The Port Arthur News
PORT ARTHUR —
The left wing of the Democratic Party is not happy with President Obama accepting the deal put together on New Year’s Day to avert the so-called fiscal cliff because income taxes were cut on the first $450,000 of income for couples instead of the $250,000 cap Obama had campaigned on. The right wing of the Republican party is not happy because taxes were raised on anybody. That’s an indication the bill awaiting the president’s signature accomplished a rare event in the halls of the capitol these days — compromise.
The stock market showed its approval of the bill even while the opening bell was still vibrating. The Dow Jones average shot up about 250 points, following a trend set Monday when the Dow was up more than 160 points on news that the Senate had passed the fiscal cliff bill.
The Associated Press boiled down the provisions of the tax package that raises taxes by about $600 billion over 10 years compared with tax policies that were due to expire at midnight Monday. Highlights include:
• Income tax rates: Extends decade-old tax cuts on incomes up to $400,000 for individuals, $450,000 for couples. Earnings above those amounts would be taxed at a rate of 39.6 percent, up from the current 35 percent. Extends Clinton-era caps on itemized deductions and the phase-out of the personal exemption for individuals making more than $250,000 and couples earning more than $300,000.
• Estate tax: Estates would be taxed at a top rate of 40 percent, with the first $5 million in value exempted for individual estates and $10 million for family estates. In 2012, such estates were subject to a top rate of 35 percent.
• Capital gains, dividends: Taxes on capital gains and dividend income exceeding $400,000 for individuals and $450,000 for families would increase from 15 percent to 20 percent.
• Alternative minimum tax: Permanently addresses the alternative minimum tax and indexes it for inflation to prevent nearly 30 million middle- and upper-middle income taxpayers from being hit with higher tax bills averaging almost $3,000. The tax was originally designed to ensure that the wealthy did not avoid owing taxes by using loopholes.
• Other tax changes: Extends for five years Obama-sought expansions of the child tax credit, the earned income tax credit, and an up-to-$2,500 tax credit for college tuition. Also extends for one year accelerated "bonus" depreciation of business investments in new property and equipment, a tax credit for research and development costs and a tax credit for renewable energy such as wind-generated electricity.
• Unemployment benefits: Extends jobless benefits for the long-term unemployed for one year.
• Cuts in Medicare reimbursements to doctors: Blocks a 27 percent cut in Medicare payments to doctors for one year. The cut is the product of an obsolete 1997 budget formula.
• Social Security payroll tax cut: Allows a 2-percentage-point cut in the payroll tax first enacted two years ago to lapse, which restores the payroll tax to 6.2 percent.
• Across-the-board cuts: Delays for two months $109 billion worth of across-the-board spending cuts set to start striking the Pentagon and domestic agencies this week. Cost of $24 billion is divided between spending cuts and new revenues from rule changes on converting traditional individual retirement accounts into Roth IRAs.
Count us among those who believe allowing taxes to go up an average if $2,000 or more on middle class families would have crippled our economy as it struggles to gain traction. While the fiscal cliff bill made the Bush-era tax rates permanent for the middle class, no such progress was made on the expense side of the ledger. The sequester cuts were put off for two months to allow the new Congress to act on the cuts in a more deliberate manner. Put another way, they kicked that can down the road, creating a new fiscal cliff which will combine those cuts in spending with the need for a new debt limit cap.
Get ready for more legislation by crisis as the new deadline approaches. That’s when we will once again need the “C word” — compromise — to break down the walls of partisan ideology.