A last-minute deal to avert the fiscal cliff was put together and passed by the Senate last night, with Joe Biden running the football for the Democrats and Mitch McConnell holding court for the Republicans.
Update January 2nd, 1 a.m.: The House passed this law Tuesday night and it has been signed into law by President Obama.
|Found at Bloomberg Businessweek|
Another Smelly Compromise:
As it is a smelly compromise; many people do not like it. It does some good things and some mediocre things:
- As the Bush tax cuts ended yesterday, it restores those tax cuts for people with individual incomes under $400,000 or family incomes under $450,000. This is better than what the Republicans wanted, which was a permanent extension of all Bush tax cuts, but not as good as what the Democrats wanted, which was permanent extensions of the tax cuts only for people with individual incomes under $200,000 or family incomes under $250,000. (However, people with incomes above $250,000 have lost some of their exemptions, so they will be paying more taxes anyway.)
- This does not extend unemployment benefits for people who have already exhausted their benefits in 2012; it simply makes those same extensions available to people who got laid off in late 2011 or in 2012.
- I've read that there is a provision to prevent decreases in farm subsidies which was threatening to raise the cost of milk substantially.
- The first five million of estates will be exempted from taxes; after that, estates will be taxed at 40%. I personally would have preferred an exemption of the first two to three million. Many middle class working (vs. uber wealthy) families do manage to leave estates of two to three million to their kids and heirs.
- Increases on capital gains taxes. I can't find the summary, but the capital gains tax will jump to 20% (still not high enough) for people with over $200,000 income.
- The Payroll tax cut is gone. I would have preferred to see a two-step elimination of this tax cut so that the average $50,000 worker would see only a $10/week decrease in their take home pay this year and another $10/week decrease next year vs. a $20/week decrease in one fell swoop. (But I'm not in Congress.)
- Several other stimulus tax credits, the Earned Income Credit and the Child Tax Credit among them, survived.
- This is not a full summary; just a summary of the most discussed parts of this compromise.
Let's remember that without this smelly compromise, the average American working class or middle class family, perhaps as many as 80 to 100 million American families, would have been paying AT LEAST $40 to $100 a week more in withholding for federal income taxes (due to the end of the Bush tax cuts and the end of various tax credits) and increased FICA taxes, and over two million American families will be without unemployment insurance extensions. These are big hits. How many middle or working class families can afford an extra $200 a month or more in taxes? How will two million families without $1200 or more a month in unemployment benefits keep the heat on and keep food on their tables?
Stop Whining and Start Working!
If you are fuming right now and posting "Obama and the Democrats caved!" all over the Internet, remember one thing: The Republicans won the House of Representatives in November.
Until we get them out of power (and we have changes to the filibuster rule in the Senate), these are the kinds of compromises that we are going to get: They involve payoffs to the rich guys just so that the middle class can hang on to something. I'm disgusted as well, but I see it for what it is. No, the Democrats do NOT hold all of the cards, and if you think they do, you are living in la-la land somewhere.
Unless there is one party in absolute power who puts the welfare of the middle and working classes above the welfare of the rich, OR two parties who both put the welfare of the middle and working classes above the welfare of the rich, we can look forward to many more situations in which the welfare of the middle and working classes are beholden to stinky compromises.
If you don't like the way things are now (and I don't), the best answer is this: The Republicans must go. Only then can we contemplate more progressive solutions to the problems of this country.
2014 needs to start NOW!
2014 needs to start NOW!