Comparison of the tax proposals – we have graphs!

Posted by AzBlueMeanie:

Michael Linden, Associate Director of Tax and Budget Policy at the Center for American Progress Action Fund, posted this analysis at the Wonk Room » Comparing Priorities In The Tax Deal:

The White House has agreed with Congressional Republicans on a “framework” for extending the soon-to-expire Bush tax cuts. In exchange for a two-year extension of all the tax cuts — including those for households making more than $250,000 per year — the deal includes a 13 month extension of unemployment benefits, a two percent cut in the employee side of the payroll tax for one year, and a retention of some expanded tax credits included in the 2009 Recovery Act.

To get Republicans on board, Obama also agreed to a two-year cut in the estate tax (which he characterized in a statement as a “more generous treatment of the estate tax than I think is wise or warranted”).

So, in order to get desperately needed help for the long-term unemployed and to provide the middle-class with tax relief in a weak economy, Obama agreed to tax cuts for a small, wealthy portion of the population that the Republicans were willing to go to the mat for, even if it meant that everyone’s taxes went up if the Bush tax cuts expired.

For comparison’s sake, here is a chart detailing both the number of people (in millions) who benefit from each side’s priorities, as well as the total cost (in billions). Obama’s components of the tax deal (extended unemployment benefits, the payroll tax cut, and the extended credits) will cost $214 billion to aid 156 million people. The Republicans priorities (extending the Bush tax cuts for the rich and cutting the estate tax), meanwhile, will cost $133 billion, but only benefit roughly 4.8 million people.

Excluded from this analysis is extension of the broad-based Bush tax cuts, on which everyone agreed. The total package will cost about $900 billion over the next two years, entirely financed through deficit spending.

As CAPAF’s Michael Linden and Michael Ettlinger noted, the various components of the tax deal (outside of the broad Bush tax cuts) will save or create about 2.2 million jobs. If, however, the GOP’s priorities were discarded in favor of further cuts in the payroll tax, that number would increase to 2.7 million, an addition of 500,000 jobs.

Of course, the lost revenue of the bonus tax cuts and the estate tax cut could also have gone towards reducing the deficit, which Republicans spend so much time complaining about, while simultaneously expanding [the federal deficit] by cutting taxes for the rich.

CAVEAT: The problem I have with all of the economic analysis I have read regarding the stimulative effect of the Obama-McConnell tax compromise and projected job creation is this: Republicans not only will take over Congress for the next two years, Republicans also captured a majority of state legislatures in November. Many of those states, including Arizona, are in deep financial crisis. The Republican ethos of defunding government and laying off public workers I believe will more than offset and stimulative effect for job creation in the Obama-McConnell tax compromise. I have not yet seen an economic analysis that factors this political reality into consideration, probably because it is presently unquantifiable: nobody really knows just how far radical Republicans will go with budget cuts and public employee layoffs. Nonetheless, this political reality must be factored into any economic analysis to be credible. Shorter version: its just numbers, nobody really knows.

Ezra Klein returns with the "snowman" graph, now updated to compare the original Obama plan, the original Republican plan and the compromise. Why liberals don't like the tax cut deal — in graphs:

All groups are getting more under this framework, but on an individual level, the wealthy are getting much, much more. The question, at the end of the day, is whether stopping them from getting it is worth cutting benefits for the unemployed, and tax cuts for middle-income Americans, and the Earned Income Tax Credit. I don't think it is, and that's particularly true because it's not, to me, about the size of the transfer so much as the possibility for stimulus. But given the level of inequality in this country, and the potential that deficit reduction deals won't be worked out by a progressive congress, I see how you could come down on the other side:

Earlier today the House Democratic Caucus voted to try to block the tax-cut deal that President Obama struck with Republicans, a move that does not kill the legislation but shows that its opponents are digging in. House Democrats seek changes to Obama's tax-cut deal:

Rank-and-file Democrats passed a nonbinding resolution, introduced by Rep. Peter A. DeFazio (D-Ore.), by voice vote that said the tax package should not come to the House floor for consideration.

And in her first explicit declaration of dissatisfaction since the tax deal was cut, House Speaker Nancy Pelosi (D-Calif.) suggested that she would not bring the package to the floor in its current form.

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At one point during the meeting on the vote, House Democrats erupted in a chant of "Just say no!"

The far-right Tea Party also opposes the Obama-McConnell compromise. Tea Party Patriots Reject Tax Cut Deal, Call For It To Be Destroyed | TPMDC. Tea party leader and conservative firebrand Sen. Jim DeMint, R-S.C., said Tuesday that he will filibuster the tax cut compromise worked out by President Obama and Republican leaders this week. DeMint Says He Will Filibuster Tax Compromise. Sen. Bernie Sanders (I-VT) also threatened to filibuster the tax cut compromise.

Looks like President Obama has finally achieved his quixotic quest for "bipartisanship" – both the left and the right have come together to oppose his tax cut compromise. Kumbaya! Now can we finally put an end to his chasing this mythical unicorn?