A Bonanza for Scrooge, But a Lump of Coal for Tiny Tim

December 20, 2012 at 6:49 pm

Taken together, the tax and budget bills that the House will vote on tonight are extraordinary in their reach and their potential impact — providing massive new tax cuts to people with incomes over $1 million and the heirs of the wealthiest Americans, and cutting deeply into basic assistance and services for millions of our poorest and most vulnerable people.  That the House is debating these bills just before Christmas is all the more striking.

The tax bill would give people with incomes over $1 million an average annual tax cut of $108,500, according to the Urban-Brookings Tax Policy Center. They would benefit from the following.

  • An extension of all of President Bush’s tax-rate cuts on their first $1 million in income.
  • A repeal of a limit on tax deductions by high-income households that’s scheduled to return on January 1.  Although Republican leaders have called recently for limiting tax deductions for high-income households, their bill blocks the limit that’s already in law from applying to anyone, including people over $1 million.
  • A tax rate on dividends of just 20 percent.
  • A continuation of an extravagant estate-tax break for the wealthiest three of every 1,000 Americans who die, giving these estates an average tax break of $1.1 million each.

While showering these lavish and costly tax cuts on the richest Americans, the bill ends the improvements in tax credits for low-income working families, as well as a credit for low- and middle-income families with college costs, that the President and Congress first enacted in 2009 and that will expire at year-end under current law.  Some 25 million Americans would lose an average of about $1,000 a year as a result, and roughly eight million children would fall into — or deeper into — poverty.  A mother raising two children on full-time minimum-wage earnings of $14,500, for instance, would see her child tax credit cut from $1,725 to just $165.

The spending-cut bill would aim its heaviest artillery on programs for the poor. It would, for instance, cut SNAP (food stamp) benefits by $28 billion over ten years — taking food aid from every poor child, elderly or disabled person, and parent on the program.  These cuts would kick in March 1, when benefits would shrink by $33 a month for every family of three and $41 for every family of four.  While cutting SNAP benefits for the poorest Americans, the bill doesn’t cut agricultural subsidies by a penny even for the largest agribusiness corporations.

Some 1.8 million individuals would lose their SNAP eligibility while 280,000 low-income children would lose access to free school lunches, according to the Congressional Budget Office (CBO).

The spending-cut bill eliminates the Social Services Block Grant (SSBG). Created in the Reagan era, SSBG gives states funds for services to prevent child abuse, provide adoption services, offer community-based care for frail elderly and disabled people so they don’t have to be institutionalized, and provide affordable child care services so poor parents can go to work.

The spending-cut bill would force large numbers of Americans to go without health insurance. The changes to health reform’s subsidies that make coverage affordable for people with modest incomes would cause 350,000 to go without coverage, Congress’ Joint Committee on Taxation estimates.  The bill also cuts off funding to help states set up insurance exchanges, where people will be able to choose from various private health plans.  Because this defunding would impede the exchanges, CBO has estimated that two million fewer people would get coverage through the exchanges in 2015.

Finally, the spending-cut bill would shrink overall discretionary funding by $19 billion, compared to the current funding caps that Republican leaders negotiated only last year in the Budget Control Act.  Cuts in discretionary funding could lead to cuts in specific programs that include homelessness prevention and mental health services, WIC and Head Start, education for disadvantaged children and Pell Grants for college students, and meals on wheels.

Maybe it’s time for House leaders to read some Dickens.

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More About Robert Greenstein

Robert Greenstein

Greenstein is the founder and President of the Center on Budget and Policy Priorities. You can follow him on Twitter @GreensteinCBPP.

Full bio | Blog Archive | Research archive at CBPP.org

2 Comments Add Yours ↓

Comments are listed in reverse chronological order.

  1. DHFabian #

    Just for another perspective, a tax cut of $108,500 is the equivalent of over 20 years of our former AFDC benefits. I guess we could fantasize that massive tax cuts for the rich will eventually turn into job creation here, in spite of decades of proof to the contrary.

  2. 2

    I hope you realize that it’s better for us to go over this phony “cliff.”

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