Two votes happened in the U.S. Senate last Wednesday, votes which highlight how Republicans and Democrats feel about tax rates.
Senate Republicans voted to raise taxes on all Americans. Senate Democrats voted to avoid raising taxes on all Americans. A Democratic-sponsored bill that limits tax increases was passed, despite Republican opposition. Republicans are now insisting that the bill the Senate passed has no chance in the Republican-controlled House. In other words, Republican votes could force everyone’s taxes to go up.
How in the world will Grover Norquist spin this?
That’s not the most amazing part. Democrats have been trying to make the argument that Republicans only care about the super-rich. Republicans have been trying to deny this charge. So to demonstrate their position, Senate Republicans forced a vote on a bill to lower taxes on the super-rich as the quid pro quo for avoiding tax increases on everyone, apparently not noticing that this proves the Democrats’ point.
Let’s review how we got into this peculiar situation.
In 2001, the Republican-controlled Congress under President Bush enacted a series of massive tax cuts, which (along with two unfunded wars and an unfunded tax giveaway to insurance companies called Medicare Part D) turned President Clinton’s $236.2 billion surplus into a nearly $400 billion deficit in only two years. Congressional Democrats opposed what has come to be known as the “Bush tax cuts,” and Democrats in the Senate threatened a filibuster. In order to force the bill through, Senate Republicans used the Budget Reconciliation process, which allowed them to pass the bill on a simple majority vote.
Republicans at the time did not actually have a majority in the Senate. In the 107th Congress, the Senate was evenly split, with 50 Democrats and 50 Republicans. In order to have a majority, Vice President Cheney had to cast a deciding vote. The Bush Tax Cuts passed the Senate 51 to 50, using a procedure Republicans would, in March of 2010, condemn as the end of democracy.
The arcane rules of the Senate, however, allowed these tax cuts to stay on the books for only ten years — meaning 2001 through 2010. They would expire at the end of 2010, and would have to be renewed if they were to continue.
These tax cuts did a number of things, including lowering income taxes on all Americans, lowering capital gains taxes, lowering estate taxes, and reducing a number of other levies as well. Most of these tax cuts affected very few people. For instance, only a tiny percentage of Americans pay capital gains taxes, and most Americans are never subject to estate taxes, since they apply only to estates worth over $1 million.
In the 2010 lame-duck session of Congress, President Obama masterfully negotiated a number of bills, including an $850 billion tax-cuts-and-stimulus deal (which contained, among other things, an extension to unemployment benefits and a temporary reduction of the Payroll Tax), the repeal of DADT, the Defense Authorization bill, a continuing resolution to keep funding the federal government, the START treaty, and a historic food-safety bill. Part of the price of all this was a two-year extension of the Bush Tax Cuts, which are now set to expire on December 31, 2012.
If Congress does not act, on January 1, 2013, tax rates will return to what they were at the end of President Clinton’s tenure. That was a good time. Under Clinton, the economy boomed, over twenty million jobs were created, and America saw a federal surplus for the first time since Lyndon Johnson. The top marginal tax rate on the wealthiest Americans was 39.6 percent. The Bush Tax Cuts lowered it to 35 percent. Note that this is the tax only on the portion of income over $288,350. The first $288,350 was (and is) taxed at a lower rate.
We can argue about how much impact the tax rate had on the Clinton boom. What we cannot reasonably claim is that a top marginal tax rate 4.6 percentage points higher than it is today stunted the Clinton economy. Republicans insist we should not raise taxes on “job creators” (by which they apparently mean people whose incomes exceed some high threshold) — yet they also claim these “job creators” are not creating jobs, since they complain there hasn’t been sufficient job creation in the last three years. (It is unclear why we should expect the “job creators” to suddenly start creating jobs if we don’t let their tax cuts expire on December 31.)
Bear in mind, the last 27 months have seen about three times as many jobs created as during the eight years of President Bush. One would think Republicans could use this as an argument for leaving the tax structure alone, since that’s what they want to do anyway. But admitting that jobs are being created would go against the narrative they want to tell about President Obama, so Republicans are willing to deprive themselves of this argument.
