Congress Almost Serves Up a Turkey of a Tax Bill…But President Obama Gives it the Bird
While many of us were getting ready for guests or to travel to family, reports surfaced that Senate Majority Leader Reid and some of his colleagues were working out a deal with House tax-writers to extend about $450 billion in tax cuts that would otherwise expire at the end of this year. Some would be extended through the end of 2015, but about 10 would be made permanent. These tax cuts mostly benefit corporations, such as a research credit and a bonus depreciation credit. A smaller share of the package provides tax breaks for individuals, including deductions for state sales taxes in states that do not impose an income tax. Although tax analysts are skeptical that these tax breaks do the economy much good, Congress has been willing so often to renew them that they are nicknamed the “extenders.”
There has been a lot of talk about work on a comprehensive tax reform plan, in which the effectiveness of breaks like the extenders would be assessed, and some would be discontinued, either as a way to reduce the deficit or as a source of revenue to offset the cost of other tax cuts. But the deal described in the press on November 25 was not part of any reform plan. It was just a big stuffed turkey, not only continuing the currently expiring tax breaks but considerably expanding some of them. The research credit, for instance, used to cost about $75 billion; this deal would agree to expanding it so it costs $155 billion (all these figures are over 10 years). When Congress passed the tax agreement a few years ago, we thought it was a big deal because it raised more than $600 billion from wealthy people. This deal would undo most of that benefit.
While the deal would have made a lot of these expensive breaks permanent, it did not make permanent the improvements in the Child Tax Credit and Earned Income Tax Credit that are scheduled to expire in 2017. These credits help low-income working parents and their children. They lift millions out of poverty and provide a proven work incentive.
Leaving out the credits that help low-income people while making many corporate breaks more stuffed and permanent was unacceptable to the Obama Administration. They threatened a veto, and the deal has been shelved, at least for a while.
Including the low-income credits in this package does not make the corporate breaks any more justified. The Child Tax Credit and EITC have proven their worth, and ought to be made permanent, whatever else Congress does or does not pass. But yet again giving corporations a lot to be thankful for while leaving out the credits that make such a difference in the lives of low-income families with children is truly appalling. Exit polls on election day showed big majorities thinking that the wealthy and powerful had unfair advantages over ordinary people, with voters often not clear on the differences between Republicans and Democrats. This kind of tax deal confirms the opinions expressed in the polls.
Thanks, Mr. President, for stopping this turkey, and for standing up for working families with children. The fight isn’t over. Corporate lobbyists don’t give up easily. Neither should we.