Fiscal Scheme Deal Raises Taxes on 77% of Americans
WASHINGTON – It’s a fool’s errand trusting President Obama, Democrats or Republicans, which is why I haven’t for a very long time. It’s 2013, the year of austerity, which didn’t work in Europe and won’t work here either, but our politicians are too ignorant to learn the lessons.
We have been subjected to a White House negotiating process that violates every standard of rationality and transparency. The public never once saw an integrated budget proposal that showed the quantitative and qualitative implications of various policy options. The public has not been told that yesterday’s agreement threatens the financing of crucial programs for education, job training, infrastructure, environment, energy, science and technology, health care, nutrition, and the poor for years to come. – Jeffrey Sachs
While Speaker Boehner couldn’t get the majority of his caucus to vote for the Senate’s Fiscal Cliff bill, breaking the Hastert rule, the House managed to pass it 257 to 167.
The deal passed by the Senate and the House will impose fewer limits on deductions than the White House plan. It will also tax income from dividends at a flat rate of 20 percent, rather than the same marginal rate as earned income. And there is another important point, often misunderstood: Affluent households will pay the new 39.6 percent rate only on income above $450,000. They and everyone else will still will pay lower rates on income below that threshold. [New York Times]
Matt Stoller lays out some interesting corporate give-aways that no one has mentioned or paid any attention to whatsoever. They include corporate subsidies to Goldman Sachs, Disney, NASCAR, which seems to include a “9B Off-shore financing loophole for banks.” From Stoller:
5) Subsidies for Goldman Sachs Headquarters – Sec. 328 extends “tax exempt financing for York Liberty Zone,” which was a program to provide post-9/11 recovery funds. Rather than going to small businesses affected, however, this was, according to Bloomberg, “little more than a subsidy for fancy Manhattan apartments and office towers for Goldman Sachs and Bank of America Corp.” Michael Bloomberg himself actually thought the program was excessive, so that’s saying something. According to David Cay Johnston’s The Fine Print, Goldman got $1.6 billion in tax free financing for its new massive headquarters through Liberty Bonds.
- $430 million for Hollywood through “special expensing rules” to encourage TV and film production in the United States. Producers can expense up to $15 million of costs for their projects.
- $331 million for railroads by allowing short-line and regional operators to claim a tax credit up to 50 percent of the cost to maintain tracks that they own or lease.
- $222 million for Puerto Rico and the Virgin Islands through returned excise taxes collected by the federal government on rum produced in the islands and imported to the mainland.
- $70 million for NASCAR by extending a “7-year cost recovery period for certain motorsports racing track facilities.”
- $59 million for algae growers through tax credits to encourage production of “cellulosic biofuel” at up to $1.01 per gallon.
- $4 million for electric motorcycle makers by expanding an existing green-energy tax credit for buyers of plug-in vehicles to include electric motorbikes.
From the New York Times, “Bigger Tax Bite for Most Households”:
But lawmakers’ decision not to reverse a scheduled increase in the payroll tax that finances Social Security, while widely expected, still means that about 77 percent of households will pay a larger share of income to the federal government this year, according to the center’s analysis.
The tax this year will increase by two percentage points, to 6.2 percent from 4.2 percent, on all earned income up to $113,700.
Indeed, for most lower- and middle-income households, the payroll tax increase will most likely will equal or exceed the value of the income tax savings. A household earning $50,000 in 2013, roughly the national median, will avoid paying about $1,000 more in income taxes — but pay about $1,000 more in payroll taxes.
As Bloomberg reports, the average rise in taxes on people paying between $50,000 – $200,000 is being estimated as around $1,635. You can argue that the payroll tax cut needed to be nixed eventually, which is absolutely true, but during a precarious time on the economic front it’s ridiculous. You also can’t pretend that the middle and working class aren’t getting a tax hike, even if it won’t be even larger, because the Bush tax cuts for this group have been extended. So, in essence the latest fiscal scheme from Obama, Democrats and Republicans simply keeps an even larger tax cuts from hitting, but doesn’t stop middle class from taxes going up at the wrong moment.
Happy New Year.
Taylor Marsh, is a veteran political analyst, a former Huffington Post contributor, Broadway babe and talk radio dabbler, and is the author of The Hillary Effect, available at Barnes and Noble and on Amazon. Her new-media magazine www.taylormarsh.com covers national politics, women, foreign policy, and culture.