According to the Congressional Budget Office (CBO) report released on Tuesday, the overall corporate tax rate (corporate receipts as a percentage of domestic economic profits) in 2011 dipped to 12.1 percent, an all-time low over the 40 years for which CBO has tracked this data, and less than half the historic average of 25.6 percent. As the Wall Street Journals notes, this is even as corporate profits are on the rise.

The CBO notes that the “unusually low levels” of corporate taxes were not only driven by the recession, but also by tax breaks, such as those allowing for special deductions for depreciation in the value of equipment. This reinforces the critical point that Citizens for Tax Justice has been making that although the US has one of the highest statutory corporate tax rates, a wide variety of tax breaks cause the US to actually have the second lowest effective corporate tax rate in the developed world.

Looking forward, the CBO projects that the corporate tax rate will rebound substantially over the next few years and return to near its average historic rate. Unfortunately, this projected rebound may not come to fruition as it assumes that lawmakers will actually allow the expiration of corporate tax breaks. Unfortunately, extension of unnecessary corporate tax breaks, such as the allowance of 100 percent bonus depreciation, is one of the few areas where the Republican leadership and the Obama Administration agree.

Although Congress should be more proactive in raising corporate taxes, the CBO report reveals yet another area where Congress could improve the situation by doing nothing — and allowing tax cuts to expire. Of course, that would require lawmakers to overcome the billions spent by corporations to protect these tax breaks. 

On Tuesday, the Congressional Budget Office reported that the federal budget deficit will fall from $1 trillion this year to less than $300 billion over the next several years — but only if Congress can resist enacting budget-busting laws like another extension of the Bush tax cuts, which would more than double the projected deficit.

Budget experts have long known that our deficit would be largely under control if Congress would simply stop extending the Bush tax cuts. But this might be news to anyone who listens to lawmakers insisting that public services must be cut dramatically to balance the budget.

What these lawmakers really mean, but never say, is that public services would need to be slashed to pay for a further extension of the Bush tax cuts — despite the lack of any evidence that these tax cuts have helped America.

The CBO report shows that extending the Bush tax cuts through the next decade would cut revenues by $4.6 trillion over the next ten years, and cost an additional $0.8 trillion in interest payments on the national debt — thus adding a total of $5.4 trillion to the national debt!

In the face of these frightening numbers, Republicans in Congress want to extend all of the Bush tax cuts. The Democrats are not much better. President Obama has proposed to extend about 81 percent of the Bush tax cuts, and most Congressional Democrats have followed his lead. 

Even organizations that have the ostensible purpose of promoting a balanced federal budget fail to see that Congress could help the budget situation dramatically by simply refusing to pass any more tax cuts. For example, take this statement about the CBO report from the Committee for a Responsible Budget:

The good news is that under current law assumptions, the debt would become more manageable in the medium term. The bad news is that these policy assumptions are politically unrealistic, suboptimal, and not a long-term fix.

Why would the so-called “Committee for a Responsible Budget” first acknowledge that the government will approach budget balance if Congress does nothing, and then insist that Congress has to pass laws that take us off that path? What’s so “suboptimal” about allowing the Bush tax cuts to expire?

Their argument is that the economy will suffer if the tax cuts expire at the end of this year. The Republicans in Congress make a much more extreme claim, which is that the economy will suffer if any portion of the tax cuts ever expires.

None of this is supported by evidence. Expiration of the Bush tax cuts would allow taxes to return to the levels in place at the end of the Clinton years. If anyone is worried about tax policies that are “suboptimal” for the economy, they should not fear the tax rates that existed during the boom years that Clinton presided over. If we need further short-term stimulus next year, then there are far better, fairer and less costly ways to achieve it.

Sometimes, lawmakers and others claim they worry that low- and middle-income people will suffer if they have to pay Clinton-era tax rates again.

