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Fight Over Tax Cuts Continues

posted on December 10, 2010


Hello, I'm Mark Pearson. The holiday season can be a cheerful time for many, except for the millions of Americans still on the unemployment line. And this week's new government data provides only a sliver of hope.

The number of Americans filing for their first week of unemployment benefits fell last week. According to the Labor Department, initial jobless claims fell to 421,000 in the week ending Dec. 4.

A floundering domestic job market hasn't quelled the world's thirst for energy.

Global oil demand hit 88.3 million barrels a day in the third quarter of 2010, according to preliminary numbers released this week. The record-setting consumption figures signal strong gasoline demand in India and China.

The Dow Jones Industrials ended a modest trading week as investors were frozen in place by pending tax policies in Washington.

As the clock ticks down to midnight on December 31, the urgency at the White House over expiring tax cuts will only grow. Buoyed by warnings from his economic advisors of further financial calamity unless a compromise is reached, President Obama set the Congressional table for a contentious holiday debate.

Fight Over Tax Cuts Continues President Barack Obama took to the airwaves this week to defend a White House tax deal with Republican leadership. Obama said compromise was necessary to prevent an automatic tax increase that would hit Americans at nearly every income level, and to save millions of the unemployed from losing jobless benefits.

President Barack Obama: "The middle class tax cuts were being held hostage to high-end tax cuts. I think it's tempting not to negotiate with hostage takers, unless the hostage gets harmed. The hostage is the American people and I am not willing to see them get harmed."

But on Thursday, House Democrats voted to reject the tax deal in its current form. It was unclear how significantly the package might need to be changed.

By voice vote in a closed caucus meeting, Democrats passed a resolution saying the tax package should not come to the House floor for consideration as written, even though no formal House bill has been drafted.

The current deal gives Republicans a two-year extension of Bush-era tax cuts for Americans earning more than $250,000 and a reduction of estate taxes on their heirs. In exchange, the President gets the same extension of tax cuts for the middle class and an extension of long-term unemployment benefits, both set to expire in less than a month.

House Democratic leaders say the tax package Obama negotiated with Republican leaders is tilted too much in favor of the rich.

Rep. Chris Van Hollen, D-Maryland:"In the form that it was negotiated it is not acceptable to the House Democratic Caucus. It's as simple as that."

Rep. Lloyd Doggett, D-Texas:"We were told yesterday by the Vice President this is a take it or leave it deal, we're saying, "leave it."

Meanwhile, the deal seems to have support among GOP lawmakers and business groups.

Sen. Mitch McConnell, R-Kentucky: "The vast majority of my members will be supporting it."

The tax cut proposal totals $900 billion at a time of mounting federal deficits. It would preserve the Bush-era tax cuts for all income levels for the next two years. Households making between $40,000 and $50,000 would get an average tax cut of $810 next year, according to an analysis by the Tax Policy Center, a Washington research group. Households making between $100,000 and $200,000 would get an average tax cut of $2,162. In addition, the deal would extend jobless benefits for 13 months and cut Social Security payroll taxes by two percent for one year.

One of the biggest sticking points among House Democrats is the lower estate tax. If the Bush tax cuts expire on December 31 without intervention, the federal estate tax would rise from zero this year to 55 percent on estates of more than $1 million in 2011. But, the deal reached this week gives each American a $5 million exemption from the estate tax --couples would receive a $10 million exemption, and the top rate would be 35 percent.

While details are still being worked out, the ethanol and biodiesel tax credits would get a temporary extension, through 2011, as part of the deal as well.

The retroactive biodiesel credit of $1 a gallon expired last year and farm-state lawmakers have blamed the expiration for the idling of biodiesel plants. The ethanol blenders credit, at 45 cents per gallon, is scheduled to expire at the end of the year.

Critics have argued the renewable energy credits are wasteful. However, farm-state lawmakers and ethanol lobbyists have argued the subsidies help lessen dependence on foreign oil and support thousands of jobs.

Senator Charles Grassley, R-Iowa: "I think it's important we do this because we don't want to import more oil by producing less renewable fuels. We want to make sure the good jobs that come from ethanol are continued, particularly in a time of high unemployment."


Tags: Barack Obama Congress George W. Bush government news