Well, we really stuck it to the rich at 1:39 in the morning. Whew, now we can breathe a sigh of relief. The 40 Republicans who voted for Obama’s stimulus bill had to swallow hard voting for over $100 billion in new spending just in 2013, but at least those of us who are not super rich won’t see our taxes increase this year.
The payroll tax rate will revert back to $6.2% for every worker.
Oh wait, the five Obamacare tax hikes, including the 2.3% tax on every medical device under the sun will go into effect.
So Republicans agreed to sell their souls to the devil for what? It is being widely reported that they traded $41 in tax hikes for every dollar of spending cuts. But it’s even worse than that. This ratio comes from the CBO, which scores H.R. 8 as a $620 billion tax hike and a $15 billion spending cut. Keep in mind that the CBO works with a ten-year budget frame. So if Congress agrees to spend $100 billion in one day, yet offsets the cost over 10 years of projected savings, they would score it as deficit neutral.
To that end, this bill is a spending increase/stimulus bill with absolutely no spending cuts in 2013, the only year that counts. Just the increased spending from doc fix, absurdly long UI benefits, and the two-month cancellation of the sequester will cost $84 billion….in 2013 alone! Now throw in the refundable portion of green energy tax credits and low-income credits, and you are easily over $100 billion. Remember that refundable tax credits, which provide filers with a “negative” income tax liability, should be scored as expenditures. The same thing applies to impotent wind energy companies that don’t produce enough revenue to pay taxes, yet enjoy refundable tax credits.
Overall, the new spending in 2013 will probably double the projected revenue from the new tax hikes, even using the puerile static analysis, which fails to account for economic modifications as a result of the taxes. This is a very important point because it illustrates the absurdity of the balanced approach. We’ve been arguing over $60 billion in annual tax hikes for months now, yet in a matter of a few hours, the statists tossed in over $100 billion in new spending – just in a matter of a few hours. And that is considered the oblique portion of the deal!
Overall, CBO scores this bill as a $330.3 billion spending increase over 10 years, with only $2 billion in offsets for 2013. Some of those offsets come from money that was never going to be spent anyway.
Ultimately, we know that doc fix and UI will be extend every year and the sequester will continue to be delayed indefinitely. So even the partial spending offsets will be rendered moot.
Additionally, the House is teeing up an emergency spending bill that will ultimately match the Senate’s $60 billion price tag. Hence, any hard fought, economy-destroying tax revenues can and will be wiped out any day of the year with a single bill.
House Republicans must remember that nothing matters until January 15 when the first payroll checks go out. Even after that date, any final deal will be enacted retroactively. It is unacceptable to vitiate regular order and the 72 hour posting rule specifically for the most consequential pieces of legislation. At this point, there is no reason to impetuously support bad legislation without amending it. They must amend H.R. 8 to include a full extension of the tax rates along with a permanent extension of the 4.2% payroll tax rate. They should also throw in a repeal of the 5 Obamacare tax hikes, some of which are opposed by a number of liberal Democrats. That way, this would be the only bill on the table that ensures nobody’s taxes go up.
Let Reid and Obama oppose the payroll tax cut in order to spite the rich. That is one thing everyone will see on January 15.
Finally, they should strip out the spending, or at the very least, offset the cost with real on-year spending cuts.