By Glynn Wilson –
While all the attention the day after the first day of the new year is focused on the United States House of Representatives’ 257 to 167 vote to approve a budget agreement to prevent what pundits have been calling the “fiscal cliff” for months, it should be noted that it was the Democratic leadership in the U.S. Senate that crafted the agreement over the New Year’s holiday to save middle class Americans from a tax increase. It also saved thousands of jobs from being lost due to automatic budget cuts Republicans inserted into the process the last time the tea party Congress took up the budget.
The agreement is being praised all around, even by organized labor, but the criticism has already started to trickle out on what had to give for this measure to pass — and it mostly has to do with specific tax breaks for big corporations, surprise, surprise.
AFL-CIO President Richard Trumka called the agreement “a breakthrough in beginning to restore tax fairness and achieves some key goals of working families.”
“It does not cut Social Security, Medicare or Medicaid benefits,” he said in a statement. “It raises more than $700 billion over 10 years, including interest savings, by ending the Bush income tax cuts for families making more than $450,000 a year.”
In recognition of the continuing jobs crisis, he said, it extends unemployment benefits for a year.
“A strong message from voters and a relentless echo from grassroots activists over the last six weeks helped get us this far,” he said. “But lawmakers should have listened even better.”
The deal extends the Bush tax cuts for families earning between $250,000 and $450,000 a year and makes permanent Bush estate tax cuts exempting estates valued up to $5 million from any tax.
“These concessions amount to over $200 billion in additional tax cuts for the (top) 2%,” he said. “Because of Republican hostage taking, the deal simply postpones the $1.2 trillion sequester for only two months and does not address the debt ceiling, setting the stage for more fiscal blackmail at the expense of the middle class” in the months ahead.
“Instead of moving to address our nation’s real jobs and public investment crisis, our leaders will be debating a prolonged artificial fiscal crisis,” he continued. “In the weeks to come, as the confrontation over the economic direction of our country continues, the working men and women of the AFL-CIO will continue to fight to keep poor and middle class families from giving more so rich people can continue paying less. That means a fairer, more progressive tax system, an end to Bush tax rates for the 2% and protection of Social Security, Medicare and Medicaid from benefit cuts.”
Before the ink was even good and dry on the agreement, Alternet out of San Francisco had already identified eight corporate subsidies in the “fiscal cliff” bill.
Number one on their list was a subsidy for NASCAR that will cost $43 million over two years.
Railroads also get a tax credit for track maintenance, estimated to cost $165 million a year.
Hollywood studios, including Disney, received a subsidy projected to cost $150 million for 2010 and 2011.
Mining companies get a tax incentive to buy safety equipment and train their employees on mine safety. “Taxpayers shouldn’t have to bribe mining companies to not kill their workers,” Alternet says.
Goldman Sachs got $1.6 billion in tax free financing for its new massive headquarters through Liberty Bonds.
Other big banks and corporations get to engage in questionable lending practices and not pay taxes on income earned from the practice.
U.S. multinational corporations also got tax credits for foreign subsidiaries, so they don’t have to pay taxes on income earned abroad. It could cost the federal treasury $1.5 billion in 2010 and 2011.
Other “corporate boondoggles” include the continuation of Research and Development tax credits, projected to cost $8 billion for 2010 and 2011, and Bonus Depreciation, projected to cost about $110 billion for those two years.
The Joint Committee on Taxation in 2010 did an analysis of what many of these extenders cost. You can see that report here.
The Washington Post carried a story saying the tea party had to swallow a “bitter pill” for Congress to pass the bill. Too bad it might not be a poison pill.
At least this deal will let us all get on with talking about other things in life for awhile without the immediate threat of a new year recession right out of the 2013 box, at least for a couple of months. But of course it will be back in the news about the beginning of spring so the Republicans can pretend to care about America’s budget deficit again and fool some people into continuing to vote for them. If they cared about the deficit, they would close the corporate loopholes and let the Bush tax cuts for the rich expire.
President Barack Obama from the White House called the agreement “a victory for middle-class families and the economy.”
“At this make or break moment for the middle class, the president achieved a bipartisan solution that keeps income taxes low for the middle class and grows the economy,” according to a White House press release. “For the first time in 20 years, Congress will have acted on a bipartisan basis to vote for significant new revenue. This means millionaires and billionaires will pay their fair share to reduce the deficit through a combination of permanent tax rate increases and reduced tax benefits. And this agreement ensures that we can continue to make investments in education, clean energy and manufacturing that create jobs and strengthen the middle class.”
In 2011, according to the release, the president cut spending. In 2012, he kept his promise of asking the wealthiest 2 percent of Americans to pay more while protecting 98 percent of families and 97 percent of small businesses from any income tax increase—raising $620 billion in revenue.
“As we move forward to address our ongoing fiscal challenges, both spending cuts and continuing to ask the wealthy to do a little more will be part of a balanced approach,” the president said. “It is critical for our economy and future generations that we reduce the deficit. We cannot keep racking up this debt on our kids.”
According to a White House fact sheet, the bill permanently extends the middle-class tax cuts and credits for working families, with additional measures to protect families and promote economic growth.
It includes a permanent extension of the middle class tax cuts.
“This will provide certainty for 114 million households including lower tax rates, an expanded Child Tax Credit, and marriage penalty relief—steps that together will prevent the typical family of four from seeing a $2,200 tax increase next year,” the release says.
It also includes a permanent fix for Alternative Minimum Tax.
The White House calls this “the most progressive income tax code in decades.”
The bill extends Emergency Unemployment Insurance benefits for 2 million people and extends tax cuts for 25 million working families and students. It extends tax credits for renewable energy and avoids a 27 percent cut to reimbursements for doctors seeing Medicare patients for 2013 by fixing the sustainable growth rate formula through the end of next year.
“The President stood firm against Republican proposals to pay for this fix with cuts to the Affordable Care Act or the beneficiaries,” the White House says.
It postpones accross-the-board budget sequestration for two months and its paid for with $1 of revenue for every $1 of spending, balanced between defense and domestic uses. The agreement saves $24 billion, half in revenue and half from spending cuts.
It raises $620 billion in revenue according to Congress’ Joint Committee on Taxation by achieving the president’s goal of asking the wealthiest 2 percent of Americans to pay more while protecting 98 percent of families and 97 percent of small businesses from any income tax increase.
It restores the 39.6 percent rate for high-income households, as in the 1990s: The top rate would return to 39.6 percent for singles with incomes above $400,000 and married couples with incomes above $450,000.
The capital gains rates for high-income households return to Clinton-era levels, 20 percent. Counting the 3.8 percent surcharge from the Affordable Care Act, dividends and capital gains would be taxed at a rate of 23.8 percent for high-income households. These tax rates would apply to singles above $400,000 and couples above $450,000.
It reduces tax benefits for households making more than $250,000 (for singles) and $300,000 (for couples), and raises tax rates on the wealthiest estates, those upwards of $5 million per person – from 35 percent to 40 percent.
The agreement’s $620 billion in revenue is 85 percent of the amount raised by the Senate-passed bill, and even radical conservative Senator Jeff Sessions of Alabama voted for it in the upper chamber. One has to wonder what he got in return.
© 2013, Glynn Wilson. All rights reserved.