So, in the cloak of night, while the rest of the nation celebrates the start of a new year, the Senate voted 89 to 9 in favor of the “American Taxpayer Relief Act” crafted by Biden and McConnell. The funny thing is, there is no “taxpayer relief” in the act.
The Congressional Budget Office has calculated that the bill includes $620 billion in revenue increases via tax hikes. Additionally, because the bill “kicks the can” on a myriad of spending programs, the actual spending cuts total a mere $15 billion. That’s 41 times more taxes than spending reduction — and it’s spending which is the root of the problem!
It is incomprehensible that McConnell was actually proud of this bill. He pointed out that now that the tax (revenue side) is settled, “now it’s time to get serious about reducing Washington’s out-of-control spending. That’s a debate the American people want. It’s the debate we’ll have next. And it’s a debate Republicans are ready for.”
Gimme a break. They’ve had plenty of time since Simpson-Bowles failed and the Super Committee failed to “get serious about reducing Washington’s out-of-control spending”.
The tax hikes include:
— An increase from 35% to 39.6% for individuals above $400K and couples above $450K. Way to punish families!
— Itemized deductions and personal exemptions and will be limited once individuals meet the $200K threshold and couples meet the $250K threshold.
— The Estate Tax (Death Tax) increases from 35% to 40% on all individual estates above $5 million and family estates above $10 million.
— Dividends and Capital Gains rates increased from 15% to 20%.
— There will be a permanent AMT “patch” as well, finally indexing it to inflation.
What about the spending cuts side? Here’s what they did:
— A $30B one-year extension of 73 week unemployment insurance, — which effects about 2 million people.
— A $30B one-year extension of the Medicare “doc fix”
— A 5 Year Extension of 2009 Stimulus tax credits aimed at college students and low-income workers.
— An extension on the Wind Production Tax Credit (the 2.2 cent per kilowatt/hour credit) that gives a refund to a wind company if it doesn’t turn a profit.
Additionally, Sequestration was delayed for two months –right about the time that the debt ceiling will reach its limit.
So many questions swirling around at this point. Do the Republicans actually think this is a good thing? That there won’t be factions at negotiation time in a couple months (defense/fiscal, etc). Why are we supposed to consider accepting more taxes now with the “promise” of spending cuts later? How is this better than Simpson-Bowles? (or even “Plan B” for that matter?) This is supposed to be an example of a “balanced approach”?
The two things to come out of this “package” are that 1) Obama was able to shape the narrative and make this about taxes, not spending; and 2) Obama was able to make Republicans break their pledge about not voting for new taxes. The damage has been done. The effects of these negotiations will be very long-term.
Let’s hope the House Republicans have the courage to do what it right. Chime in with your thoughts.