This is absurd. A fact sheet from CTJ shows who would benefit from another extension of the Bush tax cuts. The folks who are struggling the most in America today, the poorest fifth of taxpayers, would receive just 1.1 percent of the tax cuts in 2013. The bottom three-fifths of taxpayers would receive just 13.4 percent of all the tax cuts.

On the other hand, the richest five percent of taxpayers would receive 47.2 percent of the tax cuts, and the richest one percent alone would receive 31.3 percent of the tax cuts.

It’s reasonable to argue that the parts of the Bush tax cuts that go to low-income Americans should be made permanent, because they help people who truly need help. These include, for example, the provisions that expand the Earned Income Tax Credit and the refundable part of the Child Tax Credit.

But low-income tax breaks represent only a small part of the cost of overall Bush tax cuts. So Congress could and should extend those parts of the tax cuts that go to people who need them without busting the budget. If Congress instead sends President Obama another bill extending all or most of the Bush tax cuts, then he should get out his veto pen.

The six Democrats and six Republicans on the “Super Committee,” which is officially called the Joint Select Committee on Deficit Reduction, have conceded that they cannot agree on an alternative to the $1.2 trillion in deficit reduction that will occur automatically under existing law.  

As the result of this summer's deficit standoff, Congress and the President agreed to these automatic cuts, to take effect starting in 2013, if the Super Committee was unsuccessful in forging a deficit reduction plan that both parties in Congress could support.

For months, Republicans and Democrats have gone through cycles of offering plans that they claimed would reduce the budget deficit, but which would actually increase the deficit by extending all or most of the tax cuts first enacted under President George W. Bush and which are currently scheduled to expire at the end of 2012.

Even if the Super Committee did come up with a way to reduce spending or raise revenue by $1.2 trillion or $3 trillion or $4 trillion, it would make little sense if coupled with an agreement to extend tax cuts that cost even more than this, particularly when those tax cuts are heavily aimed at the rich.

The Democrats have not always presented a coherent view on this point. The plan released by President Obama in September would cut taxes far more than it would raise them. As we said back then:

The tables in the back of the President’s 80-page plan quietly remind us that the total cost of making permanent the Bush tax cuts would be $3.867 trillion over the next ten years, but the President says he will “raise revenue” by making permanent “only” $3.001 trillion of these tax cuts. We certainly applaud the President for refusing to extend the $866 billion of these tax cuts that would go exclusively to those with adjusted gross incomes in excess of $250,000, but it’s difficult to call this deficit reduction.

Setting aside the $866 billion that the President proposes to “raise” by not extending that part of the Bush tax cuts, the net effect of the other tax provisions in the plan (excluding the parts used to help pay for his proposed new jobs provisions) is to raise only $259 billion over the next decade. That means that, overall, the President is proposing more than $2.7 trillion in deficit-increasing tax cuts through fiscal 2021! The cost of these tax cuts is even greater when accounting for the additional interest payments on the national debt that will result.

And just to set the record straight, the cost of the Bush tax cuts is actually larger than that. The administration’s cost figures were based on a budget window that begins in 2012, when the Bush tax cuts are already in effect and thus have no cost.

If extended through 2013 and beyond, these tax cuts would cost $4.4 trillion over the 2013-2022 period ($5.4 trillion counting the additional interest payments that will result because of the increase in the national debt). Almost half of these tax cuts would go to the richest 5 percent of taxpayers, and only about six percent of these tax cuts would go to the bottom 40 percent of taxpayers.

The last proposal offered by the Democrats on the Super Committee, according to media reports, would have raised an outrageously low $400 billion in revenue over ten years but would have left the question of the expiring Bush tax cuts for another day. This was something the Republicans on the committee could not accept.

Last year, Congressional Republicans demonstrated that they would not accept any bill that extended most, but not all, of the Bush tax cuts. During the Super Committee negotiations they appeared willing to raise a few hundred billion dollars by closing tax loopholes that mainly benefit working class Americans if they could make permanent and even expand the Bush tax cuts at a cost of over $4 trillion. Now they seem to be signaling that they will not accept any bill that is supposed to reduce the deficit unless it actually increases the deficit by extending the Bush tax cuts.

