The House of Reps is about to vote, and it is expected that they will approve the Senate's deal on the alleged Fiscal Cliff. This deal, far from grand, pecks away at the edges of budgetary woes we face, postpones some major problems, and once again puts the welfare of the richest above that of the majority of Americans. You don't have to read too far between the lines to see a hearty "To Hell with you, working Americans!" written into the bill.
Yes, the deal does toss a few bones to the poor and middling folk: extending long-term unemployment benefits and tax credits for the working poor and college students, but as they say, it's for a limited time only. Meanwhile, benefits to the richest among us (are they even among us anymore, in their gated communities and island retreats?) become permanent. My ire is deep and my outrage broad, but I'll stick to the tax deals that emerge from this the filthy dance of a weak president with millionaire senators and zealot representatives: Payroll tax, Income tax, Capital gains tax, and Estate tax.
Payroll Tax
I begin with payroll tax because it is the one that affects the most people. Even if you do not earn enough to pay income tax, if you have a job at all, payroll taxes are deducted. I don't object to this arrangement, since this revenue goes to medical and social security programs that actually help the people who pay them, and sometimes they even get more than they put in. But lost in the discussion of this "compromise deal" is the fact that it will increase from 4.2% to 6.2%. For those of you familiar with math, that's about a 50% increase in payroll tax burden. Not for the top 1%, but for everyone who works for a living (or fraction of a living).
Obama made loud noises lately about how expiration of income tax breaks would cost middle class people on the order of $2,000/year. According to the not-so-liberal Wall Street Journal, what the payroll tax rise means for an individual who makes $113,700/year (as low as WSJ can imagine, and actually within the range of middle class in many areas) is an increase of $2,400. For a person "supporting" a family of four who earns the Federal Poverty Guideline for 2012 of $23,050/year, the tax will increase from $968 to $1429. You try feeding and housing a family for a year on $21,621, and tell me how fair and balanced this $461 tax increase feels. That $461, by the way, would have been way more likely to to flow into the local economy than into an offshore tax haven.
Income Tax
The president has been promising since 2008 to roll back what were intended to be temporary tax cuts on people who earn over $250,000/year, which in all but a very few zip codes in the US qualifies as "Damn, I want that job." Instead, this deal raises the threshold to $400,000 for an individual and $450,000 for marrieds filing jointly. For these fortunate few, tax rates on any income above the threshold will now move from 35% to 39.6%. Unable to negotiate even the symbolic threshold of 40%, the Democrats are settling for less than half the top marginal rate of the Eisenhower era, or the 70% during Reagan's first term; hell, it's a 20% discount from the 50% top rate during Reagan's second term. So when richers complain about this tax 'hike,' they are ignorant of history or else hoping that you are.
If historical perspective is not enough to piss you off, my fellow commoner, then consider this. Having won a decisive victory this past election, with polls showing massive citizen support for 'increased' (read, 'partially restored') taxe rates on high earners, Democrats immediately fell back from $250,000/year as a threshold to $450,000. They backed 80% off the line in the sand, losing revenue in the process, and you can be damned sure that the GOP will demand cuts in non-military spending to make up for this shortfall. The $450K threshold also happens to be a 15.7 % increase from the current top tax bracket threshold of around $389,000. Why the Dems would have agreed to this is beyond me; a $389K salary sounds wealthy to us commoners, but I guess it seems middling to Senators and Republicans.
Capital Gains Tax
But who am I kidding? Really rich people don't earn their money from jobs. They get it in the form of interest and investment income, which for some reason is taxed much more leniently than money earned through labor. The current deal will increase the capital gains rate from 15% to 20%; the Washington Post dutifully points out that there is also a 3.8% surcharge associated with Obamacare, making the rate 23.8% for those rich people dull-witted enough not to hide their money. This is less than my income tax rate, as a government worker earning less than my industry standard and with pay that has been frozen for 4 years.
