American Action Network Ad Blames Rep. Critz For Republicans' Tax Folly
Rep. Mark Critz (D-PA) is subject to the American Action Network's distorting tactics in a new political ad. The ad primarily hits Critz over the impending expiration of the Bush-era tax cuts, suggesting that he will be responsible for raising taxes on small businesses and for failing to extend the child tax credits. In fact, Democrats have pledged to act on the tax cuts when Congress resumes session in November, and it was Republicans who originally wrote the tax hikes into law. Moreover, Democrats' proposals would affect only 3 percent of small businesses and would actually make the child tax credits permanent.
American Action Network: "Devastating Blow"
Congressman Mark Critz. We know he opposes repealing Obamacare, which means $500 billion in new job-killing taxes. Now Congressman Critz wants to raise taxes on small businesses, a devastating blow to a weak economy. Congressman Critz even voted to delay extending child tax credits for families. Tell Congressman Mark Critz to vote to extend the tax cuts in November. American Action Network is responsible for the content of this advertising.
Democrats "Determined To Act" On Tax Cuts When Congress Resumes
Congress Resumes Session On November 15. According to records of House proceedings, at 1:04 AM on September 29, 2010, "[t]he House adjourned pursuant to H. Con. Res. 321. The next meeting is scheduled for 2:00 p.m. on November 15, 2010." [Clerk.House.gov, accessed 10/7/10]
- 210 Members Of Congress Voted To Adjourn. Kritz was one of 210 members of Congress who voted "yea" on the September 29 Adjournment Resolution. [H. Con. Res. 321, Vote #546, 9/29/10]
Axelrod: Democrats Determined To Act On Tax Cuts Before January Expiration. From the Washington Post:
The White House and congressional Democrats conceded Sunday that they will probably wait until after the Nov. 2 elections to vote on a plan to prevent tax rates from rising next year for the vast majority of Americans.
"I doubt that we will" stage a vote before adjourning next week, House Majority Leader Steny H. Hoyer (D-Md.) said. Speaking on the Sunday talk shows, he and White House senior adviser David Axelrod added that Democrats are nonetheless determined to act before the tax cuts expire in January. [Washington Post, 9/26/10]
Washington Post: "Both Parties Expect The Tax Cuts Will Be Extended." From the Washington Post:
Republicans would not compromise on any of the issues over the past two weeks and attacked Democrats for ending the session without voting on the tax cuts. House Republicans even tried to block the formal resolution that allows the chamber to adjourn, leading to an unusual 210-209 vote in which 39 Democrats joined nearly all the Republicans in opposition.
Tax rates will increase next year if Congress does not address the issue, although both parties expect the tax cuts to be extended when members return after the elections. [Washington Post, 9/30/10]
President Obama And Leading Democrats Favor Extending Tax Cuts For 97% Of Americans
PolitiFact: Dems Consistently Say Only Tax Cuts For Wealthiest Will Be Allowed To Expire. According to the non-partisan PolitiFact.com, in their analysis of an allegation from Rep. Mike Pence that Democrats want all tax brackets to rise:
Do Democrats want every tax bracket to rise, as Pence suggests? In a word, no.
For many months, Democratic officials have consistently said that they intend to let only the tax cuts for the wealthiest individuals lapse. The cutoff they usually suggest is $200,000 for individuals and $250,000 for married couples filing jointly. President Obama campaigned on just such a plan, and we've logged those promises into our Obameter campaign promises database.
Pence is right that every tax bracket will go up if the law is not extended. Still, we think the claim that Democrats don't want to extend the law is inaccurate. While the legislative drafting is still in process, the Democratic majority in Congress has made clear that it plans to extend tax cuts for all but the top couple percentage points of the income distribution. So it's highly misleading for him to say that Democrats actually want to see all the bill's cuts expire. Indeed, Pence's comment verges on a scare tactic.
