The big buzz words in the recent election were “middle class.” Every pol in both political parties claimed to be fighting to save or protect the middle class. None were more emphatic about claiming to be a friend of the middle class, its protector, than Barack Obama.
The election ended and we had a big debate about taxes. Mr. Obama, playing his usual fade and cave role, backed off from a years-long pledge to let Bush-era tax rates for the top two percent rise to Clinton-era levels, fading and caving to a $400,000-$450,000 level, a huge win for the rich. In return, the Republicans allowed Bush-era lower income tax rates for the middle class — those making less than $200,000, or $250,00 in family income — to stay in place, something they were willing to do before the negotiations started.
That’s how Mr. Obama (and go-along Democrats) protected the middle class on taxes. He didn’t fight, however, and certainly the Republicans didn’t fight, to keep the Payroll Tax rate at 4.2 percent. It rose back up to 6.2 percent.
Since three-quarters of American working people (a.k.a. the middle class) pay more in this tax than in income taxes, the net result of saving the middle class on income tax hikes while not protecting it on Payroll Tax (a.k.a. Social Security Tax) hikes is that taxes have gone up for almost all middle class taxpayers by virtue of this tax deal.
Here’s another way to look at this so-called “compromise.” If Bush-era tax cuts for all taxpayers had simply been allowed to expire, while the Payroll Tax rate had been kept at 4.2 percent, the middle class would have been better off on a net basis.
Ah, but you may have heard that this lower Payroll Tax rate might soon be reconsidered by Congress and the President down the road. Will this, if it happens, end up benefiting the middle class?
If you think that you don’t understand today’s Washington. A place where no matter who gets elected on whatever platform, the rich are aided and protected and the middle class is screwed. (The poor, or course, are no longer even considered. Their disenfranchisement and abuse is taken for granted.)
In return for lower Payroll Tax rates, Republicans would certainly demand, and likely get from a fade and cave president, middle class stiffing cuts in entitlement programs. Or Republicans would demand so-called “reform” of the Social Security. This might include a higher retirement age to collect Social Security, or reduced benefits, or a new way to compute annual COLA adjustments that would cut future benefits indirectly. Any of these would naturally hurt the middle class but not touch the rich at all, because the Payroll Tax is now collected only on incomes of $113,000 a year of less.
There are, of course, other ways to “reform” Social Security. The tax could be collected on all incomes, for example, even income from dividends and capital gains. And were this done, the Payroll Tax could be less than 4.2 percent on individuals, and perhaps lower on the Payroll Tax share paid by business as well, a huge incentive to boost hiring.
Such a real reform is not even under consideration in present-day Washington. Not with a big buck bought Republican Party, and a Democratic Party whose members that are not totally brain dead on issues are nonetheless prevented from being real middle class defenders by a need to support their party’s current fade and cave head.
One of these days, from the still breathing segment of the Democratic Party, or a new Working Americans Party, true middle class defenders will arise again. Let’s hope it starts happening as soon as the 2014 elections. Because, dear friends, it ain’t gonna happen any time before that.
(My two most recent novels, Fifteen Feet Beneath Manhattan and The Bellman’s Revenge, are available on Amazon.)
Copyright 2013 The Moderate Voice