Monday, November 19, 2012
Right now, Democrats believe they have the upper hand in the fiscal standoff. Patty Murray (Wash.) — the fourth-ranking Senate Democrat and the leading champion on Capitol Hill for going over the fiscal cliff — says that Republicans are “in a real box” because “if they do nothing, those increased taxes [they oppose] will take place.” If Republicans dig in, says Murray, all Democrats need to do is “go past the December 31st deadline” and let the tax increases happen automatically.
There’s one problem with her scenario: While the Bush tax cuts expire on Dec. 31, so do a lot of tax policies the Democrats support. For example:
●The 10 percent income tax bracket would disappear, so the lowest tax rate would be 15 percent.
●The employee share of the Social Security payroll tax would rise from 4.2 percent to 6.2 percent.
●An estimated 33 million taxpayers — many in high-tax blue states — would be required to pay the alternative minimum tax, up from 4 million who owed it in 2011.
●The child tax credit would be cut in half, from $1,000 today to $500, and would no longer be refundable for most.
●Tax preferences for alternative fuels, community development and other Democratic priorities would go away.
●And the expansions of the earned income tax credit and the dependent care credit would disappear as well.
Letting these tax policies expire would level the playing field for Republicans in tax negotiations next year. Instead of being in a “box,” Republican leaders would have leverage again — something the Democrats want and would have to make concessions to get.
I had not realized that. --TS