Wednesday, December 8, 2010

Tax plan contains essential help for struggling families, along with extremely bitter pills

The compromise tax package announced by President Obama and Republican leaders this week contains some awfuly bitter pills, particularly the stunningly generous handouts to the rich. Our country's most wealthy residents should be contributing to charity, not receiving charity from taxpayers who are struggling just to keep their heads above water.

Unfortunately, swallowing those bitter pills at least temporarily might be necessary to achieve badly needed help for low- and middle-income working families and the economy. The package included a 13-month extension of federal unemployment benefits, a move that will save jobs and provide a bridge for jobless workers as the economy works through a slow recovery. It included two-year extensions of improvements to the Earned Income Tax Credit, the American Opportunity Tax Credit and the refundable component of the Child Tax Credit. Finally, the package included a one-year reduction of the employee share of the Social Security payroll tax, replacing the Making Work Pay tax cut. Those elements are just too important to the economy and the wellbeing of working families to allow them to die.

Chief among the bitter pills is a two-year shrinking of the estate tax that will benefit only richest one-quarter of 1 percent of estates. In an economy where the official unemployment rate has reached 9.8 percent, and a more realistic measure puts it at 17 percent, concocting a huge giveaway for the richest of the rich is just plain shameless. The tax break would provide an estimated $20 billion in benefits to the super-rich during the next two years.

But the estate tax shenanigan was only the most egregious of the so-called compromises contained in the plan. Other concessions were also tilted heavily in favor of the rich. The package extends for two years President Bush's tax cuts for households with incomes of more than $250,000. Those tax cuts have for years cost our country dearly by unnecessarily driving the federal deficit to astronomical levels. Allowing the cuts to persist now ranked dead last among the tax and spending options the Congressional Budget Office studied for spuring the economy, as Robert Greenstein of the Center on Budget and Policy Priorities noted in a statement on the deal.

Congressman Mark Udall has called the tax-cut deal "objectionable" and "unbalanced," which we figure is putting it mildly. The New York Times editorial board called the deal "odious," which seems closer to the mark. Responsible representatives in Washington might be forced to vote for the plan, though, because the alternative is even worse -- waiting for the next Congress, when the political environment is likely to be even more hostile to the interests to working families.

If Congress finds it impossible to reach a more reasonable and balanced deal, we can hardly blame the more responsible members for voting in favor of the package while holding their noses.

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