In Washington today, Democratic presidential candidate Sen. Barack Obama (D-IL) unveiled his four part plan to restore fairness to the U.S. tax system. Obama started by pointing out that the American economy is changing. “It’s no secret that a fundamental transformation of our economy is taking place. In books and on balance sheets, at policy institutes and around kitchen tables, people are trying to make sense of where the swift and strong currents of globalization are taking us. What we do know is that Americans are living and working in a rapidly changing economic reality.”

“This isn’t the first time this has happened. Time and again, the American economy has undergone upheaval – from slave to free; from agriculture to industry; from peace to war-time, and from war-time to peace. And time and again, the American economy has emerged stronger. Americans also know that opportunity doesn’t come easy. You have to work for it,” he said.

“The one constant has been the advancement of individual opportunity. There are few principles more basic to our country, and there is none more basic to our economy. We believe that there is a place in the American economy for every American’s dream. And we know that when we extend that dream of opportunity to more Americans, all of us gain.” After telling the story of his father in law continuing to work hard even with MS to send his kids to Princeton, Obama then talked about the basic social compact in this country.

“This story could not exist without a basic social compact in this country. That compact says that if you work hard, your work will be rewarded. That everybody has an opportunity to make a decent living, to raise a family, to give their children the best chance at success, and to look forward to a secure retirement…That social compact is starting to crumble. In our new economy, there is no shortage of new wealth. But wages are not keeping pace. Workers are more vulnerable to job loss and more worried about retirement. Those Americans fortunate enough to have health care are paying more for it – health care premiums have risen nearly 90% in the last six years. Americans are facing deeper personal debt. From filling up the gas tank to paying for a college education, everything seems to cost more,” Obama said.

“This is not just happening by chance. It’s not something we can just chalk up to temporary shocks. It’s happening in part because of the choices we’re making, and the way that we’re making those choices. It’s happening because we’ve gone too far from being a country where we’re all in this together, to a country where everyone’s on their own. Today, I’m going to focus on one aspect of our economic policy where we need to make different choices. Because nowhere is this shift in our priorities more evident than in our tax policies. Instead of working to find ways to relieve the burden on the middle class, we’ve developed creative ways to remove the burden from the well-off. Instead of having all of us pay our fair share, we’ve got over $1 trillion worth of loopholes in the corporate tax code.”

Obama spoke about the need to shift the values in the tax code. “This isn’t the invisible hand of the market at work. It’s the successful work of special interests. For decades, we’ve seen a successful strategy to ride anti-tax sentiment in this country toward tax cuts that favor wealth, not work. And for decades, we’ve seen the gaps in wealth in this country grow wider, while the costs to working people are greater.

We’ve got a shift in our tax values that disproportionately benefits the wealthiest Americans; corporate carve-outs that serve no national purpose; tax breaks that allow companies to stash their profits overseas; a government that’s paralyzed when dealing with offshore tax haven countries; an overloaded tax code that’s too complicated for ordinary folks to understand, but just complicated enough to work for someone who knows how to work the system.”

Obama discussed the guiding principle behind his plan. “To steer a course through the change that’s taking hold, we have to hold tight to that core principle: that our economy must advance opportunity for all Americans…If we’re going to keep that social compact for a new century, we need a tax code that’s fair – a tax code that rewards work and advances opportunity. Every American who is ready to work for their American dream should be able to trust that they have a government that works for them. I’ll keep that trust by cutting taxes for working people, homeowners, and seniors, and by simplifying tax filing for middle class Americans.”

He then laid out the four parts of his plan. “First, I’ll give a tax cut to working people. The American people work longer and harder than the people of any other wealthy nation in the world. But their hours are getting longer and their wages aren’t getting any higher. Their costs are going up, but their economic security is going down…. The second thing I’ll do to ease the burden on the middle class is provide a universal homeowners’ tax credit.”

“Today, we have a mortgage interest deduction, but it only goes to people who itemize on their taxes. Like so much in our tax code, this tilts the scales toward the well-off. Only a third of homeowners take advantage of this credit. I’ll create a mortgage interest credit so that both itemizers and non-itemizers get a break. This will immediately benefit 10 million homeowners in America. The vast majority of these are folks who make under $50,000 per year, who will get a break of 10 percent of their mortgage interest rate. For most middle class families, this will add up to about $500 each year.”

Part three of Obama’s plan is tax break for senior citizens. “The third thing I’ll do is provide a progressive tax cut for America’s seniors… When I’m President, we’ll work to see that no retiree making less than $50,000 each year has to pay income tax.  This will eliminate income taxes for about 7 million Americans, at a savings rate of roughly $1,400 each year. And 22 million seniors won’t even have to file a return and hire an expensive tax preparer.”

“The final part of my plan will be simplifying the process of filing a tax return for all Americans… When I’m President, we’ll put in place a system where 40 million Americans with a job and a bank account who take the standard deduction can do their taxes in less than five minutes. The government already collects wage and bank account information, so there’s no reason the IRS can’t send Americans prefilled tax forms to verify.  This mean’s no more worry. No more wasted time. No more extra expenses for a tax preparer. Making this change would save Americans more than $2 billion in tax preparer fees, more than 200 million hours of work, and an incalculable amount of headache and heartburn.”

Obama also promised to roll back the Bush tax cuts. “To ensure that we are fiscally responsible, we’ll gain revenue by shutting down corporate loopholes and tax havens. We’ll also turn the page on an approach that gives repeated tax cuts to the wealthiest 1 percent of Americans even though they don’t need them and didn’t ask for them.  We’ve lost the balance between work and wealth.   I will close the carried interest loophole, and adjust the top dividends and capital gains rate to something closer to – but no greater than – the rates Ronald Reagan set in 1986.”

This was a very liberal speech that reflected the traditional values of the Democratic Party. Obama is really preaching to the choir when he speaks about lowering taxes for the poor and seniors. These are core Democratic constituencies. I think that it was a good speech that was in line with core Democratic beliefs. There really wasn’t anything innovative here. It was just Obama taking a position on tax cuts that is farther left than Hillary Clinton. It was a good speech, but Obama has always been strong on domestic policy. It has been his remarks on foreign policy that have gotten him into trouble.

Full text of Obama’s speech 

Jason Easley is the politics editor at His column The Political Universe appears on Tuesdays and Fridays.

Jason is also the host of TPU Radio, which can be heard at every Sunday morning at 11 AM ET.

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