As many of you may have heard, President Obama met with some Congressional lawmakers to formulate a compromise package that addresses the impending expiration of the 2001 and 2003 Bush tax cuts. Provisions in the deal include the following:
- 2-year extension for all tax rates;
- 13-month extension of unemployment insurance benefits;
- 1-year payroll tax reduction from 6.2% to 4.2%;
- 1-year capital investment write-off for small businesses;
- 1-year patch for alternative minimum tax (AMT); and
- Resurrection of the death tax from 0 to a 35% rate and $5 million exemption
Depending on how you look at the proposal (glass half-full or half-empty), there’s something to love and something else to hate. We commend the compromise for extending all current tax rates, though we loathe the idea of a temporary tax cut solution that fails to eliminate economic uncertainty and virtually guarantees another politically-motivated fight show in the next Congress. We strongly disagree with bringing the death tax – a levy that punishes thrift, savings and hard work – back to life. We have actually opposed the “compromise” rate of 35% in the past because we believe the tax should be eliminated altogether. Our position remains the same now. We also don’t support the UI extension because we don't believe a near-permanent arrangement cures unemployment or helps those individuals seeking a financially stable footing for the long-term.
All that being said, we believe that (overall) this compromise would be an acceptable solution for taxpayers, who face an exorbitant tax hike in January if Congress fails to act. Moreover, it’s far better than the so-called Middle Class Tax Relief Act that we opposed last week.
We sent an Open Letter to Congress detailing our position on the tax cut negotiations, and you can read that here.
The fate of the package still remains uncertain, as House Democrats voted down the measure in a caucus meeting earlier today. The Hill reports that 60+ Democrats are a firm NO, so here is the question: Will the House and Senate Majorities bring the compromise to the floor in its current form? It’s anyone’s guess at this point, though we have heard that the Senate could take it up as early as Saturday.