The deal is all but done. It looks as though the Bush Tax Rates will be extended, for all Americans, for at least the next two years. However, this victory for the GOP came at quite a cost when one considers the overwhelming show of support the conservative position on the expiration of the Bush Tax Cuts received in our most recent elections.
Here are the basic tenants of the deal struck between President Obama and the Congressional leaders of both parties.
- Bush Era Tax Rates (those that Americans have enjoyed for nearly a decade) will be extended for 2 years
- Unemployment benefits will be extended from 99 weeks to 154 weeks, an increase of 13 months
- The Death Tax will return in 2011, but with some changes. Instead of a 55% tax rate for estates over $1 million, Americans will now pay a 35% rate on estates over $5 million
- There will be a 2% cut in the payroll tax, which funds social security, for one year
- Several of the tax cuts included in the stimulus package are extended, for one year
It is hard to tell how this compromise turned out without some additional facts. For example, are the 13 months of new unemployment benefits going to be paid for? What will the effect of a payroll tax cut be on the solvency of Social Security in coming years?
While many Democrats will probably feel as though President Obama turned their back on their base with this deal, I would say that Republicans did the same. The GOP made compromises on matters of clear principle which should not be ignored. They have officially started off their control of Congress (yes I know its still the lame duck session, but the fact that this deal was even made shows that the GOP has effectively taken control of the Congress) by racking up debt in order to fund unemployment benefits for what is objectively an absurd period of time. Extending unemployment for 13 more months, over the 2 years already allowed, will literally cost tens of billions of dollars. Without making the necessary cuts from the budget to fund this extension the GOP has caved on the very issue that presumably put them into power come January, fiscal responsibility.
The Death Tax compromise is another sign of weakness for the GOP. The Death Tax is fundamentally wrong, and completely against everything that we stand for. The money that a person makes in their lifetime is taxed at various rates depending on how the income is derived. It is simply unconscionable to literally double-tax that income merely because a decedent wants to leave it to their family members left behind. No matter what the wealth level required or the rate, the tax itself is simply wrong and punishes savings, something we used to hold as a value in society. It took years of work to get the Death Tax taken off the books, and this compromise pushes us backward in our quest for fairness in the tax code.
Two years later we are going to have this fight again. That means that the next Presidential election is going to focus on these tax rates as a focal point for fiscal policy. This is seemingly great news for the GOP but only time will tell. Below is the video of President Obama annoucing the deal, which still needs to go through Congress to take effect.
So, Save Jerseyans, who won and who caved? Discuss in the comments.
httpv://www.youtube.com/watch?v=90PYUMLxCnA
I agree that the death tax is fudnamentally and morally wrong – but hopefully this will be stopped in a couple of years.
I don't really get cutting the payroll tax and, as much as I think social security ought to die (not outright – but my rationale and plan is too long to post here), I think cutting an already underfunded program is short sighted.
I thank GOD that I am employed (I have been out of work in more than a few layoffs in my time), but I question the extension of unemployment pay for such along period – is that to be paid for my CURRENT stimulus funds? This is just a really bad idea and will indeed cost billions. What needs to happen is the removal of the governmet's multi-year war on business from both dem and repubs. Cut the corporate taxes, stop penalizing manufacturers, open up our energy markets, allow development of our own oil/coal/oil shale – make it profitable again to actually produce something in the USA instead of (like GE recently did) moving factories to Asia.
I believe it was mostly the dems who caved on this one. 20+ senators that are up for election in 2012 are democrats and they aren't taking the last election lightly. It was obvious that there were going to be some concessions on the GOP side because the numbers are not there for them until the next congress.