[PolitiFact.com, 7/22/10, emphasis original]
Reuters: "Two To Three Percent Of Americans" Are Affected By Democrats' Proposals. According to Reuters: "Lawmakers are mulling the renewal of tax cuts enacted in 2001 and 2003 under former president George W. Bush that expire at the end of this year. President Barack Obama and his Democratic allies in Congress want to extend the lower rates for individuals earning less than $200,000 or couples making less than $250,000. About two to three percent of Americans fit into the upper income categories." [Reuters, 7/21/10]
President Obama's FY2011 Budget Calls For Extending Bush Tax Cuts For Families Making Less Than $250,000 Per Year. As Market Watch reported in February: "Facing a gaping deficit but aiming to spur job creation at the same time, President Barack Obama's fiscal year 2011 budget would hit top earners, oil companies and others while giving tax breaks to small businesses to help them hire new workers. ... Obama wants tax breaks proposed by President George W. Bush to expire this year. His budget would eliminate tax breaks on those making more than $250,000 a year, a move almost certain to be opposed by Republicans and perhaps some Democrats as the economy crawls out of the recession. 'We extend middle-class tax cuts in this budget,' Obama said Monday at the White House, but 'we will not continue costly tax cuts for oil companies, investment fund managers, and those making over $250,000 a year. We just can't afford it.'" [Market Watch, 2/1/10]
Speaker Pelosi: High-End Tax Cuts Should End. According to The Hill: "House Speaker Nancy Pelosi (D-Calif.) on Thursday rejected extending tax cuts for the wealthiest tax bracket that are set to expire at the end of the year. Pelosi took off the table a short-term extension of those cuts floated by some lawmakers in her own party. 'No,' the speaker said at her weekly press conference when asked if the cuts for the highest bracket should be extended. 'Our position has been that we support middle-class tax cuts. ... I believe the high-end tax cuts did not create any jobs, increased the deficit and should be repealed,' she said." [The Hill, 7/22/10, emphasis added]
Treasury Secretary Geithner: We Will Extend Middle- And Lower-Income Provisions Of Bush Tax Cuts. According to the Wall Street Journal: "The Obama administration will allow tax cuts for the wealthiest Americans to expire on schedule, Treasury Secretary Timothy Geithner said Thursday, setting up a clash with Republicans and a small but vocal group of Democrats who want to delay the looming tax increases. Mr. Geithner said the White House would allow taxes on top earners to increase in 2011 as part of an effort to bring down the U.S. budget deficit. He said the White House plans to extend expiring tax cuts for middle- and lower-income Americans, and expects to undertake a broader revision of the tax code next year. 'We believe it is appropriate to let those tax cuts that go to the most fortunate expire,' Mr. Geithner said at a breakfast with reporters." [Wall Street Journal, 7/23/10, emphasis added]
New York Times: Obama Plan Leaves Much Of The Bush Tax Cuts In Place. The New York Times prepared an infographic showing where President Obama seeks to change Bush-era tax law, and where he intends to leave it unchanged:
[New York Times, 7/25/10]
Expiration Of Bush Tax Cuts Would Affect Just 3 Percent Of Small Business Owners
PolitiFact: "Only 3 Percent" Of Taxpayers With Business Income Would Be Affected By The Democratic Proposal. According to the nonpartisan PolitiFact.com:
What impact would raising taxes on the top two income brackets have on small businesses? According to the Joint Committee on Taxation, the same source that Neugebauer cited in his blog post, "In 2011 just under 750,000 taxpayers with net positive business income...will have marginal rates of 36 or 39.6 percent under the president's proposal." That translates into only 3 percent of all taxpayers with positive business income. Yes, you read that right. Only 3 percent of all taxpayers who reported having positive business income will see their taxes go up under the proposed Democratic initiative.
We also consulted experts at the Tax Policy Center, a joint project from the liberal-to-centrist-leaning Brookings Institute and the liberal Urban Institute. James Nunns, a researcher at the Urban Institute, directed us to the center's July 2010 analysis of the distribution of business income by statutory marginal rate for the year 2011. The report assumes that Congress goes through with its plan to only increase taxes on individuals making over $200,000 and couples with over $250,000 in income. It turns out, 774,000 tax filers in the top two brackets --the only ones that will see a tax increase -- will have positive business income. Divide that by the roughly 36 million tax filers who report business income (positive or negative), and you get 2.1 percent. In other words, still assuming that having any amount of income from a small business means that you are actually a business owner (big assumption), only about 2.1 percent of businesses will face the prospect of higher taxes based on the Democratic proposal. [PolitiFact.com, 8/4/10, emphasis added]
PolitiFact: Business Income Reported On Tax Returns Often Comes From Book Royalties, Speaking Fees, And Other Non-Job-Creating Sources. According to the non-partisan PolitiFact.com:
The U.S. Treasury Department found in 2007 that many of the wealthiest tax filers report some type of non-wage income, such as income from a sole proprietorship, a partnership or an S corporation...
