The Big Debate: Should We Raise Taxes on the Rich or the Poor?
Ezra Klein has said this before, and I'm pretty sure I've said it before too—possibly by linking to Ezra saying it—but it bears repeating: Both Democrats and Republicans want to raise taxes on certain people. The main difference is which people they want to raise taxes on:
Democrats do want to raise taxes on families making more than $250,000. You sometimes hear Democrats say they just want to "restore the Clinton-era rates" for these folks, but that's misleading. In addition to letting the Bush tax cuts expire, the White House wants to add about $700 billion in further tax increases on these taxpayers. And that's in addition to the high-income taxes passed in the health-care law. Under Obama's plan, taxes on the richest Americans would be much higher than under the Clinton tax code.
So yes, Democrats want to raise some taxes. But so do Republicans. They want to let the payroll tax cut and the various stimulus tax credits (notably the expansion of the Earned Income Tax Credit and the Child Tax Credit) expire. Those are the tax cuts that primarily help poor and middle-class Americans. In fact, 87.8 percent of the payroll tax cut's benefits go to taxpayers making less than $200,000 and 99.9 percent of the stimulus tax credits' benefits go to taxpayers making less than $200,000.
But you want numbers, don't you? How much do Democrats want to raise taxes on the rich? How much do Republicans want to raise taxes on the poor? This is a little tricky, since the healthcare taxes Ezra mentions are a done deal. They really shouldn't be counted as part of the fiscal cliff negotiations at all. What's more, I don't have numbers for the entirety of Obama's most recent proposal. However, the Tax Policy Center gives us a good rundown of the major points of contention in the chart below, which I've compressed and annotated. Bottom line: allowing the payroll tax cuts and the stimulus tax cuts to expire will raise taxes on the poorest Americans by nearly 3 points. Allowing the high-end Bush tax cuts to expire will raise taxes on the richest Americans by nearly 4 points. Take your pick.