Despite the threats, the dire warnings, and even the over-heated rhetoric, the House of Representatives, and the White House are locked in a fierce battle to avoid the so-called fiscal cliff dictated by the failure of the unfortunately named super committee – a bipartisan group of legislators – which previously failed to agree to necessary tax reform, and spending appropriations, which has held lawmakers in a gridlock; primarily of their own making.
In one corner is the Speaker of the House, John Boehner, and in the other President Barack Obama, both of whom are backed by their elective base, and who have formed an ideology not given to more than specious wriggle room.
Ever since George H.W. Bush, said, “Read my lips, no new taxes” and then did an abrupt turnaround, and raised them, the mantra of the Republican Party has been to not raise taxes under any circumstances; since Bush’s move was seen as a key reason to losing the Oval Office to Bill Clinton.
Fast forward, and now Boehner has offered a proposal of sorts: raise taxes on the super wealthy, read millionaires, although less of the super-rich, than the merely rich, $1 million, or less; therefore keeping all of the present tax cuts.
The bill was opposed by the Democrats who stated, who according to the Huffington Post, “They argued that the Plan B bill would end some tax cuts for the middle class – worth on average about $1,000 a year – while it actually preserved some tax breaks for millionaires worth approximately $50,000. On top that, Democrats campaigned – and won – on keeping taxes lower for those with incomes of less than $250,000.”
Losing support from the Republican majority showed not only post-election fissures, but a party that seems mired in indecisiveness, and centered on cuts to Medicare and their favorite bête-noire, Food Stamps; thus making them look more like Scrooge than Jimmy Stewart in Mr. Smith Goes to Washington.
Meanwhile, the president insisted on his mantra of lowering tax rates for those making $250,000, or less, and extending unemployment benefits for millions of those who are about to lose them.
While this back-and-forth makes good copy for the fourth estate, a central problem is that the nation’s tax system is in sorely need of repair.
In an analysis of the tax rates for the wealthy and the lower, to middle class, The New York Times found that “most Americans in 2010 paid far less in total taxes – federal state and local – than they would have paid 30 years ago.”
The Times created a statistical vehicle to portray, project and pose the challenges that tax reform presents to both lawmakers, and consumers.
And, as a share of income the Times found that the “largest percent declined in total taxation” for those making over $200,000.
Many, perhaps, in the Republican camp feel that low-income earners are not paying their share of taxes, as Mitt Romney infamously noted, the “476 percent” that he derided.
Yet, while most of the wealthy pay more federal taxes, the combination of the federal payroll taxes (which finance Social Security and Medicare), sales tax, and if they rent, they “bear the cost of property taxes in the form of higher rents.”
And, as the Times pointed out, these taxes have increased dramatically in recent years, giving low-wage workers not only a share of the burden of financing these programs, but also worries if they will be able to help support them when needed.
This means that the “average Americans paid 30 percent more of income in payroll taxes than in 1980, even while paying 27 percent less in federal income taxes”; with the result that revenues from both the payroll tax and the income tax were almost equal before the temporary payroll tax cut took effect in 2011; courtesy of the president, and also due to expire at the end of this year
And, speaking of Medicare and Social Security, these have become low-hanging fruit for the Republicans to grab at – but while this plays well to the base, the aging of the base may, once again, make them look mean-spirited.
Partisanship ideology is holding from, yet the Republican juggernaut from the last primary elections seems to be disentegrating, at the same time that the president’s approval rating soars to 55 percent.
It has become apparent, to even those outside of academia, and government, that the tax laws do favor the rich, especially with the recent tax cuts, and corresponding changes in the tax code over the last 30 years, with the outcome that federal, state and local taxes are taking an even larger share from those low-income workers who make less than even a meagre millionaire.
Nowwhere is this more evident than in Illinois, where like other states, the greater share of the tax burden lies on the shoulders of those making less than $25,000, but who pay, on the average, 14.3 percent more in state and local taxes, much as they did, in the Times analysis in 2010.
If Congress fails to make a necessary compromise, and dodges the fiscal bullet, then the result that would be more than likely, according to most economists is another recession; something that the country, on the whole, can ill afford.
In particular, tax rates would rise to 15 percent for 10 percent of the population, and workers, especially low-income workers, would see the repeal of the payroll cut, leading to less take-home pay, and unemployment benefits due to expire, would force many families and inidivuduals to go hungry, and or homeless.
And, overall, the country would see a $6 trillion dollar rise in taxes over ten years, with $347 billion alone in 2013.
The resulting malestrom would bode ill for the Republican party, especially in the aftermath of the election, and contribute further to their deterioration, and another threat to the two-party system.
The bet is how, and will, Boehner pick up the tattered standard of his party and go forth, or will we indeed, as a nation face increased taxes, and another recession?