Does this mean that all those wealthy taxpayers were small business owners? Probably not. This kind of income could be reported from anyone who earned money from a source other than a regular job, such as consulting or public speaking. It could also be reported by those who make most of their income from partnerships, such as law firms and medical practices. And it could include investors who have little involvement in the day-to-day operations of a company. [PolitiFact.com, 7/25/10, emphasis added]
PolitiFact: 2/3 Of Tax Filers In Top Two Brackets Report Business Income As Less Than 50% Of Their Income. According to the non-partisan PolitiFact.com:
It's impossible to know how many of these high earners are what most people think of as small business owners. One indication, however, might be if these wealthy taxpayers reported that most of their income was from this business-type income. The nonpartisan Tax Policy Center analyzed IRS data in March 2009, looking to see how many wealthy tax filers could say that half of their income or more came from business income. The center found that, among the wealthiest filers -- the top 1 percent -- only 25 percent earned more than half their income from business-type income. The percentages for non-wage income were even smaller among taxpayers earning less. (Editor's note: After we initially published this item, the Tax Policy Center released a new analysis looking at business income by tax bracket. They found that in the top bracket, only 32.5 percent earned more than half their income that way.) [PolitiFact.com, 7/25/10, emphasis added, parentheses original]
Obama And Democrats — But Not Republicans— Propose To Make Child Tax Credit Permanent
The 2001 Bush Tax Cut Law Called For The Child Tax Credit To Be Cut In Half After 2010. In the "Child Tax Credit" section of their July 2010 report, the Joint Committee on Taxation described the Child Tax Credit provisions of the 2001 Bush tax cuts: "An individual may claim a tax credit for each qualifying child under the age of 17. The maximum amount of the credit per child is $1,000 through 2010, and $500 thereafter." [Joint Committee on Taxation, 7/12/10]
President Obama's Proposal Restores The Child Tax Credit To $1,000 Per Child. According to the bipartisan Joint Committee on Taxation: "The proposal permanently extends the $1,000 child tax credit and allows the child tax credit against the individual's regular income tax and AMT. The proposal also extends the EGTRRA repeal of a prior-law provision that reduced the refundable child credit by the amount of the AMT. The proposal permanently extends the earned income formula for determining the refundable child credit, with the earned income threshold of $3,000, and stops indexation for inflation of the $3,000 earnings threshold. Finally, the proposal permanently extends the rule that the refundable portion of the child tax credit does not constitute income and shall not be treated as resources for purposes of determining eligibility or the amount or nature of benefits or assistance under any Federal program or any State or local program financed with Federal funds... For years after 2010, this proposal doubles the child tax credit (from $500 to $1,000) to provide additional tax relief to families to help offset the costs of raising a child." [Joint Committee on Taxation, 7/12/10, emphasis added]
2011 Budget Proposes To Keep Child Tax Credit. From the Tax Policy Center: "Taxpayers can claim a child tax credit (CTC) of up to $1,000 per child under age 17. The credit is reduced by 5 percent of adjusted gross income over $110,000 for married couples ($75,000 for single parents). If the credit exceeds taxes owed, taxpayers can receive some or all of the balance as a refund, known as the additional child tax credit (ACTC) or refundable CTC. The ACTC is limited to 15 percent of earnings above a threshold that is indexed to inflation; the threshold is temporarily reduced to $3,000 in 2009 and 2010, and the 2011 budget proposes to continue this practice throughout the budget window. Because the income range over which the ACTC phases in overlaps at least part of the range over which the earned income tax credit (EITC) phases out, the CTC partly offsets the high marginal tax rates associated with that phase-out." [Tax Policy Center, accessed 10/24/10, emphasis added]
Senate Republicans' Bill Would Not Make Child Tax Credit Permanent. From Citizens for Tax Justice: "Senate Republicans have introduced a bill (S. 3773) to make permanent the income tax cuts enacted during the Bush administration for all taxpayers and to repeal most of the federal tax on the estates of millionaires. This bill would not make permanent the expansions of the Child Tax Credit and Earned Income Tax Credit included in the recovery act." [Citizens for Tax Justice, 9/17/10]
Cutting Taxes For The Wealthy Does Little To Stimulate The Economy
