WASHINGTON — Democratic New York Sen. Charles Schumer on Tuesday rejected an increasingly bipartisan proposal of cutting tax rates for the wealthy, and called for abandoning the tax reform put forth by the Simpson-Bowles deficit-cutting commission.
The senior lawmaker said in a speech at the National Press Club that efforts should be focused on protecting the middle class and reducing the federal deficit. He called it a “huge mistake” to reduce the tax rate paid by rich Americans by using the revenue from closing loopholes.
Schumer said the tax overhaul proposed by Republican presidential nominee Mitt Romney will do more harm than good to the U.S. economy when the country is facing a record high deficit.
“These promises of lower rates amount to little more than happy talk when the math behind them doesn’t add up,” he said. “Certain lawmakers will pocket the rate reductions and never follow through on finding enough revenue elsewhere in the code to reduce the deficit. Or, if they do, it will almost certainly come out of the pockets for middle-class earners.”
The Simpson-Bowles proposal suggested cutting the top rates to 23 to 25%, compared with the current 35%. The top rate is scheduled to rise to 39.6% next year.
“This is a trap of traditional tax reform, and we must not fall for it,” he added. “It is alluring prospect to cut taxes on the wealthiest people, reduce the deficit and hold the middle class harmless, but the math dictates you can’t have it all.”
Schumer argued that there isn’t enough money to lower rates for the wealthiest Americans while also cutting the deficit. By doing so, he said he’s afraid that the middle-class family will feel the most contractions among all Americans.
The senator insisted that the top rate should increase to the scheduled 39.6% next year to ensure enough revenue.
“The level of the top rate does not, by itself, dictate what happens to GDP, but a balanced budget, aided by increased revenue, just might restore confidence to investors and jumpstart our economy,” he said.
Republican Senator Orrin Hatch of Utah, the Senate Finance Committee’s ranking member, wrote in an email that he’s “glad they’ve made their opposition to reform clear to the American people” in response to Schumer’s proposal.
“Fixing Washington – from our broken tax code to our unsustainable entitlement programs – is essential to getting America back on track; it’s unfortunate that so many on the other side of the aisle fail to understand that,” Hatch wrote.
Despite the tightening budget issue, Schumer stood firmly on maintaining Medicare.
“Democrats will never sign on to a shredding of the safety net because it isn’t necessary to change the fundamental way Medicare works,” he said. “But we can find ways to reduce Medicare costs by hundreds of dollars. That is tough medicine but it still preserves the safety net.”