During negotiations in 2010, Democrats argued that the tax cuts on people with the highest incomes should be allowed to expire — that is, the top marginal tax rate (the rate for the portion of income over a certain amount), and capital gains and estate taxes, should be allowed to return to Clinton-era levels. Recognizing that we’re still not out of the woods as regards the Bush Great Recession, Democrats also argued that the tax rates on the portion of income lower than a given amount should remain at the Bush levels. Leaving the rate lower for lower incomes means that more people would have more money available for buying consumer goods, thus acting as a stimulus to economic growth.
Various cutoffs were proposed — perhaps incomes over $250,000 would return to Clinton levels, maybe incomes over $1,000,000. Republicans wanted not only to see the Bush Cuts extended on all income, but wanted to make them permanent. In the end, the Bush Tax Cuts were extended in their entirety, but for only two years.
Here we are, two years later, and the Bush Cuts are again facing their sunset. Once more, Democrats are suggesting that all Americans should continue receiving the lower Bush rates on income up to some maximum amount. Once more, Republicans are demanding that all tax cuts for all levels of income should be extended.
According to the 2010 lame-duck law, all rates will return to Clinton levels about five months from now. What we’re talking about is whether Americans will receive a tax cut on January 1, 2013 — and, if so, how much.
About a week ago, Senate Majority Leader Harry Reid made a deal with Minority Leader Mitch McConnell. Both the Republican plan for Jan 1, and the Democratic plan, would be put up for a vote. Neither vote would be subject to a filibuster. Both would be allowed to pass or fail by a simple majority. I don’t know about you, but I can’t think of anything more fair, nor anything that would more fully present the opinions and priorities of our elected representatives in the Senate.
Bear in mind that all but seven Republican senators have signed the Norquist Pledge to never vote for any tax increase, ever, under any circumstances. Bear in mind also that Republicans have been insisting that a vote to allow the Bush Tax Cuts to expire is a vote to increase taxes. By this logic, all signers of the Norquist Pledge must vote to keep in place any or all provisions of the Bush Tax Cuts.
That’s not how it worked out. The Democratic plan to extend the Bush Tax Cuts for all income under $250,000 passed the Senate by a vote of 51 to 48, with all Republicans voting against. That means that every Republican in the Senate voted to raise taxes on all Americans. There is no other way to interpret this vote. Every Republican in the Senate voted to increase taxes on all Americans.
The competing Republican plan, to extend all of the Bush Tax Cuts, was defeated, by a vote of 45 to 54.
Remember, the Democratic plan gives tax relief to everybody. The Republican votes deny tax relief to everybody, unless we treat the wealthiest Americans better than everyone else. Republicans will allow Americans to receive tax cuts on incomes under $250,000, only if people who make more than that amount also receive extra special tax cuts.
According to Republicans, Americans should only get tax relief if the most wealthy Americans — the top two percent — get more tax relief than everyone else.
In many ways, these were merely symbolic votes (just like the vote in the House a short time ago — after more than thirty comparable votes — to repeal the Affordable Care Act). The Constitution requires that all laws regarding taxes must originate in the House, not the Senate, so neither of these bills would have passed Constitutional muster (though there are ways to finesse that if Congress had wanted to). I suspect this was one of the two reasons Mitch McConnell allowed the votes to happen without a filibuster (the other being that I honestly don’t think he knew how the votes would turn out).
Nevertheless, these were important votes, despite this being only a bit of symbolism. In fact, especially because these votes were only symbolic, they were important. Even knowing that neither of these bills would become law, Senate Republicans could not bring themselves to vote for a tax bill that didn’t give extra special benefits to the wealthiest Americans.
Even knowing this was only a statement of intent, Republicans cannot say they are in favor of helping all Americans, unless the richest Americans are treated better than anyone else.
We need to take this lesson to heart. It tells us a lot about where the Republican Party is today, despite the faux–populist Teaper rhetoric. This needs to be an issue in the November elections.
(Correction made: the article originally misidentified John Boehner, rather than Mitch McConnell, as the Senate Minority Leader.)
