Tax bill comes with great costs
On Dec. 17, President Obama signed a tax-cut bill that provides critically needed stimulus to the economy, including continued income tax cuts for middle class families, refundable tax credits for working families, tax credits for college students and additional unemployment benefits for 13 more months for the many Americans struggling to find jobs.
However, these benefits for the majority of Americans did not come without cost. With a national deficit near $1 trillion, a national unemployment rate of 9.8 percent, and a growing wealth and income gap that places the survival of the middle class at risk, these critical needs were held ransom for the passage of tax breaks for the wealthiest Americans — an average income tax cut of $100,000 for millionaires. In addition to the extension of tax cuts for the wealthy, the bill also contains a significant weakening of the estate tax, well below 2009 levels. This results in an estimated $20 billion lost revenue and tax reductions over the next two years for the top one-quarter of 1 percent of estates.
In fact while millionaires and billionaires are receiving major tax breaks, the only workers facing a tax increase are single working people with earnings below $20,000 and married couples with earnings below $40,000. This is in large part due to the replacement of the Making Work Pay Credit with the 2 percent payroll tax holiday.
For two decades middle class incomes have stagnated while Wall Street bonuses have skyrocketed. As we dig ourselves out of the fiscal mess we've created, we need an honest debate and discussion around our growing deficit and a realistic path to a sustainable economic recovery. At this time of crisis, it is sheer hypocrisy for Congress to pass huge tax breaks for the rich, while arguing that we reduce the deficit by taking money out of the pockets of the middle class by cutting Social Security, Medicare, investments in education, job training, infrastructure and health care.
In the months ahead, it will become clear that our country cannot afford to continue subsidizing the very wealthy while cutting spending on programs that lift people out of poverty and thereby expand job opportunities and grow the economy. We can only hope that our leaders in Washington recognize the financial reality that many of us face every day.
David Marzahl
President
Center for Economic Progress
Chicago