in a New York Times blog post titled More Chips For Tax Reform. In case you do not recognize the name, Rattner is a long-time Wall Street player who served as the "car czar" in the first Obama term and currently chairs Willett Advisors LLC, the investment firm that manages New York Mayor Michael Bloomberg's personal and philanthropic assets. He also is highly visible as the economic analyst on Morning Joe. Thus when he discusses raising some taxes, it carries a great deal of weight.
Consider his opening paragraph:
Almost lost in the tug of war over whether the top income tax rate should be 35 percent or 39.6 percent is another consequential tax issue: the proper rate for capital gains and dividends.. This establishes the framework for his presentation, in which he comes to the conclusion that the President' proposals to eliminate the special treatment of dividends and raise the Capital Gains rate from 15 to 20% is insufficient:
Personally, I would go further and raise the capital gains rate to 28 percent, right where it was during the strong recovery of Bill Clinton’s first term, and grab hold of a total of $300 billion of new revenues over the next decade.For those who complain that this, along with the about to be in effect 3.8% Medicare tax on unearned income, would serve as a disincentive to investment, he responds
Put me down as skeptical about such dire forecasts. During my 30 years on Wall Street, taxes on “unearned income” have bounced up and down with regularity, and I’ve never detected any change in the appetite for hard work and accumulating wealth on the part of myself or any of my fellow capitalists.There is much more.
Using as sources the Treasury Department, the Tax Policy Center, and the Joint Committee on Taxation, the article is accompanied by a chart which notes the following amounts of revenue that could be raised over a decade by each of a series of tax proposals, the figures in billions of dollars:
Increase tax rates on top 2% 442
$25,000 tax on deductions except for charities 885
28% limit on tax benefit from deductions 584
Tax capital gains at 20% and dividents at 39.6% 242
Buffett Rule (minimum 30% tax rate on 160
Americans making over $1 million)
Carried Interest taxed as ordinary income 13
Rattner goes through each of these proposals in his text, for example on the subject of "carried interest" which is currently taxed at the 15% capital gains rate:
As a beneficiary of the carried interest loophole, I’ve seen firsthand the lack of any difference between the work involved in generating a carried interest and the work done by millions of other professionals who are taxed at the full 35 percent rate.As for capping deductions in some fashion, he would apply this not across the board as Romney proposed, but only to high income families, noting
The highest-income Americans don’t need tax-free health insurance, mortgage interest deductions or deferred taxation on retirement funds.Rattner also provides us with rhetorical ammunition:
These types of tax changes would have the ancillary benefit of defusing a specious argument that conservatives love to make: that raising the top rates on ordinary income would hurt small business.If you have read Rattner's article, what I have offered so far may seem unnecessary, and I would agree. He write clearly, and with the authority of someone who knows the system and also understands that his own taxes would likely increase were these proposals to be put into effect.
Certainly no small business can claim to be damaged by a higher rate on dividends or capital gains or by the proprietor’s losing some tax deductions.
Let me offer a few more observations.
First, we need to have a much clearer definition of what a "small business" is. It should NOT be defined merely by the number of employees, as the likes of John Boehner, Mitt Romney, and others are prone to do, but rather in terms of revenue generated. Remember the famous picture of the early days of Bain Capital Management"?
There are only 7 people in that photo, which qualifies it as a small business under current rules. The organization of Bain is such that with the multiple subsidiary organizations each having only a handful of "employee" the entire wealth it controls could be classified under rules of small businesses. But its function is not job creation, merely wealth creation even at the expense of the destruction of jobs- by "harvesting companies" as Romney himself said at one presentation.
Second, I do NOT believe we should be moving towards what will be an unacceptable version of a "Grand Bargain" in the lame duck. Besides the fact that the expiration of the Bush tax cuts changes the political framework drastically, there is also the reality that we just elected a new Congress whose membership is significantly more progressive than the outgoing Congress. The President ran on tax issues, twice, and the voters have this time by choosing more Democrats (with those Democrats including real Progressives like Alan Grayson and Elizabeth Warren) while Blue Dogs suffered further losses (Ben Chandler) affirmed their desire to see the wealthy pay more before the social safety net is shredded.
Third, we need leadership of the President's economic team that understands all the realities of which Rattner writes so persuasively, hopefully someone who knows how to communicate - on television and to Congress.
Perhaps by now you can see where I am going with this. Do nothing before the first of the year. Replace Tim Geithner at Treasury with Steven Rattner. Let him move an agenda such as that he describes in this post. He has a track record of success in the auto bailout, and that auto bailout clearly gave Obama Michigan and Ohio, and probably Pennsylvania and Wisconsin as well. He understands the finances of the proposals, which he can explain clearly. He is a good communicator. He can rightly point out that what he proposes will raise his own taxes. He understands the system.
At a minimum, we should ensure that all who will be participating in discussions about a Grand Bargain grasp Rattner's argument. How much better might it be were he the one pushing forth these items, perhaps by putting them all on the table - now that might really scare some Republicans, especially if done in the context of having let the Bush tax cuts expire so that they are in the position of defending a series of tax breaks for the rich and already overprivileged at the expense of ordinary folks, of whom there are many more.
Just a thought.
Do with this what you will.