As Tax Hike Looms, a Bell Tolls
Your taxes may be going up in a month or so, thanks to those “No New Taxes” folks in the GOP. Republican Senate Minority Whip Jon Kyl and other powerful GOP leaders are insisting it would be good to let middle class taxes increase, but bad to raise taxes on super rich. Ever. So, unless you happen to be super rich, this could be a problem for you very soon.
Appearing on Fox News Sunday over the weekend, Senator Kyl said he wants to let the payroll tax cut expire at the end of next month. This would significantly increase the tax bite on the middle class. But Kyl was adamant that the taxes on the rich should not be increased. Not at all, now, or ever. GOP leaders seem to believe that tax increases on the rich would only discourage them and hurt their feelings. But the middle class? Well — they can just buckle down, suck it up, and get on with it.
In 2011, the payroll tax cut meant that a typical middle income American family had about $1,000 extra to spend. To somebody making $50,000 or so a year, $1,000 is a serious chunk of change. But the tax cut that put that extra money in your paycheck will expire soon, unless Congress takes decisive action quickly. And taking decisive action quickly is not something that Congress has been noted for, as of late.
Senator Kyl complained that: “The payroll tax holiday has not stimulated job creation.” But the non-partisan Congressional Budget Office doesn’t see it that way at all. They say that a payroll tax cut works as promised.
In a recent CBO report titled “Fiscal Policy Options for Increasing Economic Growth and Employment in 2012 and 2013,” the CBO found that one of the most powerful tools that the government could use to increase the number of full time jobs would be to extend the payroll tax cut.
The other policy options that the CBO found would be most effective in speeding job growth and stimulating the economy are increasing aid to the unemployed, and providing additional refundable tax credits in 2012 for lower- and middle-income households. These are both efforts aimed squarely at the middle class. But those are both things that the GOP is against.
The GOP is most enthusiastic about tax policy changes that would:
• Reduce the top marginal tax rates. This would cut the tax rate primarily on the favored few at the top. According to the Center on Budget and Policy Priorities, it would result in a “substantial shift in tax burdens from households at the top of the income scale to low- and middle-income households.”
• Eliminate the capital gains tax. This would cut the tax that hits only people with lots of extra capital. According to the Tax Policy Center, as things stand right now, “the top 20 percent of taxpayers receive 96 percent of the benefit from the current preferential rates on capital gains and dividends.” Eliminating the Capital Gains tax altogether would distort this beneficial effects just for the rich even more.
• Eliminate the estate tax. This would cut the tax that now only hits estates worth $5 million or more.
• Reduce the tax rate on “repatriated earnings.“ This measure would not add jobs — but would add $80 billion to the deficit over 10 years.
The GOP has spent a lot of time and energy lately warning us all about dangers of “class warfare.” And they have a nice point — Americans have grown tired of all kinds of war, class, and proxy. But do you notice a pattern in the tax breaks and spending cuts they propose? It’s like a stealth-drone tax-attack on the middle class. The far right is attempting to both slash spending on popular social programs while shifting far more of the tax burden onto shoulders of the beleaguered middle-class. And the radical policy changes they propose will neither grow the economy, nor create jobs, just shift wealth. Not exactly a prescription for social peace and harmony.
In a piece in the Sunday New York Times titled “The Fire Bell of Unemployment,” the highly respected economist Robert Schiller, who helped develop the Case-Schiller Index and saw the housing bubble coming a mile away, wrote: “without government intervention, we may well have high unemployment and social discord for years to come.” And he adds rather ominously:
The stakes are very high here, and they are not just economic. As anger rises in today’s economy, I’m reminded of Thomas Jefferson’s words about the danger of “angry passions” arising between the North and South over the question of extending slavery to the Missouri territory. In an 1820 letter, he wrote that “this momentous question, like a fire bell in the night, awakened and filled me with terror.” He went on to predict, from his observations of such rancor, the secession of the South that was to come 40 years later.
Schiller closes his piece with: “we should regard the current economic dispute as another firebell in the night. It is important to recreate the sense of a just society.”
Amen, brother Schiller. Amen.