Related articles
- Republicans Shouldn’t Cave on the Bush Tax Cuts — Bloomberg (blog) (bloomberg.com)
- Who Deserves a Tax Break? (nytimes.com)
- Senate to vote on competing Democratic, GOP tax plans (cnn.com)
- Senate Passes Modified Tax Break Extension, Crapo and Risch Vote ‘No’ (boiseweekly.com)
- Senate Dems Jam House Republicans, Pass Bush Tax-Cut Extension For Middle Class (tpmdc.talkingpointsmemo.com)

Lawrence O’Donnell is strongly pushing his “Off the Cliff” plan, and a surprising number of high-profile Dems are now cautiously siding with him. Dems really seem to have found some backbone on this.
As I understand it, the plan works like this:
1.) Dems do not intervene, and do not support any GOP efforts to extend all the Bush tax cuts
2.) As a result the Bush tax cuts expire on New Year’s Eve across the board, causing everybody’s taxes to go up.
3.) All earners will see a slight increase in their January taxes, which will be subsequently refunded
4.) In January , Democrats immediately submit a bill that mirrors the one just voted on, requiring the Bush tax cuts to be restored on all incomes under $250,000 per annum
5.) Republicans will be free to vote for this bill despite the Norquist pledge, since they will effectively be voting for a tax decrease on the vast majority of the public now that the rates have already gone up. And for upper income earners they will be voting for the rates to stay the same as they were after the Bush tax cuts sunsetted on New year’s Eve, so it is also not a tax increase.
Get on board, kids. Hold hands and go Off The Cliff together! There’s even cool buttons!!
filistro,
I avoided mention of the Off-the-Cliff plan only because of space (my article had gotten long already). I think it’s a great idea.
The one correction I would make in your explanation is in this part:
That’s not quite true. The Democratic plan would involve a tax cut for all Americans who have taxable income, even the highest income earners. All income under $250,000 would get a reduced tax rate. Even people who make more than $250,000 would get a tax cut on the portion of their income under $250,000.
Republicans like to complain about “class warfare.” The Democratic plan is anything but “class warfare”, because it gives a tax cut to everybody with taxable income. The Republican plan, on the other hand, is precisely “class warfare,” because it gives an extra special tax cut to people on the top end of the income scale.
Thanks DC… I get what you’re saying, though I don’t think even O’Donnell has fully explained the subtlety of this being a tax decrease even on the upper income earners, because after sunsetting they return to the old tax rate but now they get a decrease on the first 250k.
You’re such a smart guy
Take THAT, Grover Norquist!
My instincts tell me that maybe the Dems are going to hold fast on this one. I think they realize they have a winning hand and for once they won’t be scared into compliance by the GOP noise-and-outrage-machine. Because there is really grave danger here for the elephants. If they allow Dems to shape the narrative that the GOP has chosen to actually raise taxes on the poor and the middle class rather than let the taxes of upper income earners return to pre-Bush levels, that’s a lethal meme… and it’s already taking root.
And that’s exactly what’s happening. I only briefly mentioned the capital gains tax cuts (which primarily benefit the top 2%) and the estate tax cuts (which apply only to the very very wealthy). Republicans will let taxes go up on the poor and middle class rather than allow these special benefits to expire for the hereditary nobility.
And the truly frightening thing is that the Ryan plan (which Romney described as “marvelous”) would increase taxes on the poor and middle class even more, while cutting programs that serve the poor and middle class — and would do this in order to fund additional special benefits for the very wealthy (people like Ryan and Romney). These Republican plans are patently self-serving, using the tax code as a way to siphon money from average Americans directly into the pockets of themselves and their very wealthy friends.
The GOP senators gave the game away with their votes last week. It couldn’t be more plain.
On a related note, I did an article a while back (“Mean Girls”) on the various upcoming fiscal deadlines that Congress has to deal with this year. One of them is the upcoming sequester of funds (I did an article on that, too.)
What I find amusing is that Republicans are going nuts about the coming military cuts and the attendant job losses. An independent study recently noted that around two million jobs will be lost if those cuts go into effect. Another two million will vanish if the domestic cuts happen (though Republicans don’t seem to care about those jobs).
Notice here — Republicans are complaining that jobs will be lost if these spending cuts happen.
We’ve been told for years that the way to create jobs is by cutting federal spending. Now we’re being told, by the same people, that if spending cuts happen, jobs will be lost.
