The Tax Gambit

by Mark Wilson

In the summer of 2001, life was really good. Business was booming, housing prices were going up, and the worst thing that President George W. Bush had done so far was tell a bunch of green peaceniks that they couldn’t see who was on Cheney’s energy tax force.

President Bush entered office with a significant budget surplus (note that Clinton Budget Surplus Deniers engage in a bait-and-switch with the words debt — which did not decrease — and deficit, of which there was none in Clinton’s final year).

Ignoring John Maynard Keynes, Bush decided to use this economic boom-time to give everyone a tax break. The Bush Tax Cuts lowered the tax burden at all tax brackets by about 3%.

The tax cuts, by their terms, were to expire on December 31, 2010. The Democrats’ plan was to let the cuts expire for the highest income bracket but retain the cuts for the middle income brackets. You might remember this as the time when Congressional Republican showed that they were awful and Democrats showed that they were spineless. John Boehener & Co. tried to prevent Democrats from letting the cuts expire by holding hostage unemployment insurance extensions.

In the end, each side put the issue on the back burner. Democrats got unemployment insurance, and the tax cuts were extended until December 31, 2012.

Whoa, geez! That’s soon! And this is an election year!

If no one does anything, tax rates go up for everyone. Democrats should be pushing this angle: deadlock in the Senate; i.e., the ludicrous situation where 60 votes are needed to get anything done, will result in higher tax rates for everyone. Republicans (who care about the debt only on the spending side) are content to let the tax cuts continue and continue blaming the Obama Administration for piling on debt.

In the alternative, and I am not making this up, Republicans explicitly would love to extend the tax cuts for the highest incomes and let the tax cuts expire for everyone else:

In all, the Republican plan would extend tax cuts for 2.7 million affluent families while allowing tax breaks to expire for 13 million on the bottom of the income spectrum, tax analysts say. An impact analysis released Monday by Congress’s Joint Committee on Taxation said a permanent extension of all the Bush-era tax cuts would cut taxes on households with more than $1 million of annual income by $74,505 next year. The Democratic proposal would cut taxes for those same households by $7,055.

Democrats could, theoretically, call for a vote on their plan and then demand that the Republicans explain to their constituents — especially their lower-income constituents — why nothing got done, and why their average tax bill is going up by $1,600. Right now, they should push the Republican plan; i.e., the richer get richer, while the poor get poorer.

It’s hard to tell sometimes whether Republicans are executing a master plan created in Mordor to destroy the American Middle Class. It could be that these policies are all happening independently of one another because they tend to come from the same free market YOYO (“you’re on your own”) philosophy. Due to Republicans’ conveniently-timed battle on disclosure and information, we just don’t know how much money Sauron has donated to SuperPACs.