Johnston, the well-known tax journalist, presents the debate over the Bush tax cuts, which include breaks for the middle class and the wealthy that are set to expire by year's end, as a game of chicken. As long as the president can show "courage" and "do the job [he] asked people to elect [him] to do," he can force the Republicans to keep the middle class cuts while allowing the cuts for the wealthy to expire, Johnston writes.
Since the GOP will never make good on their threat to end middle class tax cuts, Johnston says, the president does not have to hand them the top-earner extensions they crave. He "should call their bluff." Here's Johnston:
"I don't think the Republicans are so stupid that they would let all the Bush tax cuts expire if they cannot continue tax cuts for billionaires and the affluent on all of their income. ... This is a fight that Obama can win, and win handily, if he has the backbone to stand up for the vast majority and sound tax policies, and to take on the antitax billionaires who are piling up huge gains while unemployment, debt, and fear stalk our land."
Republicans, who on Nov. 2 won a majority in the House and made gains in the Senate, still cannot push through legislation that Obama opposes, Johnston notes. They will have to capitulate to the president's demands, and if they don't, "The economic news would be so awful that a president half as eloquent as Obama could easily focus attention on the Republican all-or-nothing tax policies as the cause of this universal pain," Johnston says.
The argument for extending tax breaks for the rich, championed by GOP leaders Rep. John Boehner (R-Ohio) and Sen. Mitch McConnell (R-Ky.), has centered on the idea that the top-earners create jobs, and pinching their income would wound the larger economy. McConnell has said a tax hike would affect "half of all small business income in this country."
As billionaire investor Warren Buffett argued over the weekend on ABC, the "trickle-down" theory, that giving money to the rich will also enrich the lower classes, hasn't been borne out in practice, HuffPost's Amanda Terkel reported. Buffett, who this year is ranked second on Forbes' list of wealthiest Americans, with a fortune of about $45 billion, repeated an argument he's been making for a long time.
"I think that people at the high end, people like myself, should be paying a lot more in taxes," he said on Sunday.
If business-owners do get a boost from tax breaks, there's no guarantee they'll use that money to create jobs. Companies, locked in a defensive crouch, are currently sitting on about $1.8 trillion in cash and other liquid assets, according to data from the Fed. The unemployment rate, meanwhile, is stuck at 9.6 percent.
Johnston spoke about the tax cut situation in a recent spot on Yahoo's Tech Ticker:
WATCH the interview below: