Yesterday, President Obama came out and announced a Tax comprimise that he and Republican leaders worked on over the past few weeks. In this compromise, the all the discounted tax rates from 2001 and 2003 would be continued for two years, in addition to a decrease in the Social Security Tax and a reduced Estate Tax (Death Tax) rate. This compromise, formed outside of Congress so it still has to come to the floor in both the House and Senate, quickly drew criticism from both sides.
I won’t be going into the details of the plan in this article, but I did want to address two points. For starters, the complaint that extending the discounted tax rates will add another $700-900 Billion to the national debt. I’m sorry, but that is complete nonsense, and I feel sorry for anyone who thinks that. These tax rates have been in place for almost a decade now. Congress has known the projected tax revenue from these rates for years, and should have already been taken into account in Congressional spending.
Spending causes deficits, pure and simple. Congress – both under Republican and Democrat leadership – has willfully spent more than what the current tax rates were bringing in. Their failure to budget and spend properly has caused the national debt to grow dramatically over the past decade (not to include the costs of two wars). This fiscal irresponsibility was a variable in both the Republican’s loss of power in 2008 and the Democrats loss in 2010.
One argument can be made that the Democrats were banking on the discounted rates to expire so the additional tax revenue would cover their exponential spending as well as the projected expenses associated with the Health Care Reform that was passed. This, coupled with the return of the Estate Tax, would explain why the Democrats were fighting so hard against making the rates permanent. That could be a conspiracy theory, but it also sounds like a calculated political maneuver.
The other issue I have is the constant involvement by the President in holding negotiations with Congressional members. I have no problem with a President laying out his vision and goals for the nation and encouraging members of Congress to work on what he sees as priorities, but there is no reason why a President should be constantly deeply involved with negotiations (with both his/her own party and the opposition). Legislation development, debate, and compromise are functions of the Congress, with the President having the power to sign or veto said legislation.
There is a chance that this compromise that Obama worked up with the Republicans never see a floor vote. Current House Speaker Nancy Pelosi has already come out against the proposal, and Senate Majority Leader Harry Reid stated the proposal needs to be looked at and debated carefully. This could easily delay any action on the proposal (or any similar legislation) until January. By that point, the existing discounted rates would expire, resulting in smaller paychecks for employees across the nation. Even though the rates can be applied retroactively, the initial impact during a few pay periods can make things difficult for families already on the edge financially.
My hope is that as we progress, both the Legislative and Executive branches will get their acts together and better serve the nation. Drop the misleading talking points and reestablish the balance of power.