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Tax Cuts for the Rich Extended

Tax Cuts for the Rich Extended

Congressional Republicans and the White House  struck an agreement in principle on Monday night to extend all the Bush tax cuts for 2 more years in exchange for extending unemployment benefits. The GOP agreed to the so-called “Lincoln-Kyl compromise,” a partial 2-year extension of the Bush estate tax cuts on estates worth over $5 million. If the deal had not been struck, estate taxes on estates over $5 million would have gone back up from 0 percent to the pre-cut rate of 55 percent. Instead, the rate will be 35 percent for the next 2 years.

The GOP also agreed to a short-term “stimulative” 2 percentage-point cut off the 6.2 percent payroll tax we all pay on income up to $106,800. The good news is that a payroll tax holiday will provide the most noticeable tax relief to low- and middle-income Americans. The bad news is that payroll taxes fund Social Security, so cutting the tax means starving a program that most directly benefits average people. Social Security is not in crisis yet, but steps like these could push the program into worse financial straights where significant benefit cuts become inevitable. It’s almost as if the GOP, having failed to spark panic about an as-yet non-existent Social Security crisis, is determined to engineer one.

All these gimmes for the rich were the price of a partial extension of unemployment benefits. The stakes couldn’t have been higher. If Congress had failed to act, 2 million people stood to lose their benefits this month and another 7 million would have run out before the end of next year, reports Andy Kroll of Mother Jones.

Meanwhile, unemployment continues to rise. The economy only added 39,000 jobs in November when analysts were expecting about 150,000. “At the beginning, some people just thought it was a printing error,” said reporter Motoko Rich on the New York Times‘ weekly business podcast. The overall unemployment rate climbed to 9.8 percent.

At ColorLines, Kai Wright argues that the time has come for President Obama to seize the opportunity to debunk conservatives’ bad faith arguments for tax cuts above all else:

At the same time, the anti-government crowd’s political hand—if forced—has never been weaker. A depressingly large number of middle-class and working-class Americans now know all too well what economists have long understood: You get a great deal more economic bang out of keeping lots of people from becoming destitute than you do by helping a few people horde wealth. People remain enraged about the no-strings-attached bank bailout, for instance, because they intuitively understand its ramifications. Wall Street is now enjoying a narrow, taxpayer-financed recovery while unemployment, hunger and poverty all continue climbing through the former middle class.

Extending UI makes sense

Tim Fernholtz of TAPPED tackles some of the bad arguments against extending unemployment insurance. Economist Greg Mankiw claims that extending unemployment insurance is just a surreptitious ploy to redistribute income to the poor from the wealthy. Actually, as Fernholtz points out, the point of a UI safety net is to prevent people, 3 million of them in 2009, from becoming poor in the first place. Poverty is very expensive for society at large. If we can keep the unemployed in their homes, spending their benefits in their communities, we can keep the socially corrosive effects of poverty at bay until the economy improves. The social costs of child poverty alone have been estimated at $500 billion a year, Fernholtz notes. The deeper we allow people to sink into poverty, the more difficult it will be for the economy to rebound. On this view, UI is a shared investment in a well-ordered society, not just a lifeline for jobless families.

Why corporate tax cuts won’t create jobs

Jack Rasmus of Working In These Times explains why tax cuts will not create jobs. Simply put, banks and big companies are sitting on over a trillion dollars. Among the nation’s biggest banks, lending to small and medium size businesses, the engines of job creation, has dwindled over 2009 and 2010. America’s biggest companies are sitting on a hoard of $1.84 trillion dollars, which they are not investing in job-creating projects. The Deficit Commission recommended slashing corporate taxes, ostensibly to spur investment and job creation, which would ultimately generate taxable income to help balance the budget. As Rasmus points out, this wishful thinking is predicated upon the assumption that if only corporations had more money, they would invest it to create jobs. The fact that companies are already sitting on huge piles of cash suggests that shoveling more moolah on the pile won’t change the basic dynamic. Perhaps companies are waiting to invest because they know that consumers aren’t keen to buy goods and services when they are unemployed or fearing job loss.

Economic disobedience

At In These Times, Andrew Oxford interviews sociologist Lisa Dodson about her new book on getting by in the low-wage economy. Her research shows that as economic instability mounts, many Americans are quietly taking matters into their own hands:

To understand how fair-minded people survive in an unfair economy, Dodson interviewed hundreds of low-wage workers and their employers across the country, examining what she terms the “economic disobedience” now pervasive in the low-wage sector. From a supervisor padding paychecks to a grocer sending food home with his employees, these acts of disobedience form the subject of her latest book, The Moral Underground: How Ordinary Americans Subvert an Unfair Economy.

