The dominant post election event in our unduly partisan federal government has been the treatment of the income tax cuts that were enacted in 2001 and 2002 and set to expire on December 31st of this year. Although the existence
The dominant post election event in our unduly partisan federal government has been the treatment of the income tax cuts that were enacted in 2001 and 2002 and set to expire on December 31st of this year.
Although the existence of the Dec. 31 deadline has long been known Congressional leaders made no effort to schedule any action before the November elections.
The partisan positions of both parties was well formulated and articulated during the 2010 campaigns. Taking as a guideline the Presidents 2008 contention that middle income class taxpayers deserved relief but the wealthy did not and setting a boundary of $250,000 for married taxpayers and $200,000 for single, in the main the Democrats were proposing retention of the 2001-2 tax cuts for all taxpayers having annual income below the boundary and application of the pre-2001-2 rates for those with greater income.
In general the Republicans were proposing retention of the cuts for all contending that tax increases in a recession were unwarranted and that protecting small business owners from the increases would aid in growing the economy. The rhetoric of both parties was seriously flawed.
Democrats divided taxpayers into three brackets – lower income , middle income and wealthy. This arrangement does not recognize that that the Federal Income Tax is just that – a tax on income not on wealth. There are numerous high income persons who are not wealthy and many having considerable wealth who do not have high taxable incomes.
Similarly the $250,000 criteria is an arbitrary one having origins in the Obama 2008 campaign, but no usage in income tax history. The Republicans who were elsewhere arguing for deficit reduction never acknowledged that preserving a tax cut for taxpayers who pay about 50% of the total personal income revenues was inconsistent.
Also the Republicans seemed to suggest that all of the upper income taxpayers were small business owners who needed tax relief and consistency to grow the economy by providing new jobs. Such owners were a component of the income group, but do not comprise it.
As we entered December the stakes were high. If no legislation occurred on the subject the deadline was imminent when taxes for all would be sharply increased in what has been indicated would be the largest tax increase in history.
The results of the 2010 election in which Republicans gained 63 seats in the House and gained control of that body and a half dozen seats in the Senate suggested that citizens were not approving the policies being offered by the Democrats who had been holding the Presidency and both house of Congress.
But taking advantage of the Constitutional provision that revenue measures are to originate in the House, Speaker Pelosi orchestrated a measure by which the lame duck House adopted the Democrat position. The futility of this action when it became apparent that the Senate would not enact a companion bill left matters at an apparent stalemate.
Just when darkness was about to descend some evidence arose that the parties might be able to work together occurred. In a meeting between the President and Republican congressional leaders ( Strangely the Democrat congressional leaderships were not included and were apparently left uninformed) an agreement was made.
Its principal provision was a two-year extension of the 2002 cuts for all taxpayers, but also included were an extension of unemployment benefits, a reduction in payroll withholding rates and an extension of favorable estate tax provisions. While at this writing it is uncertain whether the agreement will be implemented, it most probably will. At the end of the day both sides have too much to lose to justify turning their backs on the terms accepted.
The deal was, however, vigorously attacked by a caucus of Democrats claiming they had been betrayed and they were sickened by the relief given to “millionaires and billionaires.” A few Republicans were disgruntled by the two-year renewal deadline arguing that a taxpayer should have continuity in tax laws and that deadlines are disruptive.
A couple of general observations.
The fact that the bipartisan accord was made between the Democratic president and Republican Congressional leaders is a revealing indictment of the Democratic Congressional leadership. The president was chosen to present the agreement reached. It would require the support of members of Congress. Such an announcement should emphasize and sponsor its benefits. It was not a time for recriminations.
His reference to his former adversaries as “hostage takers” was unjustified. If that was his view he should not have made the deal. Ransoms are not the American way. His subsequent defense of the pact should, however, be commended. Whether balancing the family budget or developing a business plan taxpayers seek stability and continuity. Good tax policy would avoid the establishment of a time deadline.
If in the future a tax rate alteration is needed it would be better to have it arise because of changed circumstances than be forced by the occurrence of an arbitrary date.
That obstructive partisanship in our Federal government receded sufficiently to allow an interparty agreement to occur is heartening. Whether one agrees with the concepts of the Tea party or not, they are certainly right in concluding that the existing animosities and partisanship in Washington preclude our elected representatives from serving the best interest of the people of our country.
It will always be true that in politics differences of opinion and ideologies will exist on the path to be taken on nearly all matters. But this should not result as has been the case recently that intraparty caucuses are the primary vehicle used to determine the adoption and content of legislation in our Congress. It is vastly preferable that resolution be achieved openly through negotiation and debate.
• Princeville resident Walter Lewis writes this bi-weekly column exclusively for The Garden Island.
