Christmas is approaching and Congress is giving away all sorts of goodies in the tax break package part of the budget deal through September 2016. The approximate cost is about $650 billion and, if the past is a good guide, it will be paid for with cuts to social programs once the legislators realize the budget hole left by those tax breaks, because the deal exempts itself from current rules that require all new spending be paid for.
The package, which makes some temporary tax breaks permanent, is intended for both low-income families and businesses. However, the balance is mostly tipped in favor of the private sector, in some cases making permanent extraordinary measures taken during the Great Recession – such as certain types of depreciations – that are not justifiable today.
The other side of the coin is the improvement made to the Earned Income Tax Credit (EITC), as well as the Child Tax Credit (CTC). Those are two powerful tools to lift low-income workers out of poverty: an income supplement that helps 50 million Americans, including 25 million minors.
Still, it is surprising how quickly the Republican majority forgets its commitment to combat red ink. In one fell swoop, it eliminates $800 billion out of the $900 billon in income and savings achieved in the past few years, according to the Committee for a Responsible Federal Budget.
The tax break fever goes beyond helping business; it also seeks to destroy health care reform. The package includes measures that would delay for two years the Cadillac Tax and a tax on medical device manufacturers, as well as blocking alternative funds resources for Obamacare.
A lot has been said about the impact of a loss of revenue due to tax cuts for the private sector, which would be offset by a supposed economic boom caused by the reinvestment of that money for the benefit of all. Sounds good, but it has not proved to work for the past 35 years of tax cuts. They only thing that has been achieved is to reduce the size of the government by shrinking the social welfare network because, just this time, it is important to combat the deficit. This is how tax irresponsibility works.