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January Update
The deal reached at the end of 2010 on the fate of the Bush tax cuts provided a moderate, yet temporary solution to the potential expiration of the cuts. While the agreement succeeded in securing an extension of unemployment benefits for those out of work and an extension of tax cuts for America’s middle class and working families, it also extended tax cuts for millionaires and dramatically cut the estate tax. The President made it clear that we can’t afford these tax cuts on the high end and the changes to the estate tax, despite current plans by some members of Congress to keep them in place. It’s important to continue to press the case to end the tax cuts and restore the estate tax. Much work remains to be done in the coming year to prepare for a more formal and permanent debate in 2012.
Below is a collection of recent news on the tax cut issue, including piece on the compromises’ impact, the future of tax and spending issues in the new Congress and current public opinion on the issue.
Impact of the Compromise
Ruy Teixeira from the Center for American Progress recently wrote a piece for The New Republic lauding the tax compromise as the reason Barack Obama may win in 2012. He asserts that the tax compromise will inevitably improve the economy; once that is accomplished moderate, working class voters, whom he lost in the 2010 midterm election, will return to his camp. http://bit.ly/ggU3yl
However, not everyone is as pleased with the deal. In fact, a group of professors, who fall into the top tax brackets, have vowed to donate the money the extension of the cuts is saving them. One participant was quoted as saying, “The tax deal that the Obama administration made combined modest stimulus to the middle class with huge giveaways to the wealthy.” He and others have launched a website which allows donors to give money to federal programs which the Government could potentially be funding, were it not for the tax extension for the wealthy. http://abcn.ws/guDJDa
There has also been a bit of backlash against the deal from some of Obama’s former supporters. One such supporter contributed an op/ed to the Philadelphia Daily News outlining her disappointment with everything from the timing of the tax debate to the outcome. http://bit.ly/f02kpL Outgoing Representative Alan Grayson (D-FL) said that Obama and his progressive colleagues in Congress had failed liberal voters, specifically mentioning the tax cut compromise as a deal that would hurt President Obama’s credibility. http://huff.to/fLugUS
Effects in the New Congress
The extension of the Bush era tax cuts for the top income brackets means a loss of revenue that numbers into the billions. What’s more is that the newly Republican-controlled House of Representatives has voted to pass new rules which would make passing additional tax cuts easier and have vowed to slash billions from the Federal Budget. http://on.wsj.com/f4e90G
Bob Greenstein and James Horney of the Center on Budget and Policy Priorities each issued statements criticizing the new rules. Greenstein called the rules contradictory to the principles espoused by Congressional Republicans and said they would likely add significantly to our nation’s deficit. http://bit.ly/dRQYjX James Horney cited a CBPP report from late December which explains how replacing the current pay-as-you-go rules with cut-as-you-go, as the Congress has passed, reflect the misguided and economically hazardous policies which have led to the deterioration of our economy over the past decade. http://bit.ly/i8EnJC Horney elaborated on this during a Q and A on the new rules this week. http://bit.ly/e1Lsvw
Likewise, a piece by Dave Johnson of the Campaign for America’s Future adds to these arguments outlining the fact that not only does this strategy place social programs at risk, but also that it could be devastating to Wall Street. http://bit.ly/fjnwKp
Clearly, the positive progress made by Democrats with the tax deal and other measures passed over the past two years is in danger of being completely undone by the haphazard tactics of the new Congress.
An important part of this debate that must continue to be monitored is public opinion on the tax cut issue. Recent polling suggests that despite the passage of the tax compromise, most Americans still favor lowering or eliminating tax cuts for the rich. A CBS poll conducted between late November and early December found that 61 percent of Americans would choose to increase taxes on the wealthy over spending cuts in order to balance the budget. Furthermore, 46 percent of Americans making over $100,000 per year held this opinion. http://bit.ly/heTRAa A piece from The Hill which highlighted the poll’s results outlined how public opinion, and the promises of the new Congress with regard to the budget, may not be aligned. http://bit.ly/eEO9qs
Other Tax News
A little known provision of the Government Performance and Results Act has recently been amended by Congress and signed by President Obama to allow for closer scrutiny of tax expenditures. These tax breaks, which cost the nation tens billions of dollars each year and many of which are often the result of special interest lobbying, will now need to be more closely examined in terms of their ability to “enhance the performance of government programs and agencies.” In other words, they will be more closely scrutinized as to whether they accomplish their intended purpose. Citizens for Tax Justice recently authored an article explaining this in more detail and saying that, “this new reform has the potential to add some much needed rationality to debates over whether to pursue certain goals through spending programs or tax breaks.” http://bit.ly/fxt0XL
In an effort to focus on raising revenues in the coming budget and deficit debate, Americans for Responsible Taxes will continue to track the progress of theseissues in Congress, and update our members as information becomes available.
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The Tax Compromise is Just the Start
While Congress and the President have reached a temporary deal on the Bush era tax cuts, there is still much work to be done. Click below to see what issues are still in play, and what’s up next for the tax debate.
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