The release of President Barack Obama’s latest budget showcases a focus on three major priorities: he seeks to end the budget cuts known as sequestration that took effect several years ago, double America’s efforts to improve its aging infrastructure and provide the middle class with a new tax break.
However, the plan has already drawn fire from Congressional Republicans, who are critical of the way it raises funds to pay for things like roads, ports and railroads. Under the President’s plan, corporations would have to pay a 19 percent tax on foreign profits that they normally escape by holding their money in offshore accounts, in exchange for lowering the overall corporate tax rate from 35 to 28 percent.
The Republicans, by contrast, suggest offering corporations a lower tax rate in exchange for returning all of their foreign profits to the United States. It strains credulity that businesses who kept millions if not billions of dollars of profits in offshore accounts to avoid paying taxes on said profits would voluntarily begin paying taxes just because the rate was lower.
Everyone likes having nice, well-maintained roads and bridges, but the Highway Trust Fund, the mechanism by which we pay for our roads, is nearly bankrupt. We have to pay for it somehow. A hike in the gas tax would negatively affect people who are already living on a tight budget, whereas American companies would simply have to pay taxes that they have, until now, been able to avoid paying by exploiting a clever loophole in our legal system. That is not anti-business rhetoric, it is fairness. If we want to have the sort of top-notch infrastructure in this country that facilitates commerce, we need to accept that good quality comes at a high price. If the average American can’t avoid paying taxes, why should a company, by nature of legal loopholes, be able to avoid paying?
The new budget also includes a 30 percent tax on incomes of more than one million dollars (colloquially known as the “Buffett Tax”, named for billionaire Warren Buffett). While the rate hasn’t been at that level since the 1980s, it is necessary if we want to continue to fund the government at pre-2011 levels and pay for our bombing campaign against ISIS, our military efforts to counter Ebola in West Africa and invest in new technology. We cannot afford any more massive, unfunded interventions the way we did with the Iraq War.
Additionally, the budget allows for a tax break for many middle-class and working families in the form of more tax credits. It is sensible that the new budget does so. After all, the success of America as “the land of opportunity” is not defined by how well the most well-off are doing, but rather, by how well the middle portion of the country is doing. One of the many things that makes America great is the strength of its middle class. Tax credits, and this budget more generally, help promote that strong middle class.
Republicans derided the President’s budget as being impractical, with Senate Majority Leader Mitch McConnell calling it “backward-looking.” It’s ironic that the elected leaders who call this plan backwards are the same ones who believe that we can look to an aging infrastructure to support the needs of the 21st century and not have a plan to pay for its upkeep, much less update it or build new things. It’s ironic that the people accusing the budget of being “top-down” dismiss substantive plans to help the middle class, the people whose incomes are pretty far from the top. It’s ironic that the people criticizing the budget for “never balancing” are relying on the goodwill and beneficence of companies to pay taxes on their foreign earnings without actually being compelled to do so.
In the end, it all comes to naught. Congress, stricken by bickering, will likely not pass any budget, just as they haven’t for the last five years. Nonetheless, they have in front of them a golden opportunity to show that they care about the American middle class, that improved and properly funded infrastructure will help everyone regardless of job or status (a rising tide that will lift all boats) and that they understand that our military must be properly funded as we confront an unconventional and broad set of challenges.
Congress and the American people need to understand that we can have our cake and eat it too, as long as we pay the tab.