Congressional Republicans do the tax break two-step
The Obama administration released a report Tuesday accusing Republicans of proposing to raise taxes on 25 million low- and middle-income families in order to cut taxes for the 2% with the very highest incomes. Whether that’s true depends on how you define a tax increase: Does it just mean paying more to the Internal Revenue Service, or does it also include receiving a smaller subsidy check?
The GOP proposal in question, HR 8, would renew the Bush tax cuts through 2013, as well as continuing to shield many middle-class families from having to pay the Alternative Minimum Tax for one additional year. The measure would cost an estimated $384 billion, which would simply be added to the deficit (insert your own snarky observation about the GOP’s commitment to deficit reduction here).
The bill wouldn’t renew all of the expiring tax breaks, however, and particularly not those provided in the Democrats’ 2009 economic stimulus measure. That’s a tax increase, the White House contends, and it will fall on 25 million families with incomes of less than $250,000. “In addition to creating hardship,” the report contends, “the tax increases under the Republican approach would weaken the economy, since working families, unlike very high income households, generally cut back their spending almost dollar for dollar in response to tax increases.”
In particular, Republicans wouldn’t renew the American Opportunity Credit, which enabled people to claim a tax credit of up to $2,500 in college expenses; the expansion to the Earned Income Tax Credit, which offered a larger credit to families with three or more children and to some married couples; and expanded eligibility for the Additional Child Tax Credit, which made the credit availabile to families with significantly lower incomes. All three of the credits have been “refundable,” which means that if a taxpayer was entitled to a larger credit than he or she paid in taxes, the IRS wrote that person a check for the difference.
Supporters of HR 8 argue that the earned-income and child-tax credits are really spending programs administered through the tax code. But those who lose the credit and have to pay more taxes as a result will feel as if they’ve been slapped with a tax hike. The White House didn’t say how many of the 25 million families that benefit from the credits would fall into that category, but it’s safe to bet that it’s a significant number. It’s also clear that those families are at the lower end of the income scale, in sharp contrast to the taxpayers who’d receive the bulk of the $384 billion in breaks bestowed by HR 8.
Even liberals would concede that a “temporary” tax break for poor families hit hard by the downturn has to end sometime. But just about everyone in America is on the receiving end of one or more temporary breaks these days, and it’s hard to see why poor families should be first in line to lose theirs.
I know, I know -- Republicans argue that the Bush-era cuts weren’t intended to be temporary. But they didn’t have the votes in 2001 and 2003 to make permanent changes in the tax code, so they had to enact them through a procedural shortcut called reconciliation. And under budget rules aimed at protecting against ballooning budget deficits, they couldn’t enact a tax cut through reconciliation that lasted more than 10 years unless it was deficit-neutral over the long term. That’s why the law is temporary -- clearly, plainly, in the unmistakable text. And rather than pretending that they’re the status quo, those tax cuts should be judged by the same criteria as the rest of the expiring provisions: Are they good for the economy? Are they affordable? And are they fair?
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