How else to explain a Congress that bickers over how to fund a payroll tax cut that only deepens our national debt?
Chicago Tribune | Editorial
Welcome the W-2s and other obligatory tax documents now arriving in your mail. Preparing your 2011 return between now and this year’s April 17 due date actually may be your most pleasant encounter with the federal tax system this year. Congressional dysfunction over tax policy could be even harder on your blood pressure. And there’s the uber-crucial tax priority that, maddeningly, isn’t on official Washington’s must-do list.
The return of House and Senate members to Capitol Hill means the rest of us will be treated to a resumption of the ugly tax debate that, had our weather not been so delightful, might have spoiled December. Lawmakers now have until Feb. 29 to resolve the question they couldn’t answer before Christmas: How should the U.S. Treasury cover a payroll tax cut that a government already $15 trillion in the hole cannot afford?
As 2011 ended, Democrats were holding out for a tax increase on high earners; Republicans wanted spending cuts. There’s no evidence that positions have softened. Nor, unfortunately, is there evidence that Congress will admit the obvious, namely that continuing this costly reduction in mandatory payroll taxes causes more harm than good.
As a result, Senate Democrats still think the public is on their side, House Republicans still are spoiling for a fight, and the Obama White House has a new problem: Republicans wangled a requirement that the administration decide by late February whether to authorize the controversial Keystone pipeline from Canada through the Great Plains. Labor unions envision 20,000 jobs, environmentalists envision dangers to sparse groundwater, and the president is caught between two of his political bases.
As if all of this didn’t promise more heat than light from Washington, Congress also must decide what to do about the Bush-era tax cuts slated to expire at year’s end. That’s also when the government is scheduled to begin a $1.2 trillion diet. Remember the spending cuts triggered when the so-called congressional supercommittee couldn’t agree on even a skimpy deficit reduction plan? Expect yearlong squabbling as Capitol Hill factions compete to repeal, or to enforce, those now-mandatory cuts.
If that $1.2 trillion figure sounds familiar, it just happens to be the increase in the government’s debt ceiling that President Obama formally requested last week. This increase essentially was baked into last year’s battle over the debt ceiling, and will be difficult for Republicans to block. But they’ll use the occasion to remind voters that our federal debt continues to skyrocket. This potential for embarrassment is precisely why Obama and congressional Democrats tried so hard in 2011 for a debt ceiling deal that would halt all talk of the debt ceiling until after the 2012 general election. The Democrats couldn’t get that deal, so Republicans now have a valuable talking point.
The year’s hostilities officially begin today when Obama delivers his State of the Union address. He and his fellow Democrats will take a few swipes, Republicans will swipe back, and we’ll all go to bed with unpleasant visions of last year’s dysfunction dancing in our heads.
But wait. It gets worse. The biggest tax issue confronting this nation couldn’t get less attention if it tried:
Democrats and Republicans should be coming together, as they last did in 1986, to craft a major tax reform package. We’ve heard lawmakers from both parties praise that as a stimulus for job creation and as a way to begin containing runaway debt. Most Americans, of course, define tax reform as reducing their own burden while raising the other guy’s or gal’s. Here’s how we use the term:
Today the feds collect more than $1 trillion a year in income taxes — and give taxpayers roughly the same amount in “tax expenditures.” That’s econospeak for deductions, credits, loopholes, exclusions — all the ways by which our tax code creates incentives and rewards for politically favored groups. As we’ve noted before, these tax breaks deplete the federal treasury, penny for penny, just as much as does spending on defense or Medicaid. Exempting employer payments for health insurance premiums and other health benefits costs $131 billion a year. The home mortgage interest deduction costs $96 billion. And so on.
If Congress and the president would scale back these costly expenditures, tax rates could plummet. So say lawmakers as liberal as Sen. Dick Durbin, D-Ill., and as conservative as Sen. Tom Coburn, R-Okla. (Although Coburn wins the competition for lacerating candor: “Tax subsidies,” he says, “are socialism.”)
The point of reform would be to broaden the tax base, lower the rates and let market forces — rather than politicians — determine how individuals and companies spend their money. Given a chance, they’ll invest to gain efficiencies, profits and expansions, rather than making decisions based on what the tax code rewards or punishes. From that would come what Americans desperately need: a more predictable, more stable climate for job creation.
We hoped last fall that if the downgrade of U.S. creditworthiness had one good byproduct, it would be political unity around ambitious tax reform.
Didn’t happen.
Isn’t happening now.
Very much needs to happen in 2012.
Instead, our lawmakers are primed to fight over less substantial tax questions. Hmm. Makes us suspect that members of both parties would rather angle for position than risk offending beneficiaries of costly tax breaks in an election year.
How else to explain a Congress that bickers over how to fund a payroll tax cut that only deepens our national debt?