Winner-take all economy

In an interview with Democracy Now!, Yale political science professor Jacob Hacker explains why the Deficit Commission has it all wrong when it comes to tax cuts vs. unemployment benefits.

Hacker studies inequality. He has written a book on how the richest Americans cornered an unprecedented share of the country’s wealth for themselves over the past three decades. The richest Americans have never been in a better position to help the country grapple with the deficit. Yet, as Hacker points out, the Deficit Commission wants to balance the budget on the backs of middle- and lower-income Americans by cutting spending on programs that disproportionately benefit working people and readjusting the tax code to make it even more favorable to the rich.

This post features links to the best independent, progressive reporting about the economy by members of The Media Consortium. It is free to reprint.

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Photo credit: HikingArtist.com

By Lindsay Beyerstein, Media Consortium Blogger

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85 comments

+ add your own
3:41PM PDT on Apr 6, 2011

Are you people really that shallow minded to forget the past I agree that obama stinks but he didnt start this the rebulicans did when bush and cheney started this trumped up war and lied to the people why they were going to war and this is when gas prices soared and thats when me and hundreds of millions of people lost thier jobs. (by the way bush and cheney are in the oil business) they want us to keep getting mad at democrates or republicans and the next term we will switch to the other one, that keeps them all in a job but they are all the same (BIG BUSINESS AND MONEY.) They dont care about the working class look what republicans are trying to do now to the people it is not going to change unless America turns back to GOD and with his help take back our country and stop being a pay check, a checking account, and a punching bag for these corrupt,lying goverment. GOD BLESS YOU ALL!!!!!!!!!!!!!!!!!!!!!

2:12PM PST on Mar 10, 2011

CRAIG C.
NO TAX CUTS, I would guess you don't make an honest living.
NO UNEMPLOYMENT, You are either stupid or once again don't make an honest living.
100% ESTATE TAX, I would guess you don't have anything

12:42PM PST on Dec 17, 2010

No tax cuts!!

11:56AM PST on Dec 17, 2010

I'm fed up with the democrats. Obama has lost my vote in 2012 and I'll most likely be voting and giving my time and money to socialist or green over dem from now on. What's the point? They cave in without a fight, even offer them more than they were asking!

11:54AM PST on Dec 17, 2010

Thanks for the advice. Get back to you later with my comment.

9:56AM PST on Dec 17, 2010

I am SO disappointed. Where is LBJ when you need him? (snark)

7:43PM PST on Dec 11, 2010

Here is the Key Words of deceit and deception: and these two words are - LONG TERM - that's it; every time you hear Obama say that his tax plan is what is best for America in the "long-term" then you know Obama is LYING. For the past 20 years the Ronald Reagan - Trickle-Down-Economics - Plan has not yielded one dime to any poor or middle-class family, and that trickle-down plan was suppose to be the best - Long Term - economic plan of the Reagan era. Now look at what Wall Street Executives, and Corporations have done in the last 20 years. They have had SHORT-TERM goals and SHORT-TERM plans, and their true objective was to do a HIT & RUN with the massive profits that they robbed, cheated, and stole from those who were Waiting for a Long-Term benefit. So, if We-The-People don't COPY the Behavior of the Rich-Elite, then you had better dig your own grave, and bury yourself in it, TODAY, because your own belief system does support the thieving cheating practices of the GOP Rich-Elite, who spoiled brats that Want-It-All-NOW,... Obama has become a PUPPET of the GOP Rich-Elite, Obama has been suckered-into their End-Game, and Obama is using his presidency to Suck-Up to the GOP Rich-Elite. Obama has become a Pied-Piper who is now leading everyone to their own doom. Turn away from this Obama shame-plan,.. NOW!... Obama does have his own nightmare awaiting him in the near future,.. and all I will say is,... shame on him.

1:07PM PST on Dec 11, 2010

JW H. Your numbers are way off. Where did you get them?
Bernie Sanders talked about an oil company(?) that made $19 billion last year and paid zero taxes but got a $167 million return.
Your numbers are propagandaesque at least.
Corporate welfare is and has been the problem. It's called, corporate fascism.

12:58PM PST on Dec 11, 2010

Here's a chart that really shows how wall street deregulation by BUSHco screwed the bejesus out of the middle class. Think bundling...
http://3.bp.blogspot.com/_pCDyiFUv9XU/SwBQuJ8QeMI/AAAAAAAAHMw/sDswnwnjvM0/s400/case-shiller-chart-updated.png

12:47PM PST on Dec 9, 2010

That's good to hear since as we all know the rich are really suffering in this down economy. The poor things can barely afford to buy a second villa in the south of France much less a new yacht or Bentley. Boo hoo!

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