While I’ve gone over how the Democratic and Republican tax plans scheduled to get a vote in the Senate this week are in many ways similar, I did not identify the points of difference, which are substantial in their own way, particularly in the direction that money would flow under the two plans. In particular, as Jonathan Weisman points out today, the Democratic plan picks up four tax breaks that target the lower and middle classes, held over from the stimulus, and extends them, while the Republicans allow them to expire.
In addition, the Democratic plan would raise the capital gains and dividend tax rate from current law, while the Republican plan would freeze them in place. (A previous version also raised the estate tax, but Democrats took that out of the bill). So you really do have a difference between tax cuts focused on the poor versus tax cuts focused on the rich.
Republicans say the tax breaks for lower-income families — passed with little notice in the extensive 2009 economic stimulus law — were always supposed to be temporary. But President Obama had made them a priority in 2009 and demanded their extension in 2010 as a price for extending the Bush-era tax cuts for two years, and both the White House and Senate Democrats are determined to extend them again.
That sets up a potentially tricky issue for Republicans. They have said they do not want taxes to go up on anyone while the economy struggles to gain altitude, but under their plan, written by Senator Orrin G. Hatch of Utah, the senior Republican on the Finance Committee, about 13 million families would see their tax refunds reduced, and some would see their taxes increase.
“Senator Hatch’s amendment would extend tax breaks for the top 2 percent of Americans,” Senator Harry Reid of Nevada, who leads the Senate’s Democratic majority, said this month. “But it fails to extend a number of tax cuts that help middle-class families get by in a tough economy.”
This is all true, but it is a matter of degree. The extension of the child tax credit, patch on the so-called “marriage penalty,” expanded Earned Income Tax Credit and the tuition tax credit costs the federal government $28 billion in 2013 (about $11.1 billion just for the expanded EITC and child tax credit). But the extension of all the Bush tax cuts up to $250,000 in income, which both parties agree on, costs the government $272 billion.
Republicans have whined that the stimulus tax cuts for the poor and middle class were supposed to be temporary, but the Bush tax cuts had a sunset on them too, so you can make the same argument. The Senate Democratic plan pays for those stimulus tax cuts and then some through the changes to the capital gains and dividends tax, as well as a business tax credit that Senate Democrats would limit. This all brings in an extra $82 billion into the government coffers.
So on a limited level, the choice tomorrow in the voting in the Senate will be between a plan that distributes wealth downward and one that distributes it upward. The fact that the mass of tax cuts in the plan have agreement between the two parties muddies this message.
UPDATE: Sahil Kapur brings up another point, that taxes on wage earners, all of them, will go up next year, because nobody wants to extend the payroll tax cut, which will expire at the end of the year. That will mean about $110 billion in taxes on wage earners in 2013, which is not counterbalanced by the middle class tax cuts Senate Democrats are touting.




22 Comments

Support this site!
Subscribe to the newsletter
Advertise on Firedoglake
Send
us your tips
Make us your homepage
About FDL News Desk
This is setting the stage for an extension of all the Bush tax cuts, which is just fine with Republicans because the new battleground is the debt limit.
It is a little-known fact that the reconciliation package used to push through the Affordable Care Act (the “ACA,” aka “Obamacare”) included a sharp 3.8% surcharge on investment income received by the relatively wealthy. Under certain conditions, the surcharge does not directly hit investment income, but if a specially-defined “modified AGI” inserted into that section is higher than the investment income by a prescribed amount, then the tax is a direct hit of 3.8% on dividends, interest, net capital gains and net rental income.
See section 1411 of the tax code (26 USC section 1411), added by section 1402 of the Education & Healthcare Reconciliation Act.
hat/tip to WaPo real estate section for publishing a reminder about that 3.8% surcharge about ten days ago.
Online source for section 1411 of tax code added by section 1402(a)(4) of the Obamacare reconciliation act, known officially as the “Health Care and Education Reconciliation Act of 2010,” Public Law No. 111-152 (text and PDF versions available here).
All the Democrats simply have to do is nothing to return to Clinton-era tax rates. Trying to do anything other than that just gives them an excuse to extend all Bushbama tax cuts and other unsavory things.
The answer to the payroll tax cut is very easy: put the Making Work Pay Credit back in. It was $800 for a couple ($400 single), targeted on the first $6,451 of wages.
