Congressional Democrats and Republicans may not agree on much, but this election year both parties acknowledge that lawmakers must act to keep the Bush-era tax cuts from expiring at the end of the year.
Of course, the two parties have vastly different plans for how to actually extend those tax cuts. And while the Democratic-controlled Senate may be tackling that issue on Wednesday, as it prepares to hold a procedural vote to consider a bill that would allow the Bush tax cuts expire for incomes above $250,000, the measure is already expected to fail, as Republicans champion their own policy. The GOP plan, which will be offered as an amendment to the Democratic bill, would extend those tax cuts for all income brackets, while simultaneously allowing certain tax breaks to expire for millions of the poorest Americans.
But even if the Democratic bill passes (which it might: On Wednesday morning the Senate Minority Leader, Republican Mitch McConnell, agreed to a simple majority vote on the Senate plans) it has little chance of becoming law because revenue-raising measures are technically required to originate in the House. House Republicans are already planning to vote next week on a plan similar to the Senate GOP proposal, which would similarly extend all of the Bush tax cuts for another year.
Preserving those tax cuts for the nation's wealthiest households next year would cost about $80 billion more than the Democratic plan, according to official estimates by the nonpartisan Joint Committee on Taxation, although both measures are expected to increase the federal budget deficit. All in all, the Republican plan would extend tax cuts for 2.7 million affluent families while allowing tax breaks to expire for 13 million low-income Americans. A permanent extension of those cuts would slash taxes for households with incomes above $1 million by $74,505 next year; the Democratic proposal would cut taxes for those same household's by $7,055.
Where would those extra savings come from under the GOP plan? In part, by letting about $11.1 billion worth of tax breaks for low- and moderate-income Americans (usually families earning less than $50,000 per year) expire. About 13 million working families with 26 million children stand to lose from their expiration, according to an analysis by the left-leaning Citizens for Tax Justice.
Those tax breaks, intended for working families with children, were enacted in 2009 and later extended through 2012. Under the Republican-backed proposal, beginning in 2013 only families earning more than $13,300 would be eligible for any tax credit, a steep increase from the $3,000 minimum currently in place. Extending the current provision would save 8.9 million working families an average of $854 a year, according to CTJ.
The Republican plan also reduces the Earned Income Tax Credit -- a credit for people who work, but have low wages -- for some married couples and reverse 2009 expansions that provide larger EITC cuts for families with 3 or more children. The average family would see their taxes increase by about $530 annually under the GOP plan.
Ahead of Wednesday's vote, a group of the 87 highest-earning Americans from across the country sent a letter to Congress urging lawmakers to allow the Bush tax cuts expire for household's with yearly incomes above $250,000. The letter, signed by the likes of Kaplan Group CEO Woody Kaplan and Ben and Jerry's co-founder Ben Cohen, argues the nation cannot afford tax breaks the signatories say they do not need.
Congress faces a choice. It can ask the wealthiest 2 percent to limit ourselves to the tax cuts other Americans get -- those on the portions of our incomes under $250,000 -- so that it can shrink the deficit while continuing to invest in education, infrastructure, clean energy, health care, and rebuilding a strong middle class, the letter states. Or it can slash investments vital to our nation's future in order to be even more generous to those of us who need it the least. That shouldn't be a hard choice.