Since I am a freelancer, my wife and I already pay more annually in federal taxes than I earned in my first job out of college. Were the Bush tax cuts allowed to expire -- the one middle-class ones that politicians on both sides of the debate appear to agree on -- we would owe Uncle Sam several thousand dollars a year more, so we'd like to see them be extended. The 2 percentage point reduction in the payroll tax would even give me an unofficial "raise." Moreover, we are happy to see that the president negotiated a 13-month extension of unemployment benefits, since my wife was laid off in July.
Overall, it feels to me like a good deal for my household, and it turns out that I'm far from alone.
According to a recent Gallup Poll, 66% of Americans backed extending the tax cuts and extending jobless benefits. Not surprisingly, the deal was supported by 85% of Republicans. The deal also was backed by majorities of independents and Democrats as well. Apparently, most people are ignoring those Democrats in Congress and progressive pundits who accuse President Obama of having caved to Republican demands. That notion is ridiculous, given that the president got many of his own priorities into the agreement, but it seems to have driven House Democrats to reject the compromise in a nonbinding vote Thursday. There are now serious questions about whether the compromise bill will make it to a vote in the House before the next Congress is seated.
Making the Perfect the Enemy of the Good
The American people elect people to get stuff done, which is exactly what President Obama did. Sticking to his guns against tax cuts for the wealthy would have likely ensured no legislation at all, throwing millions of people off the unemployment rolls and raising taxes on everyone in the middle of a recession. And while a majority of Americans polled say they would prefer to let taxes rise on the rich, Americans also hate what they consider to be pointless political debates. In this case, partisan ideology gave way to economic practicality. People like myself care most about improving our financial situation. Who gets the credit is immaterial, though I believe that Obama has done plenty right.
Obama deserves credit for saving the Estate Tax (called by critics the "Death Tax") from extinction. Under the terms of the deal, the levy, which was suspended this year, would return at a rate of 35% in 2011, down from 55% in 2009. The tax will exempt the first $5 million of the estate of individuals, up from the $1 million level previously. Though I am hardly wealthy, many of my friends could easily have wound up paying the tax, as would a fair number of small business owners. Raising the threshold seems fair. Eliminating the Estate Tax entirely, a move opposed by many super-wealthy individuals, among them Warren Buffett, would have been fiscally irresponsible at at time when the federal deficit tops $1 trillion.
"Congress should approve this package -- its rejection will likely lead to a more problematic package that does less for middle- and low-income workers and less for the economy," writes Robert Greenstein, executive director of the liberal Center on Budget and Policy Priorities. "Then, in 2012, when the economy should be stronger, the President should make clear he will veto any legislation to extend either the high-end tax cuts or the weakening of the estate tax beyond the estate-tax parameters that were in place in 2009, and he should take that case to the country."
Sen. Sanders, MoveOn.org and the rest of the uncompromising progressives can make a stand in the name of ideological purity, but they aren't speaking for people like me, who would prefer to see an imperfect deal that helps most of the country now, rather than no deal at all. I admit I'm conflicted, though, because this compromise, if enacted, will add hundreds of billions to the deficit. That's something we really can't afford to do.
Then again, we can't afford not to do it either.