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Why won’t the Democrats use Reconciliation to pass their tax cuts?

Today, the Senate took two votes. The first was to extend the Bush tax cuts on income of less than $250,000 a year. The second vote was similar, but raised the income threshold to $1 million.

Since the Republicans say they will filibuster both bills, the votes were technically to limit debate and so under Senate rules required at least 60 votes, but the Democrats only got 53 votes.

Yes, the Republicans would not even compromise on tax breaks on income less than $1 million a year. Note that even people earning more than $1 million a year would have benefited from this, since the first $1 million of their income would have been taxed less. They are holding any tax breaks hostage unless they get their way completely, with no compromise possible.

What I don’t understand is why the Democrats cannot use the Reconciliation process to pass their compromise tax cuts. Indeed, Bush’s original tax cuts, both in 2001 and 2003, were passed using reconciliation because the Republicans did not have 60 votes. That is why they have an expiration. Reconciliation only requires a simple majority, and 53 votes would be more than enough. Of course, then the new tax cuts would have another expiration, but considering the deficit, that is probably a good thing.

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13 Comments

  1. mikecal85 wrote:

    It’s because we didn’t pass a budget last year. No budget, no reconciliation.

    Saturday, December 4, 2010 at 2:24 pm | Permalink
  2. Chris E wrote:

    The tax cuts are a perfect issue for the Democrats. It paints Republicans (Correctly) as a group that only looks out for the rich. Why would you want to end debate on the tax cuts quickly?

    PLUS.. most Democrats (like me) don’t want any tax cuts to continue. If Democrats argue about them forever, the tax cuts expire

    Saturday, December 4, 2010 at 2:57 pm | Permalink
  3. Iron Knee wrote:

    It is more likely that the Dems cave in and pass tax cuts for everyone. Is that what you want?

    Saturday, December 4, 2010 at 3:16 pm | Permalink
  4. christine o donnell wrote:

    They can’t do a reconciliation bill because the “point” of reconciliation is to attempt to reconcile the budget with the budget resolution (In this case H. Con. Res. 85 I believe, http://www.govtrack.us/congress/billtext.xpd?bill=hc111-85 ) which as far as I can tell does not mention ending tax cuts for the wealthy.

    Saturday, December 4, 2010 at 3:18 pm | Permalink
  5. Heather wrote:

    The system of cutting taxes only for particular groups of people and exempting higher earners from the whole process seems to me as a kind of punishment for being successful.

    Saturday, December 4, 2010 at 4:47 pm | Permalink
  6. christine o donnell wrote:

    You are correct, Heather. Let us shed a tear for those unfortunate, disadvantaged incredibly rich people. It is so sad that they may have to give up slightly more of that money they made on the backs of the proletariat, just for something trivial like the future financial solvency of their country. :’(

    Saturday, December 4, 2010 at 4:57 pm | Permalink
  7. Iron Knee wrote:

    Heavens, Heather is right! In fact, we shouldn’t make those successful rich people pay any taxes at all. It isn’t good enough that they are even richer than they were 25 years ago, and the poor are even poorer. I think only the poor should be required to pay taxes.

    I’m really glad that those lovely oil companies don’t have to pay any taxes, and in fact get a hefty check from the government so they can continue their good work.

    And we should definitely get rid of inheritance taxes, since we would just be punishing people for getting successfully born to someone rich. If we didn’t reward them, nobody would want to be born to a rich person, after all!

    Snark.

    Saturday, December 4, 2010 at 5:31 pm | Permalink
  8. Dave TN wrote:

    This time I most definitely caught your sarcasm IK, I could almost hear Pinky’s voice of Pinky and the Brain fame when you got to the “snark”. I admit there appears to be a rash of political theater here, it is not the first time over the last two years and I doubt will be the last. While I would rather see the Start treaty addressed more, the American public needs to be aware of what the GOP is beholden to and their objections and objectives lay bare. The lame duck sessions generally don’t always produce much anyway, and the next two years it appears to be more of the same so we might get a little entertainment out of them anyway.

    Saturday, December 4, 2010 at 6:26 pm | Permalink
  9. Michael wrote:

    Heather, you don’t seem to understand progressive taxation schemes, so allow me to explain. The discussion is not about exempting rich people from getting tax breaks. Under the two plans that the Dems put forward today, the rich will still get a tax break. The discussion is about extending the current tax rates for only certain tax BRACKETS.

    I’m going to make up the numbers (because I’m too lazy to look up the real rates right now), but let’s say the current rates are as follows:

    $0-$250,000 taxed at 25%
    $250,001-$1,000,000 taxed at 30%
    $1,000,001 – $10,000,000 taxed at 35%

    For simplicity, let’s assume that each bracket would go up by 2% if the tax cut for that bracket is allowed to expire.

