The so-called fiscal cliff legislation signed into law by President Obama is not a good bill. But it was better than the alternative -- which is why I voted for it.
The alternative -- doing nothing -- would have thrown this country back into a recession with nearly $4 trillion removed from the economy. Two million Americans desperately struggling to find a job would have had their unemployment benefits wiped out. The disappearing middle class, which has already seen median household income go down by nearly $5,000 over the past 12 years, would have been hit with an average income tax hike of $2,200 a year. Senior citizens throughout the country would have been denied access to their doctors because of a 27-percent cut to Medicare reimbursement rates.
As relieved as I am that all of those things did not happen, there are a number of provisions in the fiscal cliff agreement that are extremely bad. Let me mention just two of them.
First, at a time when the gap between the wealthy and everyone else is growing wider, this bill provides a $100-billion tax break to the richest 0.3 percent of Americans who inherit more than $5 million in wealth. This massive estate tax giveaway will only apply to about 3,500 estates in this country. In other words, 99.7 percent of the American people will not benefit by one penny from this tax cut. While the United States has the most unequal distribution of wealth and income of any major country on earth, and the gap between the very rich and everyone else is growing wider, this huge tax break for the super-rich is totally absurd.
But the most dangerous aspect of this bill was to extend indefinitely the Bush tax cuts on income, capital gains, and dividends on household income between $250,000 and $450,000 a year. President Obama originally demanded $1.6 trillion in new revenue. The final agreement provided only $620 billion. As a result, revenue will be increased by less than 2 percent over the next decade at a time when revenue as a percentage of GDP is near the lowest level in 60 years.
By locking in these tax cuts and raising only $620 billion in new revenue the Republicans (and some Democrats) will soon be demanding, in the name of deficit reduction, major cuts in Social Security, Medicare, Medicaid, education, nutrition and other programs of vital importance to working Americans.
If we are going to deal with the enormous income and wealth inequality that exists in this country and reduce the deficit in a fair and a responsible manner, the wealthiest Americans, whose effective tax rates are very low, are going to have to shoulder a much greater responsibility for deficit reduction than this agreement provides.
Further, the fact that the largest and most profitable corporations in this country have still not been asked to contribute one dime toward deficit reduction is a national disgrace. Today, corporations are making record-breaking profits, while corporate income tax revenue as a percentage of GDP is near a record low. In 1952, 32 percent of all of the revenue generated in this country came from large corporations. Today, that figure has dropped to just 9 percent.
At a time when we have record deficits and an unsustainable $16.3 trillion national debt, we cannot continue to provide tax loopholes that allow about one out of every four large and profitable corporations in America to pay nothing in federal income taxes.
Each and every year corporations and the wealthy avoid more than $100 billion in U.S. taxes by stashing their cash in the Cayman Islands and other tax havens. Meanwhile, corporations are actually rewarded in the tax code for shipping jobs to China and other low-wage countries. These loopholes have got to be closed, and the revenue gained must go toward deficit reduction and job creation, not to lower corporate tax rates.
During the upcoming budget battles, we will be hearing a lot of talk about "a balanced approach" to deficit reduction.
But, let's not be fooled. Making the wealthy and large corporations pay a few dollars more in taxes is not the moral or economic equivalent to cutting Social Security benefits for a senior citizen trying to stay alive on $15,000 a year, throwing elderly people off of Medicare, or cutting benefits for disabled veterans. Think of it this way. If Bill Gates has lunch with an unemployed worker, it would be wrong to split the bill down the middle. It would be even worse to have that worker pick up the tab. That is not a "balanced" plan. The same goes for deficit reduction.
In recent years, the middle class and working families of our country have seen a significant decline in their standard of living. At the same time, the wealthy and large corporations have done phenomenally well.
Now, as we struggle to lower deficits and create new jobs, the largest corporations in this country and the wealthiest people must be asked to play a significant role. The future economic well-being of working America is at stake.