It appears now that both parties are ready to screw around with the so-called "Bush Tax Cuts." That's because finding someone with any imagination or talent in Congress or the White House appears to be an impossible task....So having said that, ordinarily I would ignore the latest policy fiasco by the Obama White House with regard to the tax cuts and achieving compromise. But never in my wildest imagination could I have foreseen the dimwitted compromise proposal that appears to have come out of a few meetings between the President and the Republicans in Congress.
...We won't get any policy changes. Just more name calling.
It's an "ignore-the-deficit, free-lunch-for-everyone" policy proposal. In what is a curious piece of irony, many Congressional Democrats and Republicans are balking while the White House is attempting to sell the deal. No one knows exactly what all is in the deal. Yes, it's one of those that has the feel of another Health Care Bill. For instance, if you were in Davenport, Iowa, you would have picked up the Quad City Times and read:
A deal to extend the Bush-era tax cuts also includes action on ethanol and biodiesel credits, U.S. Sen. Chuck Grassley, R-Iowa, said Tuesday.You may be puzzling a moment wondering how such a policy proposal might have gotten into this deal, but keep in mind that when Obama was a Senator from Illinois, another corn producing state, he pushed these credits.
The details aren’t clear yet, but Grassley told reporters that the ethanol and biodiesel tax credits would get a temporary extension, through 2011.
The biodiesel credit of $1 a gallon expired last year, and farm-state lawmakers have blamed the expiration for the idling of biodiesel plants.
The ethanol credit, at 45 cents per gallon, is scheduled to expire at the end of the year.
Grassley said the biodiesel credit extension also included applying it retroactively to 2010.
Many of the details of the tax compromise aren’t known. U.S. Sen. Tom Harkin, D-Iowa, said Tuesday he didn’t know whether the tax credits were in the deal or not.
The compromise, for sure, includes continuing the income tax rates currently in effect at all income levels and retaining the 15% maximum rate on capital gains and dividends.
It also includes an estate tax of 35 percent on estates worth more than $5 million. There currently is no estate tax, but it is scheduled to jump to 55 percent on estates exceeding $1 million at the end of the year. So this compromise is a nice reduction for the wealthy families and a fine exemption for those in the upper reaches of the middle class.
It also includes a provision that allows businesses to expense the full cost of capital investments each year for the next two years. Apparently this is without any of the restrictions currently found in the Small Business Jobs Act of 2010 enacted in September that has a phase out for taxpayers having more than $2 million in annual eligible investment, may be taken only up to $500,000 of eligible investment, and is limited to current year taxable income.
This is the huge conglomerate version of the Small Business Jobs Act. Well, to be fair, it is unclear whether it is identical to the Administration proposal in October that would create or increase the size of a taxpayer’s net operating loss, which generally can be carried back for up to two years, and carried forward for up to twenty years. But where else are they going to get the outline for this provision?
It also includes a one year reduction in the Social Security withholding on employee's pay checks. The "FICA" withheld would drop from 6.2% on wages up to $106,800 to 4.2% resulting in a 16.1% reduction in FICA revenue. (You remember Social Security? It's that entitlement program that the recent special commission on the deficit said needed to cut benefits because it wouldn't have enough money.)
And, of course the proposal will extend unemployment benefits another 13 months for those who have been unemployed for an extended period of time.
One thing about it. The new increased debt created by this proposal will get new money into the economy. I can't see any way of avoiding having the Federal Reserve buy the Treasury Bonds that finance this just like they are currently doing to finance our increasing debt. It's a cool way of printing money.
As long as we're just printing money anyway, how about approving that $250 giveaway proposed for Social Security recipients who aren't getting a cost of living increase? But then, I guess they could just plant corn.
When you look at all this you have to say to yourself that voting in Congressional Republicans, who express serious concern about the deficit and oppose spending programs, offers real government largesse - something for almost everyone and a lot for the very wealthy. It feels like the Bush Years. Way to go guys!
And President Obama is a winner too because he finally can now prove that political compromise really works to benefit all. (That's sarcasm, in case I'm too subtle.)