Today, war and taxes remain our nation’s two most tragic issues. While we haven’t quite finished losing those pointless shooting wars, we’ve surely lost the tax war.
Yes, President Barack Obama has surrendered. You saw it on TV. He said right out in public that he approved continuing the famous tax cuts for the rich, when all he really needed to do to win was nothing. Those cuts would have expired on December 31, and the wealthy would have had to pony up. The government would have had hundreds of billions of dollars more to work with.
Wall Street was so worried that it was prepared to pay its obscene annual bonuses in December, a month early, just to beat the new rates. But not to worry, moguls. Obama finked out, selling his political rights for a mess of political pottage in the form of temporary unemployment benefits.
The majority of Senate Democrats did the same, not wanting to be tagged as “pro-tax” after the president withdrew his political cover. Many in the House did too, reciting the White House’s nonsense that putting more money in the hands of the rich would somehow stimulate the economy. No doubt it will, but unfortunately only Wall Street’s economy.
One particularly noxious part of this malodorous deal slashes the estate tax, known also as the inheritance tax. Both the rate and extent of coverage were severely reduced. This means that great lumps of cash and property will now pass tax-free from expired rich geezers, who may or may not have earned them, to their kids–who surely didn’t. What a windfall! Thus are financial dynasties born.
As an alternative, some economists are suggesting eliminating the estate tax altogether and simply charging heirs a regular income tax on their loot. No exemptions. That idea looks better all the time.
Another landmine in the tax deal is Social Security. The new law will save money for you and me because our payroll tax for 2011 has dropped from 6.2 percent to 4.2 percent. Spread over 155 million workers, that’s a lot of new Chinese blue jeans, Indian computer components, and Mexican strawberries. But at least it will help juice up retail sales and profits.
It will also cleverly reduce income for the Social Security Trust Fund. As you might guess, Wall Street is rubbing its hands in glee over that one. As the Trust Fund gradually goes broke, the piranhas in Congress will see justification for boosting the retirement age to 75 and for turning parts of the system over to banks and insurance companies. And as planned, these outfits are already doing very nicely in the midst of the recession, thank you, since we bailed them out.
So in annoyance you might ask, why did Obama go along with this dumb deal? Was he: 1) A bad bargainer? 2) Panicked over the recession as his reelection approaches? 3) Not as much of a reformer as he first claimed? 4) Fatally addicted to seeking bipartisanship? Or 5) A wimp? My own bet is on No. 5, though no doubt each item played a role.
Whatever the reason, you and I are left holding the bag. Now the rich will really get richer while plenty of the middle class double up with mom and dad. The poor already see fewer services and the wealthy are laughing all the way to the bank.
That’s how important tax policy is.