Top Democrat: tax revamp should not cut taxes for rich

WASHINGTON Tue Oct 9, 2012 10:04am EDT

U.S. Senator Charles Schumer (D-NY) addresses the second session of the Democratic National Convention in Charlotte, North Carolina September 5, 2012. REUTERS/Eric Thayer

U.S. Senator Charles Schumer (D-NY) addresses the second session of the Democratic National Convention in Charlotte, North Carolina September 5, 2012.

Credit: Reuters/Eric Thayer

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WASHINGTON (Reuters) - A top Senate Democrat on Tuesday called for scrapping a tax reform model of lowering tax rates for all Americans that has been the rule since Ronald Reagan was president, and instead said the rich should pay more to help pare federal deficits.

With less than a month before presidential elections where taxes have been among the most hotly debated issues, Senator Charles Schumer, the third most senior Democrat in the Senate, sought to redouble Democrats' stance that top rates for the wealthy should rise when they expire on December 31.

In a bit of tax policy blasphemy, Schumer said the approach to taxes that has held since last major overhaul in the 1980s was outdated and would hurt inevitably the middle-class who would lose valuable tax breaks.

He also criticized a deficit reduction plan known as Simpson-Bowles for taking the same approach.

Both President Barack Obama and his Republican challenger, Mitt Romney, say the tax code is broken and needs a major overhaul. The last time that occurred was 1986, when Reagan worked with a divided Congress to lower rates for all Americans and cut loopholes and deductions.

"But a 1986-style approach that promises upfront rate cuts to the wealthy is almost guaranteed to give middle-income earners the short end of the stick," Schumer said in remarks prepared for delivery in a speech at the National Press Club.

In exchange, Schumer said, Democrats should be prepared to make hard choices about revamping so-called entitlement programs such as Medicare, the health plan for the elderly.

Republicans favor major changes to these programs, including raising the age when benefits kick in, to curb deficits. Schumer, in excerpts released before his speech, did not specify policies in this area.

Across-the-board tax increases of about $500 billion loom at the end of the year if Congress fails to take action preventing low tax rates from expiring.

That threat and about $100 billion in automatic federal spending cuts comprise the so-called "fiscal cliff" that could push the U.S. economy into a recession if Congress fails to act, the nonpartisan Congressional Budget Office has estimated.

With Congress out of town until the November 6 elections, actions to address these threats are on hold, giving lawmakers just about a month to deal with the major fiscal challenge.

(Reporting by Kim Dixon; Editing by Jackie Frank)

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Comments (15)
JimTH wrote:
How about just passing H.R. 25/ S. 25 (The Fair Tax Act) which eliminates all their loopholes in one fell swoop? The tax is progressive (no tax on the poor, maximum on the rich), fair and revenue neutral. It closes *all* loopholes (as mentioned), brings offshore money home and brings industry back from overseas. 80 university and private economists just sent a letter to Congress and the President urging passage. The bill is ready for a vote. Come on, Congress!

Oct 09, 2012 10:22am EDT  --  Report as abuse
altalks21 wrote:
Contributing to the problem is low wages. Any time businesses don’t provide employees with insurance plans and don’t pay a Living Wage, then the rest of us, taxpayers are paying for ANY government support their employees are receiving.

Oct 09, 2012 10:25am EDT  --  Report as abuse
totherepublic wrote:
In November the American people will make the same decision we have always made-we will NOT become a socialized nation. With all the other side bar issues removed that is why obama is going to lose. Wether you agree with him or not this guy, like obama is pi—– up a rope with his socialists agenda.

Oct 09, 2012 10:59am EDT  --  Report as abuse
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