I wish it wasn’t necessary to say this, but it is: religiously and ethically, the “Washington consensus” tax deal is a disaster.
The New Year’s Eve pas de deux between Joe Biden and Mitch McConnell produced a deal that people with lots of money will love. America’s really rich won’t be soaked at all under this deal; they will be stroked. If the loonier House Republicans weren’t so totally obsessed with hacking domestic social spending right this minute, rather than waiting a couple of months, they would have snapped up the White House-Senate deal without all the pouting and posturing.
This deal locks in low Bush-era marginal rates for everyone with incomes up to $399,999 (single) or $449,999 (couple). Think what an incredibly sweet deal this is for a group of people most working Americans, who make a median income of around $50,000, do not think of as “middle class” by any stretch of the imagination. The already-very-comfortable people getting this big wet kiss from working-class hero Joe Biden are those whom Lewis Lapham taught me to refer to as achievatrons: many of them doing well in the so-called “knowledge” professions, which (let’s admit it) often amounts to knowing the right people and having the right connections.
Here is the most pernicious feature of the deal on marginal rates, a feature that Sen. Tom Harkin, who voted “no,” rightly excoriated: for the sake of a quick deal, the White House allowed Republicans to lock us into the new rates, which will not produce enough revenue to avoid steep domestic spending cuts. It now will not be possible to recover the hundreds of billions that will be forever lost on account of the difference between a $250K threshold and a $400K threshold. This is despicable. Remember that Obama himself drew a line in the sand on a $250,000 threshold: he campaigned on it, and he repeated it constantly. Until he caved. If basic justice were a concern (not to mention sound budget math), Obama should have taken the cliff rather than yield on this key point. And let it be said: for the people earning above $400K (single)/$450K (couple) the top rate will still be under 40 percent: not particularly harsh medicine for the elite slice of the population that managed to capture more than 90 percent of all new income generated since the 2008 crash.
Of course, much of that high-end income came in the form of capital gains. But again, the rentier class who live primarily off their investments have nothing to fear: for the $400/450 crowd the rate for capital gains and stock dividends will not exactly soar: under Biden-McConnell it merely goes from an absurdly low 15 percent to an extremely low 20 percent. (Dividends and capital gains were taxed at 28 percent under Bush the Elder and Bill Clinton; during the high-growth 1960s and early 1970s tax rates on unearned income ranged between 28 and 35 percent.)
And what did Biden and McConnell do with the estate tax? This one really does stink to high heaven, religiously speaking. The White House went in saying that estates above $3.5 million should have to pay 45 percent. Biden took a deal that completely exempts individual states of less than $5 million and family estates of less than $10 million. The tax rate for estates above these exemption levels will be only 40 percent. By contrast, during the Clinton presidency the exemption applied to estates of $1 million or less, and the rate was 55 percent.
If you think these differences don’t matter, think again: according to the Tax Policy Center, with the new higher exemption only 3,730 American households will have to pay any estate tax at all – compared to 47,150 estates that would be paying if the Clinton rules were still in effect. This part of the Biden-McConnell deal will cost the Treasury a whopping $375 billion over the next decade. To illustrate how much this political gift to the super-wealthy will cost, it’s roughly twice the amount that could be saved by switching to a so-called “chained” CPI for Social Security payments.
But the way this works is that now we’ll definitely have those effective cuts in Social Security payments because (you guessed it) the Republicans have rigged it so that the new love-the-rich estate tax can’t be revisited.
Did I mention that, under Biden-McConnell, the only taxpayers who definitely do have to suck up what (for them) will be a substantial new tax burden are people earning less than $113,000 who pay the payroll tax? They will pay, on average, $1,000 more per year toward the support of social insurance programs that will deliver reduced benefits once the deficit scolds get done with them. That’s right, working people—Obama supporters—will pay more for less. They will be screwed while the rich are still coddled – by Democrats as well as Republicans, all of whom cater to the kind of people who can fund their campaigns.
I don’t know about yours, but my Bible has a lot to say about grinding the poor and the laborers in order to deliver more luxury and comfort to the rich. I don’t believe the God of this Bible is interested in hearing “but that’s how Washington works” or “it’s the best we could get.” Barack Obama wasn’t re-elected with the votes of working America so that he could make a deal with the Devil on the Devil’s terms.
