In order to get the votes he needs to make sure unemployed Americans get the relief they need (and deserve) and employed Americans continue to enjoy payroll tax cuts, Obama is cutting a deal with the Repubs on the extension of the Bush tax cuts.
As I’ve pointed out previously, this goes against the anti-spending sentiment of the Tea Party and yet here we are…talking about tax cuts for the wealthiest Americans being extended for another couple years.
Funny, I thought the election was about the deficit and spending…
The deal has been in the works for more than a week and represents a concession by Obama to political reality: Democrats don’t have the votes in Congress to extend only the expiring income tax breaks that benefit the middle class. The White House estimates that the proposed agreement would prevent typical families from facing annual tax increases of about $3,000, starting Jan. 1.
Obama was able to extract an agreement from GOP leaders to support an additional 13 months of jobless benefits, a 2 percent employee payroll tax cut and extensions of several tax credits aimed at working families that were included in the stimulus bill.
And if you didn’t think one concession to the Repubs was enough, how about two?
The deal also would revive the estate tax, but it would exempt inheritances of up to $5 million for individuals and $10 million for couples. Democrats on Capitol Hill are strongly opposed to setting the cap at that high a level and to the 35 percent rate discussed by Obama and Republicans that would apply to the taxable portion of estates.
And just to make sure we’ll on the same page…tax rates are at the lowest point in 60 years.
And here’s some key points about our deficit crisis and tax revenue…
- Federal taxes are the lowest in 60 years, which gives you a pretty good idea of why America’s long-term debt ratios are a big problem. If the taxes reverted to somewhere near their historical mean, the problem would be solved at a stroke.
- Income taxes, in particular, both personal and corporate, are low and falling. That trend is not sustainable.
- Employment taxes, by contrast—the regressive bit of the fiscal structure—are bearing a large and increasing share of the brunt. Any time that somebody starts complaining about how the poor don’t pay income tax, point them to this chart. Income taxes are just one part of the pie, and everybody with a job pays employment taxes.
- There aren’t any wealth taxes, but the closest thing we’ve got—estate and gift taxes—have shrunk to zero, after contributing a non-negligible amount to the public fisc in earlier decades.
Also, Ben Bernanke notes that the good times are continuing to roll for the rich…
Here’s what Ben has to say about this…
“It’s a very bad development,” he said. “It’s creating two societies. And it’s based very much, I think, on educational differences. The unemployment rate we’ve been talking about. If you’re a college graduate, unemployment is 5 percent. If you’re a high school graduate, it’s 10 percent or more. It’s a very big difference.”
Mr. Bernanke added: “It leads to an unequal society, and a society which doesn’t have the cohesion that we’d like to see.”
Long story short, the rich are having a hell of a good time driving our debt up. If you believe the rich shouldn’t be taxed as much as the rest of us, well, I can’t argue that with you. But if you believe that the more you earn, the more you should get taxed (which is how it was always supposed to work) you have to wonder why this is happening.
More as it develops…