While the White House and much of the media spun the hurried
late-night move as a victory for the middle class, it was a win paid for with
new tax cuts worth hundreds of billions of dollars for America’s wealthiest
families.
Millions
of Americans watched the ball drop on New Year’s Eve. The glitzy one in Times
Square symbolized joy and hope for the New Year. Just a few hundred miles to
the south, Congress dropped another ball — one that no doubt sent champagne
glasses clinking among the richest 1 percent. But the rest of us shouldn’t
celebrate.
While
the White House and much of the media spun the hurried late-night move as a
victory for the middle class, it was a win paid for with hundreds of billions
of dollars in new tax cuts for America’s wealthiest families.
Obama
not only failed in his promise to raise taxes on the top 2 percent of
taxpayers, he couldn’t even raise taxes on all of the richest 1 percent. Only
those with individual incomes above $400,000 ($450,000 for couples) will face
higher tax rates. The threshold for the top 1 percent starts at $369,691. The
tax cuts for the richest Americans are permanent, while the child tax credit,
college tax credit, and earned income tax credits that benefit Americans of
more modest means expire once again in five years.
President
Obama’s original budget proposal would have increased the annual tax bills of
the richest 1 percent by nearly $10,000; the bill that Congress just enacted
instead cuts the income taxes of the average top 1 percent family by $17,840,
according to Citizens for Tax Justice.
The
very rich got an even greater belated Christmas gift: the budget deal raised
the estate tax exemption to $10 million per couple. That level’s so high that
only the richest 0.3 percent will pay it — just 3 of every 1,000 estates or
about 7,000 estates each year. When the clock struck midnight on January 1, the estate tax rate was 55 percent. Two hours
later, when the Senate acted, it dropped to just 40 percent.
Taking
into account the new health care tax on unearned income, the wealthiest 1
percent also saw taxes on their dividends nearly halved from what would have
become a 43 percent rate to 24 percent. With this fiscal deal, Congress
continues to honor the perverse American tradition of rewarding income from
wealth more than income from work.
And
lest corporations feel left out of the New Year’s Eve party for the rich —
Congress snuck 31 corporate tax breaks into the bill, including two pernicious
provisions called the Active Financing Exception and the Controlled Foreign
Corporation Look-Through, which helps companies like General Electric and Apple
avoid billions of dollars in U.S. corporate income taxes.
While
eight senators opposed the deal, only one — Democrat Tom Harkin of Iowa — did so
because he felt it threatened America’s middle class.
“Every
dollar that wealthy taxpayers do not pay under this deal, we will eventually
ask Americans of modest means to forgo in Social Security, Medicare, and
Medicaid benefits,” Harkin explained. “It is shortsighted to look at these
issues in isolation from one another, especially when congressional Republicans
have been crystal clear that they intend to seek spending cuts to programs like
Social Security just two months from now, using the debt limit as leverage.”
Because
the deal the White House brokered with Congress does little to reduce the debt,
deficit hawks will soon be back at it, seeking to cut more from Social
Security, Medicare, food stamps, and other programs that benefit millions of
families.
If
that happens, middle class and low-income Americans will have less money to
spend, which will mean fewer customers for Main Street businesses, and
ultimately fewer jobs for all.
Scott Klinger is an Associate Fellow of the
Institute for Policy Studies and a co-author of the report “A Pension Deficit Disorder: The Massive CEO Retirement
Funds and Underfunded Worker Pensions at Firms Pushing Social Security Cuts.”
Distributed via OtherWords. OtherWords.org
Distributed via OtherWords. OtherWords.org
