Democrats' Fiscal Tax 'Win' Ratifies Bush Tax Policy
Pundits contend that Tuesday's passage of the bill to avoid the so-called fiscal cliff was in essence the Democrats' ratification of the tax cuts implemented by President George W. Bush in 2001 – at least for families making under $450,000 annually.
Dana Perino, who served as Bush's press secretary, told The Washington Post's Jennifer Rubin on Wednesday that she doesn't believe Democrats can move away from the Bush tax cuts since they endorsed it in Tuesday's vote.
"Yes, the Bush tax cuts, which were demonized by Democrats for years as being only for the rich, were deemed critical to the country's middle class by the very Democrats who complained the loudest about – and voted against – them," wrote Perino in an email to Rubin. "When confronted with their hypocrisy, many Democrats just shrug it off as if listening to Charlie Brown's teacher. But deep down they know they lost the argument, and it will be impossible for them to ever go back on their new position."
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During both of his campaigns for the White House in 2008 and 2012, President Obama ran against the tax cuts enacted during the Bush years. But it was in his second campaign against Republican Mitt Romney that he upped the ante by wanting to increase taxes on the "wealthy," defined as anyone making over $250,000 per year.
How the tax cut came to fruition and how it was extended for some has created an interesting timeline.
Soon after President George W. Bush's election in 2000, the federal government was flush with cash. The new GOP president, sensing the time was right, proposed to lower taxes for most all Americans because the nation was on track to pay off the national debt. Then Treasury Secretary Alan Greenspan was concerned that if the federal government were to pay off the debt, additional revenues would result in the government owning too many assets.
"We need to resist those policies that could readily resurrect the deficits of the past and the fiscal imbalances that followed in their wake," said Greenspan, back when the federal debt was $5.7 trillion (It is $16.3 trillion today).
However, until Greenspan spoke on the issue, Democrats opposed the tax cuts, believing they would benefit only "wealthy" Americans. One of those who led the charge against Bush and his idea to lower taxes was then Democratic Sen. Joe Biden of Delaware. But by the end of President Obama's first term, Vice President Biden found himself doing an about face having to defend Obama's decision to extend the tax cuts until the end of 2012.
Obama wanted Congress not to extend the tax cuts when the 10-year limit was set to expire. However, with an economy still in limbo and Republicans in the House balking on the idea of raising taxes, it essentially forced Obama to give in and agree to a one-year extension in 2010 and again in 2011. Biden did say he and the president found extending the tax cuts, "morally troubling."
"We got to the end, we couldn't get it done, and we had to make a decision," said Biden on Obama's compromise with House GOP leaders. "The one target for us in two years is no longer extending the upper income tax credit for millionaires and billionaires."
As the deadline approached on reaching an agreement before the New Year, Biden headed to the Senate to negotiate what would in theory extend the rate for families making under $450,000 per year.
The primary difference is the new tax rates have no expiration date and it was Democrats, not Republicans, who produced the majority of the votes that kept some Bush era tax rates in place.
But although wealthier Americans will see their income tax rate increase, the Tax Policy Center estimates that even households making as low as $50,000 annually will play at least $822 in higher taxes because the Social Security payroll tax will increase by two percent.
And for 2013, households making between $500,000 and $1 million will see an average tax increase of $14,812, according to the Tax Policy Center analysis. Households making more than $1 million would get an average tax increase of $170,341.
The Tax Policy Center also estimated that taxpayers making between $10,000 to 20,000, and $200,000 to 500,000 got the best deal of all with only a one percent increase.
