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.)
- 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)