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So you may have heard about the tax cut fight on Capital Hill, but don't worry the world is not turning upside down. Democrats want to cut SOME taxes, Republicans also want to cut taxes but in a different way. The fight breaks down like this:
Ten days ago Sen. Casey (D, PA) introduced s.1917 (Affectionately know as the "Middle Class Tax Cut Act of 2011"). The bill would have reduced the payroll tax rate by 3.1% for both employees AND employers. The media is reporting that the cuts would be 'paid for' by a 'Millionaires Surtax' which is defined as an additional 3.25% surtax on adjusted gross income over $1million dollars. This is actually not true, the surtax does not kick in until after 2012. Which means that the first year would be paid for, according to the bill, by transfers from the General Fund. What does it mean to transfer from the General Fund? Two words: Deficit spending.
Looking deeper into the bill, you see that the payroll tax cut applies only for the year 2012 (Jan 1-Dec 31, 2012). The Millionaire surtax has no sunset provision. Which means that Sen. Casey wants to pay for a TEMPORARY tax cut, which he intends to pay for with a PERMANENT tax increase. Oh, and he wants to borrow the money now (Remember the Debt Celling debate?) to pay for the tax cut.
But of course this ignores the real injustice of S.1917. The bill raises taxes after 2012 but PROVIDES NO CONTINUED PAYROLL TAX CUT!!! The bill is the premiere election year bill, saying 'I will cut your taxes for now, but I don't know about in the future. We'll see how things look after this upcoming election..."
Of course Casey's bill went down in flames for the reasons outlined above. But that did not stop the man as he reintroduced the bill as S. 1944. While it is very similar to the bill above it does have some notable differences. The Millionaire surtax has a sunset window of 2022. Also the bill has new provisions like
- A 50% tax on unemployment compensation income for couples that make more than $1 million dollars a year. This seems odd that Casey would go after unemployed millionaires, but you go where the money is. In any case the maximum benefit that can be paid is in Rhode Island ($689/wk) so this amounts to a 1.5% tax on unemployed millionaires (on $38,500/yr benefits).
- Casey's bill also bans millionaires from from collecting food stamps. If millionaires can collect food stamps, this is an odd country indeed. (In other news, Casey's bill also imposes a 100% on vampires and dragon owners!)
- Increase the loan rates charged to lenders from Fannie and Freddy. How this got to be part of the bill I have no idea.
So you might be asking 'What do the republicans have?" Well at the moment...not much. Sen. Dean Heller (R, NV) proposed a 2% cut which went down in a ball of flames because it didn't make up the lost revenues with ANY offset in spending or taxation. It's a bad bill, even by congressional standards (If those exist). The bill was swiftly defeated by 20-78 vote, so I won't really go into the details. But trust me, it's bad.
The House Republicans are working on a plan. (Which you can read about in this incredibly poorly written article on Fox News,See if you can spot the errors. I found three.) The plan is still taking shape, so I will withhold judgment. But given the ideas outlined in the article above, they seem to have forgotten the point of the bill (Here is a hint, it involves taxes and a cut.)
So this has been a look inside the sausage factory. You know they could just cut the tax, deficits be damned! Or here is a novel idea, we could just eliminate the income tax and usher in a glorious world of Utopian happiness. Or in a sensible world we could just reduce federal spending to 2005 levels, where we would balance the budget and have the extra $140 billion for the tax cuts. But this all seems like quite a bit of effort for a 2 or 3% decrease in a tax for one year.