Both parties have tied themselves into knots over taxes that they will find difficult to untangle, but that matters little because if Congress simply does nothing (and that, frankly, is one thing it excels at) the Bush tax cuts will expire at the end of 2012 and one of the greatest causes of the budget deficit will be behind us.

We would like to think that Congress can now step away from its obsession with deficit-reduction plans that actually increase the deficit and turn its attention to the most pressing concern Americans have right now: jobs.

There is ample evidence that the Bush tax cuts have failed miserably to help the economy in the ways promised by their proponents. It’s time for Congress to focus on job creation measures that do not involve tax cuts for the rich.

A report from Macroeconomic Advisers, one of the most respected economic forecasting firms, concludes that unemployment would rise from 9 percent to 18 percent in 2012 if Congress had to cut spending to comply with the type of constitutional balanced budget requirement that Republicans and some Democrats tried but failed to pass today.

Most mainstream economists agree that the last thing the federal government should do during a recession is cut spending. Reducing government jobs, or cutting government programs that maintain consumer spending in a way that indirectly creates jobs, is the last thing we need when the economy is already contracting. But that’s exactly what would happen under a balanced budget requirement.

Recessions often cause budget crunches because they reduce revenues (because fewer people and businesses are generating income and paying taxes) and increase government spending (because more people receive unemployment insurance and other benefits). These automatic reductions in taxes and increases in spending can stabilize the economy to an extent. But a balanced budget requirement would make it far more likely that Congress would respond to a recession-induced budget crunch by slashing unemployment insurance and other programs that help offset the economic contraction.

That’s why Macroeconomic Advisers found that if Congress had to cut spending to balance the budget in 2012, another 15 million people would become unemployed and economic growth would drop from an expected 2 percent to negative 17 percent.

Such a proposal would seem too outrageous to even be discussed seriously —  except that a majority of the House of Representatives just voted for it. (The measure thankfully did not receive the two-thirds vote requires for approval of a constitutional amendment.)

The version considered today would not take effect for five years, but it’s important to remember that even the most conservative deficit-reduction plans discussed today would not result in a balanced budget for decades. And America will undoubtedly face recessions in the future when the balanced budget requirement would be in effect.

Citizens for Tax Justice has joined 275 other national organizations on a letter to members of Congress blasting the proposed balanced budget amendment as, to borrow the term used by Macroeconomic Advisers, “catastrophic.”

And just in case you were wondering, the balanced budget amendment considered today was the less extreme of the two versions that have been discussed lately. The version supported by anti-tax activist Grover Norquist would require approval by two-thirds of both chambers of Congress to pass any revenue increase, ensuring that efforts to balance the budget during recessions would definitely be done entirely through spending cuts and have the effects described above. Of course, the fact that a proposal is slightly less extreme than the one preferred by Grover Norquist is no indication that it’s a great idea.

Many lawmakers have apparently decided that they would address difficult fiscal problems with what seems like a simple answer. A rule making Congress balance the federal budget every year probably sounds reasonable to many people until they learn of the horrific consequences. Lawmakers have no such excuse, because they and their staffs are quite aware of mainstream economic research, which this recent report only reaffirms.

Make no mistake; those lawmakers who voted today for the balanced budget amendment have voted to destroy millions of jobs during a recession.

A “study” claiming Congress can raise revenue by repealing the estate tax, which was criticized at length by Citizens for Tax Justice in 2009, has been updated to provide a “solution” for the budget deficit.

Anyone who is not familiar with tax debates might be wondering, quite reasonably, how repealing a tax could increase revenue. The answer is, of course, that it can’t.

One claim made in these reports, which are commissioned by the American Family Business Foundation, is that extremely wealthy people will simply spend away their fortunes if they know they will be subject to the estate tax after they die, but they will invest those fortunes if they know they will be untaxed after they die. In the latter scenario, their argument goes, the increased investment will boost the economy and result in increased profits and incomes, which in turn would lead to increased tax payments.

