$50 billion middle class tax hike, 38 million refunds delayed

Front paged at Booman Tribune

We’ve seen the following scenario more than a few times before: a proposed massive tax cut is proposed – focusing mainly on the upper 5% or on corporate interest groups. Many Congressional Democrats (rightfully) protest this, and are painted as ones who want to raise the taxes of “people like you and me”. Ultimately, even though this is highly dishonest, at best, some sort of massive tax cut is passed – mainly benefiting those who I mentioned above – with no way to pay for the cuts.

Now picture this scenario, because the outcome is baffling in it’s backward nature, yet at the same time completely expected. A massive tax hike is set to take place on tens of millions of families , including many who only work and own a home, and even a good number of families that earn under $100,000. Democrats in Congress are pushing to get a bill that takes care of this, and as promised last year, don’t want to add another $50 billion to the deficit so they want to offset this cut with other increases on a select group of very high earners who are already getting an unfair tax advantage elsewhere.

Republicans don’t want to pay for this tax cut to the middle class, even though they are “in favor of it” and therefore either want to add another $50 billion to the deficit or give these millions of families a tax hike, while preserving the unfair tax cuts to their favored constituents. Democrats are being blamed for not getting something done quicker, and as a result, even if something is passed, 38 million people will now have delays in getting their refund early next year.

Of course, I am talking about the AMT (Alternative Minimum Tax) bills that are kicking around Congress now. And while I don’t really want to talk tax, I want to talk about the framing here in terms of what should be said and how this should be discussed – because this should be an absolute slam dunk winner of an issue for Democrats, yet they are going to be painted into a corner if they don’t get out in front of this.

Right now, the republicans, and Mister Bush are playing chicken with the Democrats on this, all while holding hostage the $50 billion in additional taxes that the middle class will have to pay. By doing so (in addition to being a total dickish move), they are at the same time continuing to be completely fiscally irresponsible and also show their contempt for the plight of the middle class.

It is really that simple. Because of their delays and threats of filibuster of anything that is remotely fair or responsible, we have stories like this (from the AP link above):

Silena Davis had counted on an early tax refund to pay for getting her teeth fixed. Now, because Congress has dawdled all year on a tax bill, she and millions of other early filers could have to wait extra weeks for refunds that last year averaged $2,291.

The Internal Revenue Service is looking hard at delaying the start of its filing season, set to kick off on Jan. 14, if Congress fails to pass legislation in the next two weeks. At issue is how to handle what could be a dramatic increase in the number of people facing a higher alternative minimum tax.

If there is a delay and it extends into mid-February, it would slow nearly 38 million refunds worth a total of about $87 billion, the IRS Oversight Board predicts.

"It would definitely make a big difference with me," said Davis, a George Washington University Law School administrator. "I'm going to have to get a crown and it's going to be really expensive."

For those who don’t know or think about how bad this will be if nothing is passed, the Joint Committee on Taxation released a report (JCS-38-07) that has nearly 14% of all households being hit this year, with that number increasing over the next couple of years. Approximately half of all families with income between $75,000 - $100,000 will be hit this year alone. So we are talking some pretty big numbers.

Republicans want to cut spending to pay for this, if they even want to pay for it at all. Yet, nobody has come up with a proposal that even has basics in terms of paying for this. So, the lip service aside, republicans are perfectly content with causing 38 million refunds to be delayed and increasing taxes on those who can afford it least by $50 billion. This is obviously a killer of an issue both politically and in reality.

Yet, instead of using the majority that he has or doing any sort of public awareness of the fact that republicans are doing this, Senator Reid is working to add another $50 billion to the deficit while promising to extend other tax cuts with appropriate spending cuts elsewhere. And the party line is that something has to and will get done but at this point it looks like Bushie tax cuts will be extended as well, with cuts to programs that republicans will be amenable to (read: stuff that impacts We the People).

Either way, millions of people are going to be screwed, and a golden opportunity to lay this at the feet of those who are responsible for this debacle (and at the same time irresponsible with the country’s money) is getting missed. As a result, the “Democrats don’t care about the deficit either” meme will be easier to use against them.

The fact that republicans aren’t getting slaughtered for this predicament is simply amazing. The fact that tens of millions of people are about to get royally screwed because of this game of chicken, especially at a time when holiday bills will come due and the housing market is crashing is reprehensible.