Treasury Secretary Timothy Geithner insisted Monday that the administration’s proposals to raise taxes mainly on businesses and the rich would not further limit an already struggling economy.
He also cast President Obama’s tax proposals as an effort to make the tax code more fair — an argument the administration is using to rally his base and fight back at GOP assertions that the tax hikes will hurt the economy.
“If Congress were to meet those basic principles he laid out, then I am very confident that the modest changes we’re suggesting in terms of revenues would have — would make the economy stronger in the long term, not weaker in the long term,” the Treasury secretary told reporters during a press conference laying out Obama’s proposals.
One of those principles, the “Buffett rule,” is named after the investor Warren Buffett and declares that the wealthiest taxpayers should pay a larger share of their earnings to the government than middle-class families.
Administration officials on Monday did not spell out how the Buffett rule would work, instead describing it as a guidepost for a revenue-raising overhaul of the tax code that also lowered rates.
“How you achieve that principle, the Buffett principle, depends on the shape of the basic reforms,” Geithner said.
The Buffett rule and proposed tax hikes were made in the context of a $4.4 trillion deficit-reduction plan, but new spending cuts made up a small portion of that total sum.
The proposals are also intended to pay for Obama's jobs proposal, and add up to about $4.81 trillion in total.
This includes the $1.2 trillion in cuts enacted in August after Congress approved a deal to raise the nation’s debt ceiling. Tax hikes on businesses and the rich make up $1.5 trillion, while reducing interest payments saves another $430 billion, according to a White House fact sheet.
Most of the reduced spending, $1.1 trillion, comes from the drawdown of troops in Afghanistan and the transition to a civilian-led mission in Iraq. Besides those savings, only $580 billion comes from reduced spending.
Maya MacGuineas, the president of the Committee for a Responsible Federal Budget, declared that the president’s plan needed to be bulked up on the spending side, noting the expected savings from the end of the two wars.
“I think it’s great that the president’s embraced the notion that the supercommittee needs to go big,” MacGuineas said. “But if you peel back the layers, there really aren’t enough cuts in this plan to really get us where we need to go.”
As details of the Buffett rule began leaking out over the weekend, Republicans started blasting the president’s plan as just the latest Democratic attempt at class warfare. Business groups have also panned the proposal.
Conservatives have also expressed concern that taking aim at the wealthy could hurt investment. As Buffett himself has noted, one of the key reasons top earners have a reduced tax bill is that capital gains are taxed at a lower rate than income.
“Tax increases thinly veiled as tax reform isn’t reform,” Sen. Orrin HatchOrrin HatchOvernight Finance: House passes spending bill as shutdown looms | Fate in Senate unclear | Labor groups pan Trump's Labor pick Mnuchin, Price meet with GOP senators Overnight Finance: Trump blasts Carrier's union leader | What's in the spending bill | Jamie Dimon gets perch for Trump era | AT&T, Time Warner execs grilled MORE of Utah, the top Republican on the Finance Committee, said in a statement. “It’s time for a new approach that puts the American people back in charge built on a simpler, fairer tax code, reformed entitlements, and reduced federal spending.”
But Geithner argued introducing reforms that increase taxes on the wealthy is the best way to ensure the government can fund necessary programs for the poor and middle class while reducing deficits at the same time.
“If you try to return this country to living within our means, if you try to restore financial soundness to the basic fiscal trajectory of the United States, and you do so without modest changes in revenues, then you’re just adding to the burden of people that have already borne so much of the burden of this crisis,” Geithner said.
Democrats on Monday largely leaped to the president’s defense, noting that a slew of polls this year have reported that the majority of Americans believe the wealthy should pay more to help reduce the federal deficit.
Democrats also cited statistics showing that the top 400 earners in the country had seen their income skyrocket in recent years, even as they paid a lower share in taxes. And other observers have asserted that only a relative handful of taxpayers reporting small-business income make enough to be hurt by increasing taxes on the wealthy.
“More than anyone else, these millionaires and billionaires benefited from Bush tax cuts and contributed $3 trillion to our deficit to help plunge this nation into a financial hole,” Senate Majority Leader Harry ReidHarry ReidClinton reappears on Capitol Hill for Reid send-off Pressure grows on Perez to enter DNC race Overnight Tech: Last-ditch effort to get Dem FCC commish confirmed | Facebook's Sandberg on fake news | Microsoft completes LinkedIn deal MORE (D-Nev.) said on the chamber floor on Monday.