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January 17, 2018

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The Policy Racket


More action on tax-cut extensions, but no closer to a compromise



Senate Majority Leader Harry Reid, D-Nev., center, and other Senate Democratic leaders speak to reporters just after Senate Democrats passed their version of a yearlong tax cut extension bill by a near party-line 51-48 vote, at the Capitol in Washington, July 25, 2012. From left to right are Sen. Charles Schumer, D-N.Y., Reid, Sen. Richard Durbin, D-Ill., and Sen. Patty Murray, D-Wash.

Senate Democrats declared victory last week after passing a bill to extend tax cuts on income up to $250,000, while striking down a plan to extend cuts at upper income levels. On Wednesday, House Republicans declared the same victory — by doing the opposite.

The House voted 256-171 to extend the Bush tax cuts first passed a decade ago at all income levels, including all earnings of the top 2 percent of wage earners, for whom Democrats had hoped to let such cuts expire to offset the deficit. The House also rejected Senate Democrats’ plan by a vote of 257-170.

These votes were never expected to solve anything.

Congress is hurtling toward another tax deadline at the end of 2012, when tax rates are set to rise on dividends, capital gains and all levels of income. It’s the same sort of situation — and lawmakers seem bound to the same sort of schedule — they dealt with in 2010, when they extended the full complement of cuts for two years, rationalizing their decision as appropriate caution for a country just emerging from recession.

But this time, Democrats say they aren’t going to make that compromise — though the message is tailored for the campaign trail, not interparty talks.

“For nearly two years, the Republican-led House has ignored the will of the American people by accomplishing virtually nothing of bipartisan substance,” Reid wrote Wednesday in a letter to House Speaker John Boehner that Reid’s office then widely distributed. “I urge you to show Americans that you are still capable of accomplishing something of utility by passing the only bill to avoid the fiscal cliff for middle-class families that has a chance of being signed into law: the Senate’s middle-class tax cut.”

Republicans are also playing this one up for the electoral moment.

“In 2009, President Obama stated that we should not raise taxes during a recession. Three years later, Nevada’s unemployment rate leads the nation,” said Republican Rep. Joe Heck, an early supporter of and surrogate for presumptive GOP presidential nominee Mitt Romney in Nevada. “While the president’s proposal to raise taxes will create zero new jobs, the bill passed by the House to extend current rates for individuals and businesses will keep Nevadans working.”

Really, none of that is coming to pass anytime soon. It would defy the laws of political physics for compromise or, ultimately, a conclusion on this bill before the lame-duck session: The economy is simply too important and issue for either side to fold before the election.

But that does leave quite a few tax questions up in the air — not just for the wealthiest 2 percent of Americans wondering if their tax rate next year will be 35 percent, 39.5 percent, or something in between.

The House and Senate bills have other differences as well. The Senate bill does not address the question of the estate tax, for example, which at the end of 2012 is set to spike from 35 to 55 percent, while the amount for which that tax is waived would drop from $5 million to $1 million. In the past, Democrats have had difficulty agreeing on the estate tax: Some would let the rate rise more than others, while some, like Nevada Rep. Shelley Berkley, have been strong advocates for keeping it low.

Republicans, meanwhile, did not extend some stimulus bill provisions that are featured in the Democrats’ bill that are directed toward low- and middle-income families, including those with children in college.

The differences allow members of both parties to claim their bill saves the average American family thousands more than the alternative would make them pay in taxes. But neither bill will make it into a law in its current form: The House Republicans’ bill is doomed because President Barack Obama has promised to veto it, and the Senate Democrats’ bill is hampered by not being able to draw support of House Republicans.

Nonetheless, the debate will be re-run ad infinitum in the fewer than 100 days between now and the election. For more developments on your tax rates, however, tune back in mid-November.

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