Bloomberg News: "Give The Wealthiest Americans A Tax Cut And History Suggests They Will Save The Money Rather Than Spend It." According to Bloomberg News: "Give the wealthiest Americans a tax cut and history suggests they will save the money rather than spend it. Tax cuts in 2001 and 2003 under President George W. Bush were followed by increases in the saving rate among the rich, according to data from Moody's Analytics Inc. When taxes were raised under Bill Clinton, the saving rate fell. The findings may weaken arguments by Republicans and some Democrats in Congress who say allowing the Bush-era tax cuts for the wealthiest Americans to lapse will prompt them to reduce their spending, harming the economy. President Barack Obama wants to extend the cuts for individuals earning less than $200,000 and couples earning less than $250,000 while ending them for those who earn more." [Bloomberg News, 9/14/10]
New York Times: "Research Suggests That Tax Cuts... Have Limited Ability To Bolster The Flagging Economy." According to the New York Times: "The concept of lower taxes is so appealing to voters that many embrace them as an economic cure-all. But economic research suggests that tax cuts, though difficult for politicians to resist in election season, have limited ability to bolster the flagging economy because they are essentially a supply-side remedy for a problem caused by lack of demand. The nonpartisan Congressional Budget Office this year analyzed the short-term effects of 11 policy options and found that extending the tax cuts would be the least effective way to spur the economy and reduce unemployment. The report added that tax cuts for high earners would have the smallest 'bang for the buck,' because wealthy Americans were more likely to save their money than spend it." [New York Times, 9/11/10]
CBO: Among Eleven Proposals To Spur Economic Growth, Cutting Income Taxes Ranks Last. Below is a chart created by the Congressional Budget Office to show the "cumulative effects of policy options on employment in 2010 and 2011":
[Congressional Budget Office, 2/23/10]
Republicans Set The Stage For Tax Increase By Writing Expiration Date Into Bush Tax Cuts To Hide The True Cost Of The Cuts
Time: Congress Wrote Tax Law To Expire After 2010 Because It Made Cuts Appear Cheaper. According to Time:
Topping the list of odd features is the "sunset" provision that repeals the entire bill at the end of 2010. Budget rules require Congress to include a sunset clause in all major tax legislation, but this sunset arrives a year early--after 10 years instead of the 11 years covered by the current budget resolution. That year was shaved off to keep the total cost of the bill under $1.35 trillion. By repealing the legislation in the 10th year, Congress saved billions of dollars. Without the repeal and a few other tricks, the cost of the full 11-year plan would balloon to more than $1.8 trillion by the end of 2011, far exceeding anything the Democrats would vote for. And the cost in the second decade would reach as much as $4 trillion. Even some conservatives on Capitol Hill are dismayed by the apparent dishonesty of the early sunset. After both parties agreed to a smaller tax cut, the conference committee pulled a fast one.
[Time, 6/3/01, emphasis added]
American Enterprise Institute: Reconciliation "Ploy" To Pass Bush Tax Cuts Means They Expire After 10 Years. According to Norman Ornstein, resident scholar at AEI:
It is worth repeating why we are in this particular car heading toward the cliff. When the Bush tax cuts were on the agenda at the very beginning of his presidency, Republicans in Congress and the White House made a tactical choice to avoid giving Senate Democrats the leverage that a 60-vote hurdle can provide by employing reconciliation (yes, the same tool that those who applied it then condemned roundly when it was used for health care reform this year). It was tricky to use reconciliation for tax cuts, which increased deficits when reconciliation was specifically supposed to be used for revenue-neutral or deficit-reducing programs. But the decision was made to use it for this purpose--but not to violate the proviso that the plan would increase deficits outside the budget window of 10 years.
That meant a ploy of declaring that all the tax cuts would expire entirely after 10 years, including the absurd-on-its-face provision that estate taxes would gradually decline to zero in 2010--and then be fully restored in 2011. From the day after the tax cuts were signed into law, Republicans were campaigning to extend them, in effect admitting that the policy was built around a "never mind" ruse. To be fair, there were plenty of ruses in the health care reform reconciliation, so it is not as if one party is clean--this is legislative politics. But the charges now emanating from Republicans that the Democrats are going to be responsible for a huge tax hike is, shall we say, bemusing.
