President Barack Obama Friday told an enthusiastic crowd of students at the University of Michigan that extra taxes on millionaires should help subsidize their futures.
Without mentioning former Massachusetts Gov. Mitt Romney by name, Obama used his campaign-style event to urge higher taxes on the nation’s most prosperous to reduce student loan-payments, increase student grants, fund universities and pay for high-tech research.
“You’re the ones who need help,” the president told students gathered at the University of Michigan’s Al Glick Field House.
“A quarter of all millionaire [earners] pay lower taxes than millions of middle-class households. t… [audience boos] Is that fair? … does it make sense to you? … do we want to invest in things like… student loans and grants?”
He called on Congress to cut the interest rate on government loans to students, and said he had already limited graduates’ monthly payments on government loans to 10 percent of their after-tax income.
When he announced the student-loan rollback proposals last year, education and financial experts said they would inflate the education sector bubble, and would leave millions of graduates with growing debts even before they try to marry or buy houses.
In the housing sector, a similar easy-credit policy gradually created a housing bubble in the mid-1980s. That bubble burst in 2008 and brought down the likes of Bear Stearns, Lehman Brothers, and American International Group.
However, Obama Friday used the continuing economic pain of the housing bubble as a reason for students to support his policies.
He did not mention the $4 trillion that he’s added to the national debt, nor the high unemployment rate, nor the slow economic growth rate.
Instead, he repeatedly cited the tough economy as a reason why students would need to rely on government aid and not on free-market solutions.
“We’ve got a different idea of America, a more generous America” than the one offered by his political rivals, he said, without stopping just short of naming GOP presidential candidates who champion the free-market, and who oppose Obama’s emphasis on economic direction by progressive university graduates.
“We’re not successful just by ourselves… Everybody here is only here because somebody [else], somewhere down the road, decided we’re going to think not about ourselves, but about the future,” he declared.
But, he declared, “we can’t do everything… we’ve got to choose” between extra taxes or government programs for students.
“Either the deficit will go up and you guys are going to have to pay for it… or some seniors, [or a] veteran has to pay the bill, or students have to pay higher interests charges,” the president said.
One quarter of millionaires pay a lower tax rate than their secretaries, he said. “Asking a billionaire to pay at least as much as a secretary in taxes is just common sense,” Obama said, citing quasi agreements from billionaires Warren Buffett and Bill Gates.
Obama’s one-quarter claim comes from research showing that roughly 95,000 millionaires earn much of their money via investments. Passive income earned from investments enjoys a 15 percent federal tax rate, whereas individual federal income tax rates range from zero to 35 percent.
Overall, the top 1 percent of earners paid 37 percent of all federal taxes in 2009, according to the National Taxpayers Union. The top 5 percent of earners pay 59 percent of federal income taxes, and the lowest-earning half of the nation’s taxpayers paid only 2.25 percent of income taxes, according to NTU’s study.
The number of millionaires in the country has also declined sharply since 2008 and critics caution boosting the tax rate on investment income would slow investment, lower tax receipts, widen the federal deficit, and increase unemployment among new graduates.