Friday, December 17, 2010

Let the Trickling Begin: Tax Bill Passes Congress

Supply-side Santa visited last night and stuffed the stockings of the rich with wads of cash. The first line in the NY Times story sums it up pretty well:

Congress at midnight Thursday approved an $801 billion package of tax cuts and $57 billion for extended unemployment insurance.

To start off, this is very good news for the unemployed, to be sure. The Michigan UIA had asked that people continue to call and keep your claim current with MARVIN while this debate was going on, and the agency will probably be slammed today with people wondering about retroactive benefits and when they can expect to see the checks start again. Be patient with them as they get this running, also be warned that they were planning to close for four days over the upcoming holiday stretch - the two days before Xmas and New Year's - so staffing might be thin. They suggest you keep calling MARVIN during those days, but now that this deal is done maybe plans will change as they rush to keep up with demand. Keep watching the news for updates.

Besides the unemployment extension, we did get the renewable energy credits. Good to see. Other than that, this next summary comes from the WSJ, just so you understand the slant:

The measure includes retention of the Bush-era tax rates and breaks for all earners for two years, as well as protection through 2011 from the Alternative Minimum Tax for more than 20 million mostly middle-class households. It includes a new payroll-tax credit for virtually all workers, as well as a 13-month extension of benefits for the long-term unemployed. The wealthy won a lowered estate tax rate for the next two years of 35% on estates of more than $5 million.

Middle-income Americans fared best from the deal, due in large part to the new payroll-tax holiday, according to the nonpartisan Tax Policy Center. Those with the largest average gain in after-tax income, compared with current tax policies, earn between $35,000 and $64,000. They gain about $613, or 0.9% of their income.

Lower-income earners will benefit from continued expanded availability of the child credit and other breaks. But the substitution of Mr. Obama's Making Work Pay break—a tax subsidy for lower income people—with a payroll-tax holiday will be a net loser for them.

Higher-income people took the most cash from the deal. The average gain for households with $500,000 to $1 million in income was $3,859 compared to current tax levels. Democrats had wanted tax rates for this group to rise.

Businesses gained a number of provisions Congress usually extends for a year or two, including a big research credit, a range of subsidies for alternative energy and a slew of targeted breaks for motor-sports tracks, restaurant buildings, railroad maintenance and corporate donations of food and other items.

Some provisions that didn't make it, from the WaPo:

Negotiators, in fact, excluded more than 70 temporary programs from the bill, including federal subsidies for state and local borrowing known as Build America Bonds, a sales tax deduction for new cars and trucks, a property tax deduction for people who don't itemize on their tax returns and an exemption from taxes for the first $2,400 of unemployment benefits. All those provisions will be allowed to expire.

The Build America Bonds were financing state and local construction projects, so kiss those jobs goodbye. Better hope that the wealthy decide they need to invest in America again, or this tax bill will only provide a short-term boost to the economy and create a very long-term revenue problem for the country - because you know there is no way these guys will fight for fiscal sanity during a presidential election year. Already the Republicans are complaining about "spending", even as they add earmarks for their districts and promptly turn around and oppose them, even as they try to deny that cutting revenue is a form of "spending" that will eventually come out your pocket in the form of cuts to Social Security, Medicare/Medicaid, aid to state budgets - which are about to take a major hit over the next two years - and other various quality of life programs.

Was it worth it? Stay tuned. Maybe that Republican drown-government trickle-down voodoo that they do will work this time. It's worked so well this past decade, hasn't it? Or, maybe when things get real, real bad, we will find that we need to get off the "more tax cuts" path, and start to invest in our people and our country again.

Just hope it won't be too late when that happens.