Suddenly, It’s No Fun to be Rich

After much haranguing over the size and scope of the stimulus, Mr. Obama has released his second sweeping proposal to adjust Americans’ balance sheets.

This time, it comes through a leveling of the tax structure that has bedeviled low and middle income workers since the Reagan administration. The proposal indicates a historic effort to address income inequaltiy, but with Republicans already miffed over the gargantuan stimulus bill, Congress will likely be poised for a fight.

The details sound anathema to the largesse some high earners have been accustomed to for thirty years. The highest one percent of the tax bracket–the very group that ushered Mr. Obama into office–could pay up to $100,000 of their annual income in taxes. Their contributions would funnel into federal education and health care programs which would further reduce the burden on the lower tax brackets that currently face rocketing medical costs.

The Wall Street Journal details, “After 2010, American households making over $250,000 would see the rate at which they can deduct mortgage-interest payments and other items from their taxes reduced to 28% from the current 35%, costing them $318 billion over 10 years.”

The wealthy did certainly benefit under the Bush tax codes at the same time median income for the middle class fell by nearly $2000 annually. In a polemic against Republican favortism for the wealthy, Obama introduced his tax proposal yesterday at the White House. “With loosened oversight and weak enforcement from Washington, too many cut corners as they racked up record profits and paid themselves millions of dollars in compensation and bonuses. There’s nothing wrong with making money, but there is something wrong when we allow the playing field to be tilted so far in the favor of so few.”

In Congress–where 2009 salaries avergage $174,000–the debate will likely depart from the massive drain on federal coffers the stimulus foretells. Add to this the as yet unknown depths of the economic recession and fierce debate over tax reform looks assured.

Matt Miller, Senior Fellow at the Center for American Progress and author The Tyranny of Dead Ideas, continues the discussion of taxes and tax reform.