Nel's New Day

January 2, 2013

GOP Passes Tax Cuts, Otherwise Fails

After stalling for two months, the House finally decided late last night to support the Senate version of the fiscal cliff bill one day before the end of the 112th Congress. Although the end vote was bipartisan, the Republicans were badly split: Speaker John Boehner (R-OH) and Budget Committee Chairman Paul Ryan (R-WI) voted in favor; House Majority Leader Eric Cantor (R-VA) and Majority Whip Kevin McCarthy (R- CA) opposed.

Grover Norquist can’t complain about the tax increase on the top 2 percent because it wasn’t really an increase. According to the GOP, the taxes went up on midnight of 12/31/12; the new bill lowered the taxes on the bottom 98 percent and left the top 2 percent the same. They think like children do.

Provisions of the new law:

  • Tax rates will revert to the ones in 2001 for families making over $450,000 and individuals over $400,000. All income below these amounts, basically the bottom 98 percent of the people in the United States, will permanently remain at the current level.
  • Taxes on capital gains and dividends are permanently set at 20 percent for the top 2 percent and stay at 15 percent for everyone else. [Clinton-era taxes were 20 percent for capital gains with dividends taxed as ordinary income, topping out at 39.6 percent.]
  • The estate tax is permanently 40 percent for the top 2 percent ($450,000/$400,000), indexed to inflation, with a $5 million exemption.
  • The pay freeze for Congress, lifted by President Obama this week, has been re-imposed.
  • The 2009 expansion of tax breaks for low-income Americans: the Earned Income Tax Credit, the Child Tax Credit, and the American Opportunity Tax Credit ($2,500 tax credit to help college students and their families pay for tuition and related expenses) will be extended for five years.
  • The Alternative Minimum Tax, which sometimes raised taxes for the middle class, has been fixed.
  • Two limits on tax exemptions and deductions for higher-income Americans will be reimposed: Personal Exemption Phaseout (PEP) will be set at $250,000 and the itemized deduction limitation (Pease) kicks in at $300,000.
  • Extended for the coming year are the full package of temporary business tax breaks, federal unemployment insurance that benefits those unemployed for longer than 26 weeks, and avoidance of Medicare cuts to doctors.
  • A farm bill fix is good for nine months, probably keeping the price of milk the same.

After two months of wallowing in the possible disaster of the tax-cut situation, the climate of antagonism and fear will continue for the next two months.  That’s when the debt ceiling expires, and Congress has to approve its increase. The Republicans will spend most of their time claiming that raising the debt ceiling costs us money. It doesn’t. Raising the debt ceiling just allows the United States to pay their bills; it doesn’t spend any additional money.

The sequester, the across-the-board spending cuts of $110 million both domestic and military, has not been settled, just delayed for two months. And the payroll tax “holiday” has expired, raising taxes 2 percent for Social Security on the first $113,700 of wages.

Thus the GOP will rattle their sabers for two months about raising the age for Social Security, lowering the payments, and screaming about how “entitlements”—that people have already paid for—are the reason for the deficit instead of the Bush tax cuts and wars that cost the country over $4 trillion.

The fiscal cliff bill did provide bonuses to corporations in the form of subsidies.

  • NASCAR – Sec 312 extended the “seven year recovery period for motorsports entertainment complex property.” That means the tax breaks for anyone who builds a racetrack and related facilities to the tune of $43 million during the next two years.
  • Railroads – Sec. 306 provides tax credits to certain railroads, private businesses, for maintaining their tracks which costs taxpayers about $165 million a year.
  • Movies – Sec. 317 costs about $150 million for two years by providing a subsidy to Hollywood studios.
  • Mining Companies – Sec. 307 and Sec. 316 offer tax incentives for miners to buy safety equipment and train their employees on mine safety because laws can’t make companies protect their workers.
  • Goldman Sachs Headquarters – Sec. 328 extends “tax exempt financing” an extension of post-9/11 recovery funds that pretty much goes to “fancy Manhattan apartments and office towers for Goldman Sachs and Bank of America Corp,” according to Bloomberg. That paid Goldman $1.6 billion in tax-free financing for its new headquarters through Liberty Bonds.
  • Off-shore Loophole for banks – Sec. 322 allows American corporations such as banks and manufacturers to avoid taxes on certain lending practices. Those benefiting from the $9 billion include GE, Caterpillar, and JP Morgan.
  • Foreign Subsidiaries – Sec. 323 extends the “Look-through treatment of payments between related CFCs under foreign personal holding company income rules.” This provision cost $1.5 billion from 2010 and 2011 and allows U.S. multinationals to not pay taxes on income earned by companies they own abroad.
  • Bonus Depreciation, R&D Tax Credit was projected to cost $8 billion for 2010 and 2011, and the depreciation provisions were projected to cost about $110 billion for those two years, with some of that made up in later years.

The Joint Committee on Taxation in 2010 did an analysis of what many of these extenders cost, more than the over $100 billion per year listed above.

While the Republicans were stalling on the fiscal cliff bill, they refused to address the issue of the money needed after Superstorm Sandy. After the House adjourned on Tuesday night without passing the $60.4 billion Sandy relief package that the Senate approved last week, many GOP members affected by the storm became livid. Rep. Peter King (R-NY) told people in New York and New Jersey to not donate one cent to congressional Republicans.

Boehner felt so threatened that he promised to address the bill on Friday. That’s after the 112th Congress ends, meaning that both House and Senate have to restart the entire legislative process. Chris Christie, New Jersey governor, used much stronger language when he charged that the GOP put politics “before our oaths to serve our citizens”:

 “Our people were played last night as a pawn. Last night, the House of Representatives failed that most basic test of public service and they did so with callous indifference to the suffering of the people of my state. There is only one group to blame for the continued suffering of these innocent victims: the House majority and their Speaker John Boehner. [Historically] disaster relief was something that you didn’t play games with, but now in this current atmosphere everything is a subject of one-upmanship. It is why the American people hate Congress.”

Christie finished by emphatically saying, “Shame on you, shame on Congress.”

Boehner may back down on the Sandy relief bill, but it appears that after 18 years, the Violence against Women Act is gone.  Sen. Patty Murray (D-WA), the Democratic point person on VAWA, said:

“The House Republican leadership’s failure to take up and pass the Senate’s bipartisan and inclusive VAWA bill is inexcusable. This is a bill that passed with 68 votes in the Senate and that extends the bill’s protections to 30 million more women. But this seems to be how House Republican leadership operates. No matter how broad the bipartisan support, no matter who gets hurt in the process, the politics of the right wing of their party always comes first.”

If proponents succeed in reviving the bill in the 113th Congress, there will still be far fewer resources available for state and local governments to combat domestic violence until they succeed. The original VAWA was drafted in the office of then-Sen. Joe Biden (D-DE) in 1994; maybe the vice-president can resurrect his creation.

At this time, no one knows if Boehner will even continue as Speaker of the House. Conservatives claim that they have enough votes to oust him. Again, they are behaving like children. No one has come out for Boehner’s job because they are afraid, and no one will try a coup if they aren’t 100 percent positive that they will succeed. Boehner has already taken retribution against his opposition, and he’ll continue to do that.

So Boehner stays, the House GOP will cause Congress to be the same failure for the next two years, and the bottom 98 percent won’t have to pay more taxes.

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