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 Dec. 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of tax policy blasphemy, Schumer said the approach to taxes that has held since last major overhaul in the 1980s was outdated and would hurt inevitably the middle-class who would lose valuable tax breaks.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 Nov. 6 elections, actions to address these threats are on hold, giving lawmakers just about a month to deal with the major fiscal challenge.
Schumer: Wealthy Must Pay Share of Taxes