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Flawed Tax Deal Is Good Deal For Democrats

by Thom Kleiner

This month Congress passed the great tax compromise of 2010. President Obama insists he did what he could to make the bill more palatable by getting Republicans to extend unemployment insurance and provide tax incentives that primarily benefit the middle class. During the debate, the Republicans held up all other business ‘€“ at one point even voting down health benefits for 9/11 World Trade Center rescuers ‘€“ until those high income tax breaks were approved.

When one breaks down the compromise, one can certainly argue that ‘€œthe Democrats’€ got more than ‘€œthe Republicans,’€ both substantively and politically.

First, on the politics, it’s surprising that the national Republicans have allowed themselves to be pigeonholed so completely as the party of the rich. CNN’s Wolf Blizer actually started off a question to a senator this way: ‘€œthe Democrats got tax cuts and an extension of unemployment benefits, which primarily benefit the middle class and the Republicans got what they wanted: tax cuts for the rich and a break on the estate tax for estates worth up to $5 million.’€

It’s stunning that a national correspondent would paint the divide in such black and white terms; it’s, even more remarkable that the Republicans are not fighting the stereotype that that’s all they care about. The longer the Democrats in Congress railed against the deal as each day passed in December, the more the public got to hear the two party dynamic that Obama helped to create: the Democrats are fighting for the middle class; the Republicans are fighting for the top 2%; the president only made a deal because he was ‘€œheld hostage’€ by the Republicans. The lines between the parties were more clearly drawn this month than any time during the midterm election campaign when the Democrats were seemingly unable to communicate where the parties stood on these issues.

On the substance, most of the $900 billion in tax cuts and other incentives go to the lower and middle class, for unemployment benefits, middle class tax cuts, tuition tax credits and similar provisions. ‘€œOnly’€ about $100 billion goes to the top 2% of taxpayers and the top 1% of estates. Democrats are rightfully upset, particularly about the unnecessarily generous estate tax treatment which benefits only a tiny fraction of Americans. Those that do benefit in this group stand to gain millions at a time when our national debt is approaching $13.5 trillion. But, overall, 7/8 of the benefits go to those the Democrats have been advocating for.

Who comes out ahead in the end politically? One has to think that all this will inure to Obama’s benefit in 2012 when an all out fight to extend the tax cuts for the top 2% will ensue. No matter how the economy is doing at that time, Obama will certainly never agree to extend the upper income tax cuts again. The Republicans will reflexively defend it, and Obama and the Democrats have to hope that those in the middle who tend to determine the winners of presidential elections’€“ the unaffiliated or independent voters ‘€“ will be paying attention.

Thom Kleiner is the former Town Supervisor of Orangetown, NY.

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