The reports ignore the fact that extremely wealthy people will save and invest most of their money in any event because there’s not much else they can do with it. In our 2009 report, we put the question this way:

Can extremely wealthy people really spend away their millions on expensive dinners and cruises? That’s a lot of dinners and cruises. In 2004 (the last year before the amount of estates exempt from the tax was increased), 72 percent of estate taxes were paid on estates worth more than $3.5 million. And 61 percent of estate taxes were paid on estates worth over $5 million… Let’s say you had this sort of money and you wanted to keep your estate from being taxed by the federal government. What would you do? You can’t put it in stocks or bonds or even a savings account. You can’t buy fancy houses, because they would become part of your estate. Even if you buy expensive cars or yachts, those would be part of your estate as well (even if they lose some of their value before you die).

You would have to spend your entire estate on caviar or cruises or cocaine or something that won’t be around after you die. It’s unclear whether anyone can eat away, cruise away, or snort up their nose $5 million.

This is just one of the many bizarre conceptual problems with the claims that estate tax repeal would result in increased revenue. For more, read the CTJ report.

The National Priorities Project, working in partnership with Citizens for Tax Justice, has unveiled a new website that presents a running tally of the cost of the Bush tax cuts for the richest five percent, who now receive almost half of the total tax cuts. The cost is also broken down for the richest one percent and the next richest 4 percent.

As the Joint Select Committee on Deficit Reduction (aka "Super Committee") considers drastic cuts in public investments and services that working people depend on, the amount of revenue lost due to tax cuts for the rich cannot be ignored. As CTJ has said for years, we will never have the revenue necessary to invest in the American people until these tax cuts are allowed to expire.

See the website: www.costoftaxcuts.com

Obama’s Plan a Massive Tax CUT Despite GOP Claims of “Largest Tax Hike in Modern History”

While House Republican Leader Eric Cantor’s staff and others have called President Obama’s jobs and deficit plan the “largest tax hike in modern history,” the unfortunate truth is that it actually cuts taxes overall and increases the deficit.

There is much to like about the plan, as explained below. Citizens for Tax Justice applauds President Obama’s vow yesterday to, in his words, “veto any bill that changes benefits for those who rely on Medicare but does not raise serious revenues by asking the wealthiest Americans or biggest corporations to pay their fair share.”

Unfortunately, however, President Obama’s proposals would ultimately reduce taxes far more than raise them, compared to current law.

The tables in the back of the President’s 80-page plan quietly remind us that the total cost of making permanent the Bush tax cuts would be $3.867 trillion over the next ten years, but the President says he will “raise revenue” by making permanent “only” $3.001 trillion of these tax cuts. We certainly applaud the President for refusing to extend the $866 billion of these tax cuts that would go exclusively to those with adjusted gross incomes in excess of $250,000, but it’s difficult to call this deficit reduction.

The President’s claims that he is raising revenue are based on the common, but misleading, practice of comparing a given proposal to an alternative “baseline” that assumes Congress has already increased the deficit enormously by making permanent the Bush tax cuts. By this logic, we do not see what stops the President from comparing his plan to a baseline that assumes Congress repealed the federal income tax, in which case his plan would “raise revenue” even more successfully.

Setting aside the $866 billion that the President proposes to “raise” by not extending that part of the Bush tax cuts, the net effect of the other tax provisions in the plan (excluding the parts used to help pay for his proposed new jobs provisions) is to raise only $259 billion over the next decade. That means that, overall, the President is proposing more than $2.7 trillion in deficit-increasing tax cuts through fiscal 2021!

The cost of these tax cuts is even greater when accounting for the additional interest payments on the national debt that will result.

