For several years, I have assumed that my taxes, and those of many millions of Americans, would skyrocket in 2011. So when I first learned the terms of the compromise between the President and the Republican leadership–most of the Bush-era tax rates made permanent, tax rates for upper-income taxpayers extended for two years, a one-year two percent payroll tax holiday, long a favorite conservative policy–I thought, and wrote, that it was an excellent deal for conservatives.
Since then, however, the deal has steadily worsened, to the point where even the Associated Press says that “Add-ons turn tax cut bill into ‘Christmas tree.'” The AP itemizes some of the ornaments on the tree:
The tax deal, reached behind the scenes and still informal, now includes ethanol subsidies for rural folks, commuter tax breaks for their cousins in the cities and suburbs and wind and solar grants for the environmentalists–all aimed at winning votes, particularly from reluctant Democrats. …
Almost $5 billion in subsidies for corn-based ethanol and a continuing tariff to protect against ethanol imports were wrapped up and placed on the tree Thursday night for farm-state lawmakers and agribusiness lobbyists. Environmentalists won more grants for developers of renewable energy, like wind and solar.
For urban lawmakers, there’s a continuation of about-to-expire tax breaks that could save commuters who use mass transit about $1,000 a year. Other popular tax provisions aimed at increasing production of hybrid automobiles, biodiesel fuel, coal and energy-efficient household appliances would be extended through the end of 2011 under the new add-ons.
The package also includes an extension of two Gulf Coast tax incentive programs enacted after Hurricane Katrina to spur economic development in Mississippi, Louisiana and Alabama.
President Obama correctly noted yesterday that the Democrats shouldn’t be up in arms because the bill hasn’t actually been written yet. That’s true, and, in traditional Washington fashion, it is a safe prediction that the bill once reduced to writing will include any number of provisions that were not part of the original deal. I don’t pretend to know how the politics of a fallen-apart agreement might flop, but if the Democrats really do turn the original agreement in principle into a Christmas tree, all bets are off. I, for one, would certainly re-think my original support.
A Washington insider told me today that he thinks the GOP should have held out for a better deal:
The serious Dems in town — including the ones at the WH — know that they’ll get a much worse deal after GOP takes over in January — with fewer D senators and a Boehner House, a retroactive extension of the cuts would pass that probably didn’t include as generous unemployment provisions. The liberals just need a little longer to vent their frustrations…
I wouldn’t say it publicly, but R’s should have held out longer — they had Obama right where they wanted him. He wouldn’t have, couldn’t have, let the middle class tax cuts expire. The negotiators gave away more than they needed to…and now the debt will be even bigger, which should be a bigger disappointment than it is.
I still stand behind the original agreement as reported, but if the legislation as written by the Dems is, in fact, a Christmas tree, then forget it. Let’s take our chances in January.