Of the the 8 Senators voting against the Biden-McConnell deal, one of them was our own, very special Tom Carper. What was his chief complaint? It raised taxes on the rich? The deal did not cut spending? The deal did not eliminate or cut Medicare or Social Security. He hates the unemployed and wants to cut all unemployment insurance. I am very curious to hear his reasoning.
In the grand scheme and in context, and considering that I want the sequester cuts to go into affect (because it cuts 500 billion from the Defense budget and unless we let those cuts go into affect automatically, we will never get that much cut from the Pentagon budget ever), it is not a bad deal. It is not a good deal either, as the Democrats caved on indexing the Estate Tax to inflation. Going from 250k to 400k? Meh, I can live with that. Payroll tax holiday not preserved? That’s the bad part of this deal, in my opinion, along with the estate tax indexing.
Here is the full deal:
— Tax rates will permanently rise to Clinton-era levels for families with income above $450,000 and individuals above $400,000. All income below the threshold will permanently be taxed at Bush-era rates.
—The tax on capital gains and dividends will be permanently set at 20 percent for those with income above the $450,000/$400,000 threshold. It will remain at 15 percent for everyone else. (Clinton-era rates were 20 percent for capital gains and taxed dividends as ordinary income, with a top rate of 39.6 percent.)
— The estate tax will be set at 40 percent for those at the $450,000/$400,000 threshold, with a $5 million exemption. That threshold will be indexed to inflation, as a concession to Republicans and some Democrats in rural areas like Sen. Max Baucus (D-Mt.).
— The sequester will be delayed for two months. Half of the delay will be offset by discretionary cuts, split between defense and non-defense. The other half will be offset by revenue raised by the voluntary transfer of traditional IRAs to Roth IRAs, which would tax retirement savings when they’re moved over.
— The pay freeze on members of Congress and all other federal civilian employees, which Obama had lifted earlier this year, will be re-imposed.
— The 2009 expansion of tax breaks for low-income Americans: the Earned Income Tax Credit, the Child Tax Credit, and the American Opportunity Tax Credit will be extended for five years.
— The Alternative Minimum Tax will be permanently patched to avoid raising taxes on the middle-class.
— The deal will not address the debt-ceiling, and the payroll tax holiday will be allowed to expire.
— Two limits on tax exemptions and deductions for higher-income Americans will be reimposed: Personal Exemption Phaseout (PEP) will be set at $250,000 and the itemized deduction limitation (Pease) kicks in at $300,000.
—The full package of temporary business tax breaks — benefiting everything from R&D and wind energy to race-car track owners — will be extended for another year.
— Scheduled cuts to doctors under Medicare would be avoided for a year through spending cuts that haven’t been specified.
— Federal unemployment insurance will be extended for another year, benefiting those unemployed for longer than 26 weeks. This $30 billion provision won’t be offset.
— A nine-month farm bill fix will be attached to the deal, Sen. Debbie Stabenow told reporters, averting the newly dubbed milk cliff.
For those who say that it was better to go over the cliff, well, perhaps. But none of the stimulus measures I highlighted would have been preserved. Obama’s one weakness is that he truly cares about people, and ideological purity to him means nothing if his adherence to principle hurts those relying on policies he could get preserved in a deal.