Editore"s Note
Tilting at Windmills

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November 29, 2010

DRAWING THE TAX LINE AT $1 MILLION.... The first Democratic compromise plan on Bush-era tax rates was straightforward: a permanent lower rate for those making under $250,000; Clinton-era top rates for those making more. The second compromise floated by Dems was even more conservative: a permanent lower rate for those making under $250,000 and a temporary extension of existing rates for the wealthy. Congressional Republicans balked at both.

Now there's a third Democratic compromise plan.

Over the past few days, a growing number of lawmakers have publicly embraced the idea of extending expiring tax cuts for families making as much as $1 million a year. They include newly elected Sen. Joe Manchin (D-W.Va.), Sen. Robert Menendez (D-N.J.) and Sen. Claire McCaskill (D-Mo.), who argued on "Fox News Sunday" that "we should draw the line in the sand for millionaires."

The idea's chief proponent, Sen. Charles E. Schumer (D-N.Y.), said that raising the income threshold from $250,000, as Obama has proposed, has the potential to unite fractious Democrats behind a single strategy on the tax cuts, which are set to expire Dec. 31 unless Congress acts.

Schumer also said the higher threshold would make it far more difficult for Republicans to say no.

Almost immediately thereafter, Senate Minority Leader Mitch McConnell (R-Ky.) said no.

Still, Schumer's pitch isn't ridiculous. "There's a strong view in the caucus that if we make the dividing line $1 million, it becomes a very simple argument: We are for giving the middle class a tax break; they're for tax cuts for millionaires," the New York senator said yesterday. At $250,000, the message is "too muddled," he said. "It's much clearer at $1 million. It unites our base and the independent voters we lost in this election."

The next question, of course, is how much this would cost, and Jonathan Cohn connected with the Center on Budget and Policy Priorities to get an answer.

The original Democratic policy (extending tax breaks to those below $250,000) would cost about $3.2 trillion over the next decade, whereas the Republican alternative (permanent Bush-era rates for everyone) would cost about $4 trillion. The Schumer-backed compromise, meanwhile, would come in with a price tag in between: $3.6 trillion.

For all the talk about deficit commissions, spending cuts, and austerity, no one in the political establishment seems to think it's odd that policymakers are having this discussion -- and that those who claim to be most concerned about the debt are the ones pushing the most expensive package.

That said, if Republicans continue to believe even a penny of tax increases applied to one person is a bridge too far, and they're prepared to kill middle-class cuts unless they get everything they want, all of this is probably moot. Dems think the GOP would feel embarrassed about fighting tooth and nail to protect millionaires and billionaires at the expense of everyone else? That assumes Republicans are capable of shame.

Steve Benen 10:45 AM Permalink | Trackbacks | Comments (28)

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I see the seven-figure logic but the Dems really, really need to show their mettle. The time for idle threats is long past. Take the fight to the GOP.

Posted by: BrklynLibrul on November 29, 2010 at 10:55 AM | PERMALINK

Shame? Shame? They don't need any stinkin shame...

Roll over Obama. You let all this happen by your bipartisan antics. From the start they sent a clear signal: NO. No is no. You kept it up "pretending" that they'd eventually compromise. They did. They compromised their morals and ethics to bury you, your party and any hope of a progressive agenda to help the middle class out of the "ditch" you so perfectly used to describe their actions to get us to this point. What you didn't factor in was how stupid your electorate is, and how delusional they had become after drinking the Palin cool aid and the MSM "pass" on it's traditional Fourth Estate responsibility to pitch truth..

The experiment is a failure. Democracy is becoming , at a very quick rate, a vestige organ Nauseating...

Posted by: stevio on November 29, 2010 at 10:55 AM | PERMALINK

I love McCaskill's comment "we should draw the line in the sand for millionaires."

We are not talking millionaires, we are talking about people who make $1M a year after deductions. Six zeroes.

The Democrats are pitiful. How long will it take them to realize it's all or nothing for the Republicans.

Posted by: Mudge on November 29, 2010 at 10:55 AM | PERMALINK

But apparently, they'd like to eliminate the tax break to companies for their employee healthcare benefits.

http://news.yahoo.com/s/ap/20101128/ap_on_bi_ge/us_employer_health_plans

My favorite line from the article:

"The idea isn't to just raise revenue, economists say, but finally to turn Americans into frugal health care consumers by having them face the full costs of their medical decisions."

Posted by: SaintZak on November 29, 2010 at 10:58 AM | PERMALINK

and that those who claim to be most concerned about the debt are the ones pushing the most expensive package.

That's because tax cuts, like wars and occupations, pay for themselves.

It's incredible that after all these years of the same bullshit the American people still believe this. But we should remember the American people are told all day every day that they can SAVE SAVE SAVE by buying something.

Posted by: James E. Powell on November 29, 2010 at 11:03 AM | PERMALINK

I don't think Republicans will be happy until the rich are the only ones left alive!
The rest of us can starve to death, or die from treatable diseases, for all they care...
"That's too bad, it's a shame. You would live if only you were rich!"

I think it's time for the next Revolution. Don't you?

