Obama Goes for the Tax Increase

This morning's headlines say that president Obama is "calling on Congress" to extend the Bush tax cuts for the middle class now. In the media, this is portrayed as a tax cut for the middle class even though, if Congress complied, the taxes for middle income families would not change. That's right, the proposal is to keep tax rates the same for the middle income but to raise them for the wealthier folks. With the scheduled increase in tax rates set to kick in on January 1, 2013, it has been inevitable that Obama would make this pitch. The key point here is that the Republicans also want to extend the current tax rates for middle income folks; they also want to keep the current tax rates for everyone. The real fight is over Obama's plan to raise taxes on the wealthy.

I have to assume that the Republicans in Washington have planned how they will respond to this all too predictable move by Obama. Hopefully, the House will pass a bill that extends all the current tax rates covering income and estate taxes both. That can then go the Democrat controlled Senate for a vote. I predict that Harry Reid will not allow the bill to reach the floor. After all, how likely is it that the Democrat senators will all vote to raise taxes on the owners of small businesses and others who create most of the new jobs in the country? A number of Democrat senators have already announced that they oppose raising taxes on anyone given the perilous state of the economy. Remember what Obama himself said in December of 2010. At that time, when he supported keeping rates the same, Obama announced that it would be bad policy to raise taxes on anyone when the economy was weak. If the Senate were to vote, my prediction is that the bill to extend all the present rates would pass with a bipartisan majority and Obama's view would be defeated.

Were Congress to pass such an extension, would Obama veto it? He could do that but it would label him as opposing a bipartisan measure that would keep taxes from going up. He would become the reason that taxes would rise for everyone. I doubt that Obama would take that risk.

It will be interesting to see how this plays out. After all, Obama's move is purely political; he knows that the House will not pass a bill like the one he wants. If they play it correctly, however, they may be able to box Obama into a capitulation that will be good for the country.