Obama’s Tax Proposals are a Non-Starter (but might actually make sense)

In his state of the union address last night, President Obama proposed some things that are sure to be non-starters.  Like closing corporate loopholes to pay for things like free education for students in community colleges. It reminded me of the crazy quilt that has been our top tax rates in the United States, since a federal income tax was enacted through the 16th Amendment in 1913.

The graphic (left) shows the highest and lowest marginal tax rates for earned income (salaries, wages, etc.) from 1913 through 2013. It’s a crazy quilt. Tax rates were pretty high from the 2nd World War all the way through the 1970s until the Reagan administration years, and then the floor just fell out. Trickle down economics. We know how that worked out. And yet Republicans will continue to swear by the notion that any increase in taxes will be the ruination of our economy.

There is a reason that people wanted to have progressive taxation when the 16th Amendment was first enacted. Because it seemed fair to have those who are really wealthy pay for a higher share of what it takes to keep governmental services running. That picture has, of course, been turned on its head. With all the corporate tax breaks, as well as those for wealthy individuals, now it’s the poor and middle class who pay a greater share of their income.

But it doesn’t matter what makes sense, or what’s fair. This will be a complete non-starter with the Republican Congress, who are now in firm control of both branches. My guess is that Obama just wants to position the Democrats for 2016. And, as I’ve said previously,  he seems to feel released by not having to run for election again, and is just pursuing the things he really wants to pursue. But it still isn’t going to get the job done.