There has been some kind of stimulus / middle class relief in the Tax Code since 2007, you know. First it was Bush’s stimulus rebate, which was a check in 2008, based off 2007′s reported income. Then came the Making Work Pay, followed by the payroll tax cut. I am not sure the middle class could handle that effective tax hike if it’s not included in the Fiscal Cliff repair that you know is coming next January . . .
Well, the democrats have had a hard time “doing nothing” when “nothing” was what was needed.
I suppose time will tell. I doubt the senate changes much. But many experts think the GOP may lose the house…again.
Can’t the masses see the repugs fpor what they are, wanting to extend the tax breaks for the 1% and willing to NOT give the mioddle class a continuing break unless it’s tied to that ???
That’s pretty telling.
Oooh! There’s a difference between Republicans and Democrats! Vive la difference!
Meh.
All I can say is this.
“Never be deceived that the rich will permit you to vote away their wealth” - Lucy Parsons
“If voting made any difference they wouldn’t let us do it” – Mark Twain
And this will get past the House republicans how…???
I’m curious how Democrats will frame it after they agree to extending all the Bush tax cuts, cutting SS, in return for one year extension of unemployment benefits–all before January 2?
Sure, their abjectness has already been unmasked, but I think even the Beltway grovel-squad will probably explode when there’s a replay of this disgrace.
This is theatre. The time for tax planning is long past. That would have been when D’s held majorities in both houses. Oilbomber never promoted his own “Tax Cuts for Working People”. Instead, he was mum on any tax plans of his own as he adopted The Bush Tax Cuts as his own.
(O also adopted NCLB, Charter Schools, Nukes, Coal, Mountaintop removal, Oil and Agribiz subsidies, nukes, wars, warmongering bombast, the Security State, the evisceration of Civil Liberties, Haliburton, Eric Prince, etc.)
Look for more Tax Cuts for the rich with cuts in Social Security and Medicare (and increased age eligibility) for workers and the poor.
It wouldn’t surprise me that somehow Congress has the votes to avoid cutting SS, but Obama uses a combination of threats and handouts to members of Congress on the fence to see to it that SS is absolutely cut.
Obama had his buddy Social Security Austerity Pete Peterson lined up for a big speech and had to pull him at the last minute when he got called out on it.
Obama is all in on cutting Social Security and Medicare. The Deficit Commission is his baby.
Congress was too afraid to go near it (SS Cuts), so Oilbomber made the Deficit Commission.
A vote for the Democrats is a vote against progress.
Obama and the Democratic Party represent the death of New Deal liberalism, i.e. – if that’s liberal, than liberalism is dead… and true progressive politics has become the enemy.
The Obama (not Bush) tax cut kabuki is just that – kabuki.
meh…
out here in Wishy-Warshy, it is full bore & full speed ahead with cry walker and let slip the rats of fear.
today, a centrally-moderate-bipartisan-shitter running against Darcy Burner in WA-1 was endorsed by the sell out Rick Larsen and Adam Smith, listed as a founder of the “New Democrats”.
this cohort of political sell outs – Cantwell, Kerry, Murray. Pelosi, Reid … has stayed employed with LOTE, with 6 figure salaries and 7 figure lifestyles, for 20 years. Why the fuck should they change ???
The ONLY way to ‘fix’ them is to unemploy them, and, Good Riddance to Bad Trash.
rmm.
WEll said….And yet somehow,people who call emselves progressives keep heralding these creeps as saviors…
I guess they have been asleep for the last 15 yrs cuz these so called Dem party icons(Cantwell,Kerry,Murray,Pelosi & Reid) have all played a huge party in helping us become penniless.
There are more of us in poverty,homeless,jobless & in prisons than ever before,this is not just the GOP fucking us,The Democratic party has been right there helping the GOP to fuck us.
Wake up people.
Sounds like a set up for the Grand Bargain.
Lest we forget…the Democrats are in a real bind here, talking about helping the poor and working class while trying so very hard not to alienate their corporate masters.
They gonna join hands and sing Steppenwolf’s “The Ostrich” … well … maybe not – those lyrics kinda hit too close to home for centrists on the same level as all the spine plucking in Mortal Kombat hits too close to home for Sen. Lieberman …