[AEI.org, 7/21/10, emphasis added]
Ezra Klein: Reconciliation Maneuver Meant "Twisting A Budget Process Meant To Reduce The Deficit." According to the Washington Post's Ezra Klein:
In order to maximize the size of the cuts, Republicans had to minimize the influence of minority Democrats on the package. So they chose to run the bill through the reconciliation process. But that posed some challenges. Budget reconciliation had never been used to increase the deficit. In fact, it specifically existed to decrease the deficit. That's why one of its rules was that you couldn't use it to increase the deficit outside the budget window. Republicans realized they could take that very literally: The budget window was 10 years. So if the tax cuts expired after 10 years, they wouldn't increase the deficit outside the budget window. They'd also have the added benefit of appearing less costly in the Congressional Budget Office's estimates, as the CBO duly scored them as expiring after 10 years, which kept the long-range budget picture from exploding.
But the plan was never to have the tax cuts expire. Instead, the idea was that people would get used to the new tax rates, and no future Congress would want to allow a big tax increase, so when the time came, either Republicans in office would extend the cuts or Republicans in the minority would hammer Democrats until they extended them. And that's where we are now: Democrats control the government, so Republicans are screaming about tax increases as a way to get Democrats to extend tax cuts.
It's really hard to know where to start with this one. It's not a tax increase passed into law by Democrats. It's a reversion to old tax rates passed into law by Republicans. It's not how law is supposed to work. It's the result of twisting a budget process meant to reduce the deficit so you could use it to massively increase the deficit.
[Washington Post, 7/19/10, emphasis added]
Health Care Reform Creates Jobs And Reduces The Deficit
Health Care Reform Will Create Up To 4 Million American Jobs In The Next Decade. According to the Center for American Progress, "Relative to baseline employment forecasts from the Employment Projections Program at the U.S. Department of Labor, we estimate that moderate medical savings from health care modernization as envisioned under the legislation now before Congress would lead to an average of 250,000 additional jobs created annually. Under the larger assumption about savings due to health care reform, 400,000 new jobs a year would be created on average." [Center for American Progress, New Jobs Through Better Health Care, January 2010]
Health Care Reform Would Create Over 8,000 Jobs In Pennsylvania. According to the Center for American Progress, "the reduction in health insurance premiums caused by health care reform would create" up to 8,288 jobs in Pennsylvania.
[Center for American Progress, 2/24/10]
CBO: Health Care Reform Package Would Reduce The Deficit By $138 Billion By 2019. According to the Congressional Budget Office: "The reconciliation proposal includes provisions related to health care and revenues, many of which would amend H.R. 3590. It also includes amendments to the Higher Education Act of 1965, which authorizes most federal programs involving postsecondary education. CBO and JCT estimate that enacting both pieces of legislation - H.R. 3590 and the reconciliation proposal - would produce a net reduction in federal deficits of $138 billion over the 2010-2019 period as result of changes in direct spending and revenue." [CBO, 3/18/10]
OMB Director: Affordable Care Act Reduces Deficits By $1.1 Trillion By 2030. According to Office of Management and former Budget Director Peter Orszag: "The bottom line remains the same: the Affordable Care Act is the largest deficit reduction package enacted in over a decade according to CBO. It will reduce deficits by more than $100 billion in the current decade and more than $1 trillion in the decade after that - and that will not change." [WhiteHouse.gov, 5/12/10, emphasis added]
CBO To GOP: Repealing Cost-Saving Provisions Of The Affordable Care Act Would Increase Deficit By $455 Billion. In a letter to Sen. Mike Crapo (R-ID), the Congressional Budget Office wrote: "Finally, you asked what the net deficit impact would be if certain provisions of PPACA and the Reconciliation Act that were estimated to generate net savings were eliminated - specifically, those which were originally estimated to generate a net reduction in mandatory outlays of $455 billion over the 2010-2019 period. The estimate of $455 billion mentioned in your letter represents the net effects of many provisions. Some of those provisions generated savings for Medicare, Medicaid, or the Children's Health Insurance Program, and some generated costs. If those provisions were repealed, CBO estimates that there would be an increase in deficits similar to its original estimate of $455 billion in net savings over that period." [CBO, 8/24/10]