And, oh yeah, the Democrat's will fold. It's a tradition. Kind of like the Cubs never winning a World Series.

Posted by: c u n d gulag on November 29, 2010 at 11:08 AM | PERMALINK

Sure, do the million, save the North East blue states but bump the top rate to 50%.

Posted by: KK on November 29, 2010 at 11:10 AM | PERMALINK

"Still, Schumer's pitch isn't ridiculous. "There's a strong view in the caucus that if we make the dividing line $1 million, it becomes a very simple argument: We are for giving the middle class a tax break; they're for tax cuts for millionaires," the New York senator said yesterday.

It is too ridiculous. Quite apart from the ridiculous tactic of negotiating against oneself (nothing new for Dems), Schumer's "pitch" is not only ridiculous, it does not even make sense. If the tax cut extension will apply to tax returns showing $1 million or less adjusted gross income, how is that not a tax cut for "millionaires"?

Beyond the nonsensical rhetoric, why in the name of Zeus does someone making this kind of income qualify as "middle class" and need a tax cut?

Posted by: robert on November 29, 2010 at 11:13 AM | PERMALINK

And I ask the humble readers of this blog - Do you personally know or hang out with anyone who clears a million dollars a year? I don't . If you do ask them what they think.

Posted by: John R on November 29, 2010 at 11:14 AM | PERMALINK

"They include ... Claire McCaskill (D-Mo.), who argued on "Fox News Sunday" that "we should draw the line in the sand for millionaires."

OK. Maybe it's semantics but being a millionaire does not mean making a million dollars a year in income. My home state of Idaho is said to have more millionaires per capita than any other state in the union. There are, in fact, many wealthy people in the state, many who have homes in Sun Valley, where they are living off the family trust fund. But what makes the numbers so high is that there are many farmers whose holdings equal more than a million dollars, but their annual income is no where near $1 million. Claire shoud get her facts straight before she tries to sell such bullshit.

Posted by: Vandal on November 29, 2010 at 11:21 AM | PERMALINK

Hey Dems, when you're done negotiating with yourselves, give us a call. My guess is the negotiations will end when there's only one Dem left in Congress, which at this rate is not far off.

Posted by: Basilisc on November 29, 2010 at 11:23 AM | PERMALINK

Dems think the GOP would feel embarrassed about fighting tooth and nail to protect millionaires and billionaires at the expense of everyone else? That assumes Republicans are capable of shame. - Steve.

Exactly. Give them an inch and they'll take a mile.

Solution: Don't give them an inch.

Posted by: Goldilocks on November 29, 2010 at 11:23 AM | PERMALINK

Give it up. The Dems are not going to make a vote on the taxes happen during the lame duck session.

The GOP is driving the narrative and the Dems are reacting. We have to wait for a Republican policy initiative before anything can move the political balance in DC.

The world is better off with Sharon Angle out of the Senate, but it's poorer with Harry Reid as the Dem leader.

Posted by: angler on November 29, 2010 at 11:25 AM | PERMALINK

Schumer's proposal only goes half the distance.

Like KK suggests, they have to bump the rate to AT LEAST 50%. When they start whining, ask them if they're really serious about reducing the deficit cuz if they are, it shouldn't be a problem.

Increase the cap, but also increase the rate. That puts the pain where it belongs. Oh, and repeal the cap. gains treatment of income received by multi-gazillionaire hedge fund managers (and other Wall St. criminals).

Posted by: bdop4 on November 29, 2010 at 11:27 AM | PERMALINK

It's also unfortunate that Schumer chooses to throw out such a weak-ass opening bid. Is there a Dem out there that can reframe the party's position?

I'm not looking to Obama for courage on this, but I would love to be pleasantly surprised.

Posted by: bdop4 on November 29, 2010 at 11:30 AM | PERMALINK

I think it's a good idea to make the new limit at 1M.

"Fine minds make fine distinctions."

Posted by: neil b on November 29, 2010 at 11:45 AM | PERMALINK

Permanent tax cuts are just ridiculous to begin with from a budget perspective. We should have a tax rate freeze for the middle class until job growth picks up, and let the Bush tax cuts expire for the rich. The rich have been doing quite well in the past couple of years. Their greed will keep them investing and having less money to do that with will ostensibly make them more careful about those investments.

Posted by: John Henry on November 29, 2010 at 11:48 AM | PERMALINK

While Benen is normally fairly accurate in his statements, I must quibble with a part of his comments.

"...they're (republicans) prepared to kill middle-class cuts..." is completely inaccurate and misleading!

An accurate and truthful statement would be that we republicans are totally in favor of middle-class cuts!

- We favor cutting business deductability of health care insurance costs.
- We favor cutting social security benefits.
- We favor cutting medicare benefits.
- We favor cutting veterans benefits.

And this is just a few of the many examples where we republicans favor cutting the middle-class!

Posted by: RepublicanPointOfView on November 29, 2010 at 11:55 AM | PERMALINK

Let the Republicans kill the whole package loudly. Spend a few weeks yelling about how we tried to give everyone a tax cut and the Republicans blocked it.