The people who were born to wealth, or married into it, or otherwise find themselves living off investment income that they choose not to shelter, will end up paying tax at a ridiculously low rate. Not that I feel too bad for someone making $500,000/year in wages or salary, but why does that person pay at a rate 2/3 higher than someone who sits on their ass collecting interest and dividends for doing nothing?
Estate Tax
Speaking of doing nothing, some people get money just because some other person died. This latest dirty deal enshrines the exemption for estate taxes at $5,000,000 per person, and promises to raise it 50% to $7,500,000 by 2020 (yet somehow fails to adjust poverty thresholds that affect who gets social benefits up 50%, or even 1%).
People are incredible emotional and ignorant about what the GOP propaganda machine has successfully labeled "the death tax." For one thing, it applies only to any amount in excess of $5,000,000, which of course is a Bush era give-away to rich people; the exemption even in recent history was 80% lower than this. For another, the alluring commonsense argument that "that money was already taxed" is usually bullshit. People with vast estates that surpass the exemption have typically had it socked away for a long time; only very rarely did the value accrue in the decade prior to inheritance. Grandpa paid some income tax maybe, then used some of his leftover cash to buy stocks or some interest-bearing instrument. But unless he cashed out, he did not pay tax on the profit, and neither will the grandkid who does nothing an inherits the estate. For example, the stock purchased for $100 in 1950 and worth $10,000 when you inherited it in 2010, which you sold for $11,000 this year will be taxed as $1,000 in gain, not $10,900 in gain.This is why it is so much easier to become richer if you were born into a rich family.
To act as if an increase in estate tax is something that will affect the majority of Americans, or even the lower echelons of the 1%-ers, is to exhibit woeful ignorance. To quote Maryland Rep. Chris Van Hollen, this is a "sweetheart give-away to the wealthiest 7,200 estates in the country."
I have ranted long enough that now the House has passed this deal. Republicans there will wave fists at the liberals and gnash their teeth, claiming to have given up much, and demand cuts in the paltry domestic discretionary spending portion of the budget as amends. Yet, what they have actually accomplished is the enshrinement of income tax rates for the wealthy that are historically low, exemptions from extate taxes that are at all-time highs, capital gains tax rates that reward parasitism over actual work, and a punitive increase on the only tax extracted from our poorest workers.
So, congratulations rich people. You win again.
Yes, the deal does toss a few bones to the poor and middling folk: extending long-term unemployment benefits and tax credits for the working poor and college students, but as they say, it's for a limited time only. Meanwhile, benefits to the richest among us (are they even among us anymore, in their gated communities and island retreats?) become permanent. My ire is deep and my outrage broad, but I'll stick to the tax deals that emerge from this the filthy dance of a weak president with millionaire senators and zealot representatives: Payroll tax, Income tax, Capital gains tax, and Estate tax.
Payroll Tax
I begin with payroll tax because it is the one that affects the most people. Even if you do not earn enough to pay income tax, if you have a job at all, payroll taxes are deducted. I don't object to this arrangement, since this revenue goes to medical and social security programs that actually help the people who pay them, and sometimes they even get more than they put in. But lost in the discussion of this "compromise deal" is the fact that it will increase from 4.2% to 6.2%. For those of you familiar with math, that's about a 50% increase in payroll tax burden. Not for the top 1%, but for everyone who works for a living (or fraction of a living).
Obama made loud noises lately about how expiration of income tax breaks would cost middle class people on the order of $2,000/year. According to the not-so-liberal Wall Street Journal, what the payroll tax rise means for an individual who makes $113,700/year (as low as WSJ can imagine, and actually within the range of middle class in many areas) is an increase of $2,400. For a person "supporting" a family of four who earns the Federal Poverty Guideline for 2012 of $23,050/year, the tax will increase from $968 to $1429. You try feeding and housing a family for a year on $21,621, and tell me how fair and balanced this $461 tax increase feels. That $461, by the way, would have been way more likely to to flow into the local economy than into an offshore tax haven.