    Take an earner of $50,000. Under the current rates, they’d pay $12,500. They’d pay the same if the tax cuts are extended for up to $250,000 or $1,000,000. If all expire, they pay $13,500.

    Now, take someone earning $1,000,000. Current taxes are $287,500. If you extend the tax cuts only for the first $250,000 (which is what the Dems want), they pay $302,500. Extend up to $1,000,000, and they pay $287,500 (the same as now). But if you let all expire, they pay $307,500. So this person still gets a tax break if any of the current rates are extended.

    Now, let’s take a $10,000,000. Currently, $3,437,500. Extend the first $250,000, they pay $3,632,500. Extend the first $1,000,000, and they pay $3,167,500. But if you let all tax cuts expire, they pay $3,637,500.

    If any of the tax cuts are extended, EVERYONE, even billionaires, will get a tax break. It’s just a question of how much you want that tax break to be in order to ensure fiscal solvency of the federal budget.

    Saturday, December 4, 2010 at 10:09 pm | Permalink
  10. Theo wrote:

    Heather,

    There are also two other issues at hand:

    First, the concept of institutional privilege and inheritance. If you look at figures of wealth spanning the last fifty years, perhaps longs, a significant portion of it was passed on through some form of inheritance. The rich aren’t “being punished for being successful” because they started at a higher platform than lower-income people. Additionally, the structure of society is such that those with large amounts of capital are given the tools to yield a return. They can invest in more large scale business models and gain more in the long run. Those from higher income families are also given greater societal advantages from the start– they have access to better education, healthcare, job opportunities because of networks, nutrition and parents who know how to operate in the structures of society. Therefore, someone who is born wealthy absorbs patterns of success and they need to overcome less hurdles than the poor. In essence, the wealthy need to take five steps forward and the lower classes need to take fifty. Progressive taxes try to equalize where each group starts so people are all given a good education, access to cheaper healthcare, etc.

    Second, it is important to keep in mind the relative value of money. The absolute dollar amount seems significantly larger, but one purpose of taxation is to equalize what is considered a ‘fair share’. The more money you have the less each individual dollar is worth. Also, as I said before, when you have more money you can invest more of it for a higher return. A 2% return on $10,000,000 is significantly higher than a 2% return on $12,000.

    Overall, society expects the rich to pay their fair share in tax dollars because A)they have more expendable income and they can afford to pay a higher portion and B) society is structured–through tax codes, investment returns and inheritance– so that the rich will continue to be successful. It’s not a punishment by any means because they already get significantly more structural benefits than lower-income people.

    Sunday, December 5, 2010 at 12:12 am | Permalink
  11. BTN wrote:

    Theo, you make greta points. Too many people look at the tax code in a fish bowl. As you go up the economic ladder, there are already increasing numbers of adavantages. I think it is only fair to balance these out.

    Inflation can also be viewed as a tax. However, while everyone pays this tax, those with assets are “reimbursed.” Assets values (real estate, stocks, etc.) tend to go up with inflation. This doesn’t help you out if you have no assets.

    Sunday, December 5, 2010 at 12:29 am | Permalink
  12. ebdoug wrote:

    My money is inherited. I’ve added to it over the years. Example of inherited wealth: Neither I nor my parents paid for my college education. My trust fund did. I in turn made sure that my children borrowed none. Think of yourself and all the people you know who finished college and were saddled with debt, thanks to Reagan and his ilk. Long haul out of debt before you can get started in life.
    Lest you think that the inherited wealth people are Republicans, find the recent article on Rachel Bunny Mellon. http://hosted.ap.org/dynamic/stories/U/US_EDWARDS_AFFAIR?SITE=AP&SECTION=HOME&TEMPLATE=DEFAULT&CTIME=2010-12-03-14-27-34 She is one with inherited wealth. She turned 100 in August. Her son and grandchildren are under investigation as to why she funded Edwards campaign. Study Richard Mellon Schaif who through the Heritage Foundation does his best to skew Wealth distribution. Then his sister did all she could to help the less fortunate.

    Sunday, December 5, 2010 at 6:58 am | Permalink
  13. Name: Mark wrote:

    Like we didn’t see this coming? And I am sure that none of us will be surprised when all Bush era tax cuts are extended for years and jobless benefits are not extended. Obama is a fucking Republican and the biggest fucking idiot in the world.

    Monday, December 6, 2010 at 8:06 pm | Permalink

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