Then, in January, introduce a new tax cut bill only for under-$250K and see if the Republicans will still vote against it....

Posted by: Z. Mulls on November 29, 2010 at 12:07 PM | PERMALINK

What a ridiculous "compromise." As you can see here the bottom of the 95th percentile is $180,000, and the bottom of the 90th percentile is $138,000. If you're doing better than 90% of the country, you're not "middle-class" by any definition.

Taxes should be raised on everybody at or above the 90th percentile, with additional brackets at $1M and $10M.

Posted by: PeakVT on November 29, 2010 at 12:19 PM | PERMALINK

After reading about the fed worker pay freeze, demoralizing isn't strong enough for the admin's strategy on the budget. Unilateral jab at people likely to vote for him and craven stall to be followed by full concession to people who will do anything to get him out of office.

If Obama's ultimate goal is to make George Will like him it may work, but everything else that Democrats stand for will be lost.

Posted by: angler on November 29, 2010 at 12:32 PM | PERMALINK

Just to remind everyone, someone earning $1M a year pulls in $19,231 every week, or $2,747 every day.

No wonder these people need a tax break - I just don't know how they survive.

Posted by: Just Guessing on November 29, 2010 at 12:36 PM | PERMALINK

Look, folks.

The argument has been available for a long time now.

And it is not a hard one to make.

Unless, of course, it is one that Democrats are not prepared to make.

Which by their inaction is what this appears to be.

Democrats. Want. To. Extend. Tax. Cuts. For. The. Rich.

I mean, geesh. Recognize the obvious here. There are only two parties, and they aren't Democrats and Republicans.

They are the People Party and the Money Party. And one controls everything, and you and me aren't in that party.

Posted by: terraformer on November 29, 2010 at 12:37 PM | PERMALINK

Reid said he was going to present several plans. Let the Republicans vote down $250K as a limit, then $1 Million as a limit and insist on saving billionaires, which the Democrats then vote down.

Come back in January with a 2 year refund of the $250 amount to every filer and dependents [about $1000 each, nice round number]. A refund would go to anyone filing a return. By definition that means the bottom 95-98% get about the same break. Let the House vote that down in favor of their giveaways to the rich.

Next propose to use the saving from the over $250K tax giveaway [call it a giveaway] to finance infrastructure, paying more of Mediaid, and alternative energy, including nuclear.

The Rethugs will vote it down.

We KNOW the Rethugs are not going to pass anything that will not ruin the country. Nothing is going get done. So propose what sounds good to the middle and lay the basis for 2012.

Meanwhile the deficit disappears rapidly as the worse than useless Bush tax cuts stay off and growth balance the budget.

Remember there is no stimulus from the Bush cuts. None. The Rethugs reject that fact. They think they are sabotaging Obama when in the real world they are doing him the biggest favor possible. Let them.

Posted by: OKDem on November 29, 2010 at 1:14 PM | PERMALINK

I've been wondering why I haven't heard the Dems (or anyone else) mention using reconciliation to pass the tax cuts for the middle class.

That's how the cuts got passed in the first place, and if we must have middle class cuts (a premise I don't fully buy into) simply do it the very same way the Repubs did it. It'll make for nice symmetry and when the Rs complain, even the MSM won't be able to ignore the hypocrisy.

Let's move it to reconciliation. Or at the very least float it out there as a possible approach. Then watch the Rs vomit hypocrisy all over the airwaves.

Posted by: Old Patch on November 29, 2010 at 2:20 PM | PERMALINK

Always count on Chuck Schumer and Bob Menendez to pander to the limousine liberal branch of the Democratic Party. Chuckie's been a ho to Wall Street since forever. As for Bob -- erstwhile boss of Hudson County, NJ (a place that would make Chicago and New Orleans look ethically pristine) -- he knows that there are plenty of Wall Street and hedge fund Dems living in NJ (and if he didn't, former Goldman Sachs honcho Jon Corzine would remind him).

Win-win for them -- appear to draw a line, and keep on drawing those campaign checks from the Upper East Side and Alpine, NJ.

Posted by: Eisbaer on November 29, 2010 at 3:29 PM | PERMALINK

Just let the tax cuts expire and blame the republicans.

Posted by: N.Wells on November 29, 2010 at 11:24 PM | PERMALINK

Call the Robber Barron's bluff... Let the tax cuts expire. If the Robber Barron's want to hold the middle class tax cuts hostage, I'd say let's get moving. If the Robber Barron Party wants to reward their constituents, let's do like Nancy Reagan and just say no. If tax rates returned to the Clinton years 4 trillion dollars will be saved, returning our country to fiscal solvency immediately. Since the Robber Baron Party denies that fiscal stimulus works, we probably should go down the less safe, but fairer plan to raise revenue... Since the Robber Baron Party has declared that nothing is more important than defeating our President in 2012, perhaps we can turn this back at them... It's funny that the Robber Barons of our time, have forgotten that it was their greed in the past that caused them to be reined in. Let's hope for the best in the years to come... Their greed will be their downfall with any luck at all.

Posted by: DougW on November 30, 2010 at 1:10 AM | PERMALINK




 

 

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