Obama's OMB Chief Defends Raising Taxes

President Obama’s budget boss yesterday offered a spirited defense of the Administration’s call for raising taxes on the highest wage-earners in its 2012 budget request. 

Over a lunch for reporters in Washington hosted by the Christian Science Monitor, HUMAN EVENTS pointed out to Office of Budget and Management Director Jack Lew that analysis by groups such as the Heritage Foundation and Americans for Tax Reform conclude the Obama budget, if enacted in full, would raise taxes by $1.7 trillion over the next decade.

Lew made no attempt to argue this and in fact, defended the budget’s proposed increases in the estate and capital gains tax as well as those on households that make more than $250,000 a year. 

“I think that if you look at the challenges we face in terms of getting our fiscal house in order,” Lew said, “the President made clear in December he didn’t believe we could afford to keep the tax rates in the highest tax brackets where they were set and where the December legislation continued them.”

Lew defended the President’s acceptance of the Bush tax cuts back in December because we need to “avoid a tax increase in January of this year [so]we needed to keep the provisions that were going to provide for more economic activity now.”

But when they expired at the end of two years, Lew added, “we needed to allow them to go back to the levels they were at in the 1990’s when we had the longest period of uninterrupted growth in our nation’s history.”

The OMB head insisted that “[w]e’re talking about tax rates that were totally consistent with and part of the economic landscape when we last had economic growth [sic].”

When HUMAN EVENTS pressed him on raising the estate tax, Lew made the somewhat surprising statement that “I think everyone agrees there needs to be a readjustment of the estate tax from where it defaulted to when the provisions that were in effect ran out.”  He added that “there was a bipartisan agreement that the levels that were in effect in 2009 were reasonable and as part of the December agreement, there were more generous terms put in place.  And at the time in December, I think it was also made clear that we thought the 2009 levels were more appropriate.”

“So what we tried to do in this budget was lay the foundation for going back to rates that had been the subject of considerable agreement and to use that as the policy base.

We noted that Lew served in the Clinton Administration when the 42nd President signed a cut in capital gains that brought in considerable revenue and was key to a budget surplus.  But Lew would have none of it.  Rather than try to argue about the White House proposal to raise capital gains tax rates from 15% to 20%, he simply said: “[I]f you look overall at our budget, we have provisions that encourage small business investment, provisions that normalize the treatment of capital gains with small and large businesses, and we’ve tried to put together a series of well-targeted incentives on economic growth.”