That’s another way of saying that increased federal spending creates jobs.
Republicans are busy reversing themselves on nearly everything they’ve said in the last few decades. We’ve seen them reverse themselves on the individual mandate (they used to be for it), on deficits (they used to say deficits don’t matter), and now on whether spending creates jobs. They’re even voting against tax cuts.
At times like this I fear for the nation.
The last time politics in this country were this out of control, a lot of people died.
On another thread, we’ve touched on the slowness of the recovery from the Bush Great Recession. Republicans have, perhaps inadvertently, revealed one of the biggest reasons. They’ve admitted that government spending creates jobs. Yet Republicans at all levels (city, state, federal) have been slashing government spending. It’s almost as if they’ve been slowing the recovery on purpose.
Nearly a million public sector jobs have been lost in the last three years due to spending cuts. If those losses hadn’t happened, the unemployment rate would now be under 7%.
Any discussion of why the recovery isn’t faster than it is has to include the Republican-induced spending cuts.
Floor vote in the House coming up on Thursday.
Bill to be introduced by Ways and Means committee ranking member Sandor Levin, (D-MI.)
Assuming neither side blinks before the election, the House and
Senate-passed bills will serve as potential models for how Congress will
proceed in the event of a Romney or Obama victory, respectively. Levin
suggested he’s well aware of the political dynamic.
“As long as this is a stranglehold on action, it’s hard to know how
we resolve anything else,” Levin said. “I wish I could be more
optimistic.”
AW,
In every generation there is a point where people say “if this goes on …” (Actually, that was the title of a Robert Heinlein story published in 1940 in which he imagined an America in the grips of a fundamental “Christianist” religious tyranny in which the “prophet” practiced polygamy. It was never said, in the novel, where the movement originated, but I’ve always got a sense of Mormonism off it.)
sc,
And do you remember the year of that presidential election?
Max,
I’m old, but not that old. I could only relate what I’ve read — and you all can do that as well as could I. The first election I ever noticed was the 1964 election. Our family was solidly behind Goldwater.
I’ll admit to a certain glee in playing Devil’s Advocate with my conservative family members who were so adamant that government spending kills jobs but are now vociferously arguing that we must have government spending to save jobs.
“Wait, I thought you said that government spending killed jobs?”
“Of course it does!”
“But, now you’re arguing that we need more government spending to save jobs?”
“Military spending doesn’t count as government spending.”
“Are you saying that military spending isn’t part of the federal budget?”
“No, it’s not like that!”
“Then, what budget does military spending come from?“
etc.
Hehehe.
@shortchain
I think Max was asking what year the election takes place in Heinlein’s 1940 story that you referenced. I’m assuming you meant If This Goes On, with First Prophet Nehemiah Scudder getting elected President in…
wait for it…
2012.
Lawrence O’Donnell is strongly pushing his “Off the Cliff” plan,
Damnit, I got excited when I heard Crazy Larry was pushing a jumping off the cliff plan. But I guess it just involves taxes.
Ah, more food fights at the DC freakshow. Place your bets on which team “wins” this round and hoists the coveted “Winning the weekly PR battle while accomplishing nothing” trophy.
@mclever,
On a similar note, I chuckle every time I hear an elected Republican say that government cannot create jobs. As Lawrence O’Donnell points out, these are people with government jobs.
They are also people with government healthcare.
@mclever,
That crossed my mind, but Max’s question was open to interpretation.
So Heinlein knew about the Mayan End of Days prophecy! er a Mormon running for president in 2012. Kinda like Mencken’s 1920 quote:
As democracy is perfected, the office of president represents, more and more closely, the inner soul of the people. On some great and glorious day the plain folks of the land will reach their heart’s desire at last and the White House will be adorned by a downright moron.
Predicting Bush er Harding being appointed/elected president.
As always America survives despite itself, but ignore the Mayans at your own risk!
carry on
And in case anyone suspects Romney doesn’t intend to give Special Treatment to himself and his über-wealthy friends, we’ve got analysis available of the Romney tax plan. It’s open class warfare, intended to put money in his own pocket and the pockets of others in the yachting class. Bottom line: your taxes go up, unless you make an absurd amount of money. Then they go way down. And on top of that, it doesn’t work.