So, the White House did another whiteboard on the tax cut deal, contrasting their priorities with Republican priorities. And if you look at the deal on a pure cost basis, the President got more raw dollars in the deal. However, they get spread over an astronomically higher number of people, so on a per-person basis, the Republicans made out pretty darn well. You can see in this chart that millionaires and billionaires make out better in this deal than they would have by just extending all the Bush tax cuts.
As Ezra says, “All groups are getting more under this framework, but on an individual level, the wealthy are getting much, much more.” And if you don’t think, as I do, that we’ll end up getting much stimulus on net in the exchange, you can see the urgency in ending this tremendous transfer of wealth upward and finally doing something about the crippling inequality in this country.
And then there’s this, something I hadn’t contemplated about the shift from Making Work Pay tax credits to payroll tax cuts. I already knew that this threatens Social Security finances long-term in indirect ways, and I knew that Making Work Pay was a flat benefit and the payroll tax an increase as you go up the income ladder. But I didn’t realize at first that this stiffs 6 million public employees:
The proposal to extend the Bush-era tax breaks unveiled by Mr. Obama this week would offer a tax cut for most Americans. The deal would end the Making Work Pay credit, which gave a tax reduction of up to $400 to workers with low and middle incomes. That credit will be replaced by a 2 percent decrease in the payroll tax for Social Security for people of all incomes.
But more than six million federal, state and local government employees do not pay into Social Security at all. Instead, they pay into public pension systems. So if the agreed proposal becomes law, such employees will lose the $400 credit and would not reap any benefit from the payroll tax cut.
Public employees lose again.