Income Tax
The president has been promising since 2008 to roll back what were intended to be temporary tax cuts on people who earn over $250,000/year, which in all but a very few zip codes in the US qualifies as "Damn, I want that job." Instead, this deal raises the threshold to $400,000 for an individual and $450,000 for marrieds filing jointly. For these fortunate few, tax rates on any income above the threshold will now move from 35% to 39.6%. Unable to negotiate even the symbolic threshold of 40%, the Democrats are settling for less than half the top marginal rate of the Eisenhower era, or the 70% during Reagan's first term; hell, it's a 20% discount from the 50% top rate during Reagan's second term. So when richers complain about this tax 'hike,' they are ignorant of history or else hoping that you are.
If historical perspective is not enough to piss you off, my fellow commoner, then consider this. Having won a decisive victory this past election, with polls showing massive citizen support for 'increased' (read, 'partially restored') taxe rates on high earners, Democrats immediately fell back from $250,000/year as a threshold to $450,000. They backed 80% off the line in the sand, losing revenue in the process, and you can be damned sure that the GOP will demand cuts in non-military spending to make up for this shortfall. The $450K threshold also happens to be a 15.7 % increase from the current top tax bracket threshold of around $389,000. Why the Dems would have agreed to this is beyond me; a $389K salary sounds wealthy to us commoners, but I guess it seems middling to Senators and Republicans.
Capital Gains Tax
But who am I kidding? Really rich people don't earn their money from jobs. They get it in the form of interest and investment income, which for some reason is taxed much more leniently than money earned through labor. The current deal will increase the capital gains rate from 15% to 20%; the Washington Post dutifully points out that there is also a 3.8% surcharge associated with Obamacare, making the rate 23.8% for those rich people dull-witted enough not to hide their money. This is less than my income tax rate, as a government worker earning less than my industry standard and with pay that has been frozen for 4 years.
The people who were born to wealth, or married into it, or otherwise find themselves living off investment income that they choose not to shelter, will end up paying tax at a ridiculously low rate. Not that I feel too bad for someone making $500,000/year in wages or salary, but why does that person pay at a rate 2/3 higher than someone who sits on their ass collecting interest and dividends for doing nothing?
Estate Tax
Speaking of doing nothing, some people get money just because some other person died. This latest dirty deal enshrines the exemption for estate taxes at $5,000,000 per person, and promises to raise it 50% to $7,500,000 by 2020 (yet somehow fails to adjust poverty thresholds that affect who gets social benefits up 50%, or even 1%).
People are incredible emotional and ignorant about what the GOP propaganda machine has successfully labeled "the death tax." For one thing, it applies only to any amount in excess of $5,000,000, which of course is a Bush era give-away to rich people; the exemption even in recent history was 80% lower than this. For another, the alluring commonsense argument that "that money was already taxed" is usually bullshit. People with vast estates that surpass the exemption have typically had it socked away for a long time; only very rarely did the value accrue in the decade prior to inheritance. Grandpa paid some income tax maybe, then used some of his leftover cash to buy stocks or some interest-bearing instrument. But unless he cashed out, he did not pay tax on the profit, and neither will the grandkid who does nothing an inherits the estate. For example, the stock purchased for $100 in 1950 and worth $10,000 when you inherited it in 2010, which you sold for $11,000 this year will be taxed as $1,000 in gain, not $10,900 in gain.This is why it is so much easier to become richer if you were born into a rich family.
To act as if an increase in estate tax is something that will affect the majority of Americans, or even the lower echelons of the 1%-ers, is to exhibit woeful ignorance. To quote Maryland Rep. Chris Van Hollen, this is a "sweetheart give-away to the wealthiest 7,200 estates in the country."
I have ranted long enough that now the House has passed this deal. Republicans there will wave fists at the liberals and gnash their teeth, claiming to have given up much, and demand cuts in the paltry domestic discretionary spending portion of the budget as amends. Yet, what they have actually accomplished is the enshrinement of income tax rates for the wealthy that are historically low, exemptions from extate taxes that are at all-time highs, capital gains tax rates that reward parasitism over actual work, and a punitive increase on the only tax extracted from our poorest workers.
So, congratulations rich people. You win again.
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