Now that Congress has passed the “framework agreement” on extending tax cuts and unemployment benefits, it’s a good time to understand the relative size of the various components of that package.
The Center on Budget and Policy Priorities has released a breakdown of the cost for the tax package. It shows that over half of the package’s cost is to continue the “middle-class” tax cuts, Alternative Minimum Tax (AMT) changes, tax extenders, and 2009 estate tax rules. Continuing the tax cuts for high-income households and further weakening the 2009 estate tax rules makes up 16 percent of the bill’s cost. In contrast, extending tax credits for low- and moderate-income households makes up only 5 percent of the cost. The provision to provide additional weeks of Unemployment Insurance for workers unable to find jobs makes up only 7 percent of the package.
On December 17, the U.S. House of Representatives passed the tax package by a vote of 277 to 148. Minnesota Representatives John Kline, Jim Oberstar, Erik Paulsen, Collin Peterson, and Tim Walz voted for the bill, while Representatives Michele Bachmann, Keith Ellison, and Betty McCollum voted against it. The House vote followed a vote in the U.S. Senate on December 15 where the bill passed by a vote of 81 to 19. Both of Minnesota’s senators, Al Franken and Amy Klobuchar, voted for the bill.
As we noted in our December 8 blog, this package contains some good news for low- and moderate-income working families but also includes some bad news in the ongoing struggle for fair and responsible tax policies.
The good news is that the package extends expiring Unemployment Insurance benefits for some 7 million Americans over the next 13 months and extends improvements to the Child Tax Credit and the Earned Income Tax Credit, actions that are vitally important to thousands of Minnesota families that are struggling through these difficult economic times. These are actions that have a high “bang for the buck” in supporting consumer spending and the economic recovery.
The bad news is that the package extends all of the expiring 2001 and 2003 tax cuts, including those to households with annual income above $250,000, for another two years, and dramatically weakens the estate tax. These provisions come at a high cost and have been found by the Congressional Budget Office to be a relatively ineffective way to boost economic growth.
-Steve Francisco
