Saturday, December 18, 2010

Top 5 Problems with the Tax Deal

Problem #1: The deal is a stealth attack on Social Security.

The deal will lower the payroll tax—the tax that funds the Social Security trust. This is a trap for Democrats. Republicans have been coming after Social Security for years and this cut is the biggest threat to the vital program in decades. It will cut one-third of Social Security's funding this year alone and when we need to restore the payroll tax back to its current level, Republicans will cry "tax increases" and could gut it permanently. 1

Problem #2: For nearly one in three workers, it's a tax increase.

Nearly 50 million working Americans—including all workers making less than $20,000 per year—and millions of federal, state, and municipal workers will see their taxes go up because of the deal.2

Problem #3: The deal has not one but TWO millionaire bailouts.

In addition to extending all the Bush income tax breaks for the top 2%, the deal will slash the estate tax. If Congress did nothing, next year the estate tax would be 55% and apply to everyone inheriting $1 million or more. But the deal reduces it to 35% and only people who inherit more than $5 million will have to pay. This second bailout will give a gigantic tax giveaway to a few thousand of the richest families in the country and add hundreds of billions to the national debt.3

Problem #4: Unemployment help is insufficient and inadequate.

While the deal extends unemployment benefits for another 13 months for people currently receiving it, millions of unemployed workers who've struggled the most and been out of work more than 99 weeks—since the giant Wall Street banks wrecked the economy—will get no help at all under the deal.4 It's a gamble that there will be jobs in the next 13 months when the insurance runs out, but the tax cuts will go well beyond that. Better to just pass a stand-alone unemployment extension to help all struggling Americans.

Problem #5: Tax giveaways to the rich are a terrible way to create jobs.

Tax breaks for the rich are the least efficient way to create jobs and help the economy grow. In fact the nonpartisan Congressional Budget Office says extending all tax cuts would lower unemployment only 0.1% to 0.3% over the next year5 and that the cost of the tax deal would be $900 billion over the next five years.6

Sources:

1."Tax Cut Deal A Hidden Threat To Social Security," The Huffington Post, December 8, 2010
http://www.moveon.org/r?r=205508&id=25500-630415-3avf8fx&t=6

2. "Obama-Republican Deal Could Mean Tax Hike For One In Three Workers," The Huffington Post, December 10, 2010
http://www.moveon.org/r?r=205509&id=25500-630415-3avf8fx&t=7

3. "Estate tax deal: worst part of a bad tax compromise," The Christian Science Monitor, December 7, 2010
http://www.moveon.org/r?r=205510&id=25500-630415-3avf8fx&t=8

4. "Unemployment benefits: Extension won't help '99ers'," The Christian Science Monitor, December 7, 2010
http://www.moveon.org/r?r=205511&id=25500-630415-3avf8fx&t=9

5. "The Deal," Paul Krugman, The New York Times, December 7, 2010
http://krugman.blogs.nytimes.com/2010/12/07/the-deal/

6. "CBO score shows tax plan ups deficit $900 billion in 5 years," CNN.com, December 10, 2010
http://www.moveon.org/r?r=205512&id=25500-630415-3avf8fx&t=10

A tip of the Mirsky hat to Moveon.org

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