Political brinksmanship is not unusual in Washington, but rarely have the stakes been as high as they were on New Year's Eve. Americans wishing for a New Year to begin with no significant tax increases in the offing were left to wonder if they could pop the cork to celebrate such an outcome. Certainly they had to wonder why the long, tedious negotiations to avert the so-called fiscal cliff — the imposition of deep mandatory spending cuts and broad tax increases — have been so hard to conclude.
The short answer to that question is, Republicans have a hard time saying yes to fair deal.
For a party that embraces as its symbol an elephant — a long-lived giant renowned for its memory — the GOP's hang-up on keeping in place the huge Bush-era tax cuts for the superwealthy is, in one respect, an anomaly. Those Bush tax cuts, kept in place as George W. Bush's two credit-card wars doubled the national debt, were originally sold as "temporary" 10-year tax cuts. They were not supposed to be permanent, at least not for public consumption.
The "temporary" tag, of course, was always a ruse meant to hide their unaffordable long-term costs, and to shade their outlandishly disproportional benefits for the top 1 percent of earners, and especially the top one-tenth-of-the-top-one-percent. Yet those numbers soon became clear.
Between the income tax cuts for the mega-millionaire/billionaire bracket, and the bulk of the benefits this group captured in capital gains and dividend tax cuts, the super-rich — with average annual incomes of more than $27 million — got an average of nearly $350,000 a year in new tax cuts, while families in the broad middle class got Bush tax cuts of several hundred dollars. And their Wall Street investment kingpins got to define their income tax rate at the super-low 15 percent "carried interest" rate for dividends.
What those ludicrously lopsided tax cuts for the super-rich earned Republicans was a loyal legion of rich campaign donors, as their multi-million-dollar donations to the super-PACS in November's elections confirmed. Republicans' allegiance to holding on to that gilded base by keeping those undeserved high-end tax cuts in place has further warped their party's politics. Their guns-god-gays-and-anti-women's-rights issues help fill up their tent, but it is their allegiance to high-end tax cuts that keeps their campaign coffers brimming.
That explains why Republicans have pushed so hard to cut Social Security, Medicare and Medicaid, which spends as much for nursing home care for the middle class as for health care for the poor, when they should have been willing to let the unfair, Bush-era high-end tax cuts expire. It is telling commentary on their allegiance to the super-wealthy that they waited until Monday afternoon, just hours away from the New Year's Day deadline, to even consider a compromise deal to let the bottom 98 percent of Americans avoid an income tax hike.
The tentative deal should not have been hard to arrange. If accepted, it would permanently reinstate a more reasonable tax structure for the top one percent of earners. It would raise the tax rate on income of $400,000 for single people and $450,000 for couples from 35 percent to 39.6 percent, and raise dividend and capital gains taxes from 15 percent to 20 percent. Other exemptions would be phased out for those with incomes of $250,000 for single people and $300,000 for couples, meeting President Obama's pledge to raise tax rates for the top 2 percent. Estate taxes of 40 percent, a compromise figure, would apply to estates valued at over $5 million. Those changes would generate $600 billion toward deficit reduction over 10 years, or about 85 percent of Obama's goal from tax changes on high incomes.
In addition, the tentative deal would extend tax cuts passed by the Obama administration for middle-class and working-poor taxpayers for five years.
The proposed deal, to be sure, failed to provide a Republican template for other spending cuts to match Obama's, or to settle paycheck tax relief and debt ceiling issues. And it still had to be approved by both chambers of Congress. But as this was written, approval of the income tax fix seemed likely, if only because a portion of Republicans did not want to be branded as the party that held middle-class tax cuts hostage to their allegiance to the super-rich. That should have been a no-brainer from the beginning.