Why is Congress arguing over $127 tax?

As we enter full bore into the Silly Season of Campaign 2012, it seems especially silly that Congress and the presidential candidates and the media are focused, in such a superficial way, on Barack Obama’s plan, once again, to raise taxes on those making over $250,000 a year.

Democrats say it’s only fair that the rich pay billions of dollars more in taxes; Republicans say higher taxes will kill the economy at a time when it’s already sputtering.

Why doesn’t anyone bother to calculate exactly what we’re talking about here?

First, the proposed increase on the top rate, from 35 percent to 39.6 percent, applies only to money earned above $250,000 (for families). That’s how the marginal rates work. Next, consider a household with an income of $350,000, which is a higher pay scale than about 98.5 percent of Americans make in a year.

That $350,000 couple would pay the new rate on their final $100,000 of income earned, or about $127 extra per week. That’s what this whole crazy argument in Washington is all about — an extra $127 paid weekly by someone who earns $168 an hour.

Don’t our elected officials and presidential contenders have better things to talk about?

Former Republican congressman Pete Hoekstra certainly thinks so.

During an interview with The Macomb Daily the other day, Hoekstra wondered aloud why Congress is battling over a small increase in the top tax rate, which affects 2 percent of the workforce, rather than taking on comprehensive tax reform and overhauling entitlement programs such as Medicare and Social Security.

The GOP Senate candidate, who hopes to challenge Democratic Sen. Debbie Stabenow in November, urged Mitt Romney to “be bold” and address a complete overhaul of the tax code to eliminate corporate loopholes and exemptions carved out by lobbyists, plus deductions protected by lawmakers that disproportionately help upper-income taxpayers.

Much like with the Bradley-Gephardt bill, Democratic tax reform legislation of 1986 which Ronald Reagan embraced, the goal is a simpler, economically clean tax code that prevents people and companies from gaming the system. That would have a much bigger impact than maintaining the status quo of the Bush tax cuts.

Inside the Beltway, they love to talk about taxes and spending (without getting into any specifics) because that’s what they do – they bicker endlessly, in a hyperpartisan manner, about issues that are basic and simplistic. Even if those issues don’t mean much unless you take a big, bold approach.

The Obama proposal on the table is not a job killer, as Republicans claim, and it is not a satisfying effort to soak the rich, as Democrats hope. More likely, it will have little effect on the economy — though it will generate up to $1 trillion in revenues over a decade. The bottom line: A $127-per-week tax hike on the wealthy won’t affect their consumer spending habits or their employee hiring practices, if they own a business.

Serious deficit reduction requires a mix of spending cuts and revenue increases. To satisfy taxpayers, Congress must establish a debt/deficit reduction fund for new revenues. And don’t call it a lock box. Too many bad memories of Al Gore, circa 2000.

A new report from the non-partisan Congressional Budget Office found that federal tax rates are already at their lowest level in 30 years. The average federal tax rate for Americans — largely income and payroll (FICA) taxes — fell to 17.4 percent in 2009, down from 18 percent in 2008 and 19.9 percent in 2007.

Other data shows that the top 1 percent of earners saw their share of tax liabilities fall by 4.4 percent from 2007 to 2009. Still other studies have concluded that overall federal tax revenues have dropped to 1950 levels.

Yet, our economy is in the doldrums. If we have the lowest tax collections since 1950, shouldn’t we have the best economy since 1950? Or consider this: In the good old days of the 1950s and 1960s, when the U.S. economy was flourishing, the top income tax rate fluctuated between 91 percent and 70 percent.

That historical fact makes it easier to understand why the Bush tax cuts didn’t work, the Obama proposal to increase rates on the rich won’t hurt the economy, and the massive $5 trillion tax cut proposed by Romney relies more on that old-time Republican religion than economic reality.

In fact, some of the more ridiculous claims about the Obamacare taxes setting records sparked a flurry of activity by the fact-checkers which backfired on those who live and die by tax rates. Five of the 11 largest tax hikes since 1968 — when adjusted for inflation and measured against the Gross Domestic Product – came under Ronald Reagan’s watch.

There are a lot of things plaguing our economy in 2012 that traditional methods will not fix. Beyond the lowest taxes in decades, we already have record low interest rates, cheap housing and a Federal Reserve that has pumped trillions of dollars into the economy. Yet, unemployment remains high due in part to the devastation created by the financial crisis, the housing market crash, and the continuing loss of jobs due to outsourcing and globalization.

Obama certainly cannot dodge the blame, but the Romney camp needs to get serious and stop focusing so intently on tax rates. Quality infrastructure, technology, education, broadband’s reach, highways, rail, export opportunities, energy costs, a rejuvenated middle-class consumer bloc – these all have profound effects on America’s economic health.

But avoiding a minor tax which will have a minimal impact on jobs — that’s not a national strategy.

Take a look around Macomb County — at the party stores and pizza shops and nail salons and restaurants – do you think those employers crack the $250,000 mark? And would they be swayed to hire people based on a tax benefit that’s out of their league?