” McConnell said. “Their aim isn’t job creation. They’re interested in wealth destruction. But the President needs to realize he wasn’t elected President of the hard-left wing of the Democratic Party.”