Clinton & Obama Clash on Tax Cuts for Wealthy

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Bill Clinton disagrees with Obama about what should be done about the tax cuts that are set to expire in January 2013. Obama’s position is that they should be renewed for people earning below $250,000.  The former president believes we should extend tax relief across the board for all Americans (at least for now) regardless of income levels:

What I think we need to do is to find some way to avoid the fiscal cliff, to avoid doing anything that would contract the economy now, and then deal with what’s necessary in the long-term debt-reduction plan as soon as they can, which presumably will be after the election.

~ Bill Clinton on CNBC’s “Closing Bell with Maria Bartiromo”

It’s hard to imagine there’s another potential “cliff” in our future, but I certainly would not doubt it.  Letting the tax cuts expire completely would be akin to running along the edge of the cliff blindfolded.

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The Payroll Tax Cut Extension

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There are always two sides to the tax relief coin. Heads: slash taxes. Tails: find a way to pay for it.

Both Republicans and Democrats agree that the payroll tax cut needs to be extended, but can’t agree on how to fund it, and unless they start making concessions soon, it will expire.

Republicans want to pay for the tax cut by cutting spending elsewhere. Specifically, they want to freeze federal workers’ pay through 2015 and reduce the government bureaucracy to the tune of 200,000 jobs.

Democrats want to tax the rich. Specifically, they want to make deeper cuts to the payroll tax and pay for it by imposing a 3.25 percent surtax on income exceeding $1 million.

Both of these measures have been put to votes and both have been killed. Still we are being told that the payroll tax cut will likely be extended in one form or another before Congress breaks for Christmas.

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Perry’s Tax Reform Plans

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Republican presidential candidate, Rick Perry, is trying to set himself apart from the other candidates with his bold tax reform talk.  He wants to dramatically reduce taxes, and with that would come deep cuts in government funding and government programs.  Key points of Perry’s plan:

  1. eliminate taxes on Social Security benefits
  2. eliminate estate taxes
  3. eliminate taxes on dividends & capital gains
  4. popular deductions remain in tact
  5. $12,500 personal exemption plus $12,500 for each dependent

Under Perry’s plan, we would get to chose between paying a 20% flat tax or paying under the current system.  Those who oppose this proposal say that the wealthy taxpayers in our country would chose the flat tax and enjoy huge savings, everyone else would stick with the current tax system and pay what they are paying now, and there wouldn’t be near enough revenue for the government to continue operating.