Revenue could be raised by closing corporate tax loopholes, but unfortunately the President’s plan calls for a reform of the corporate income tax that is “deficit-neutral.” We believe that most, if not all, of the revenue-savings resulting from closing corporate tax loopholes should go towards deficit-reduction or job creation and public investments, rather than paying for more breaks for corporations. ( See one-page fact sheet on why corporate tax reform can be “revenue-positive.”)

There are some good ideas in the President’s tax proposals that would raise revenue compared to current law and that would ask those whose incomes have grown the most in recent years to pay something closer to their fair share. This includes his proposal to limit deductions and exclusions for the wealthy, which we estimate would affect only 2.3 percent of taxpayers. ( See related report.) Certainly Congress should pursue these types of tax provisions and loophole-closing measures.

But ultimately, our nation is going to need significantly increased revenues to pay for essential public programs and services. Starting off with a gigantic tax cut that makes 80 percent of the Bush tax cuts permanent, as Obama proposes, only digs our deficit hole deeper — and makes big reductions in Social Security and Medicare even more likely.

Our contempt for Grover Norquist’s no-new-taxes pledge is no secret, and it seems that at least one member of Congress is willing to come out and admit he shares the feeling. Nebraska Rep. Jeff Fortenberry signed the no-new-taxes pledge in 2004, but now says he regret s the move.

He says, “A while back, I had notified the organization that I had taken that pledge when I ran for office and upheld that my first term in office but realized that this type of pledge can constrain creative policy thinking, so I asked not to be associated with it any longer."

Ouch.  Poor Grover!

Responding to Fortenberry’s snub, a spokesperson from Norquist’s group bristled, “One does not promise to be pro-life for two years, or pro-Second Amendment for one year. One is pro-life, pro-Second Amendment or pro-taxpayer as long as one is in office. Or not.”

This pathological inflexibility defines the pledge mentality and hurts our democracy. It’s chilling that even when legislators abandon the pledge after recognizing it for the ideological straightjacket it is, they are never fully released from it.  Isn’t that how cults work?

Completely taking tax increases off the table is no way to govern.  Pledges thwart the important debates and conversations that make our political system work, the current Washington gridlock offering a case in point. Rep. Fortenberry is setting an example for his GOP colleagues, going so far as to say Warren Buffett might even be right about taxing millionaires.  We’ll see if his stance helps open up our debates.

Pledging to spending cuts as the only budget balancing tool is like agreeing to eat a bowl of spaghetti with only a knife; it doesn’t work and it makes you look foolish.

Photos via Steve Rhodes & Republican Conference via Creative Commons Attribution License 2.0

House Democratic Leader Nancy Pelosi today appointed members to fill the three seats allotted to her for the 12-member “super committee” created under the recent debt deal.

Last December, all three voted against the “compromise” that extended the Bush tax cuts entirely, even for the richest Americans, for two years. All three also received high scores from CTJ’s legislative report card during the previous administration for opposing President George W. Bush’s regressive tax cuts.

Pelosi’s appointees are Xavier Becerra of California, James Clyburn of South Carolina, and Chris Van Hollen of Maryland.

This move by Pelosi provides needed reassurance to advocates of tax fairness. The six Republican members of the super committee have all taken Grover Norquist’s infamous “no new taxes” pledge. The Senate Democrats appointed to the committee have a more mixed record on taxes (see related post.)

Photo via Campus Progress Creative Commons Attribution License 2.0

Super Committee Should Either Focus Entirely on Revenue, or Simply Allow Automatic Sequestration to Go into Effect

Numerous surveys show that large majorities of Americans want Congress to address the deficit with a combination of spending cuts and tax increases. The first half of deficit reduction accomplished under the newly enacted debt deal will be entirely through spending cuts. This means that the second half of the deficit reduction — which is to be determined by a Congressional “super committee” — should be accomplished entirely by increased revenue. Responsible members of the super committee should walk away from any deal that falls short of this goal.

The super committee has many options to increase revenue, particularly by eliminating or reducing subsidies provided through the personal income tax and corporate income tax to business and wealthy investors. As CTJ director Bob McIntyre explained to the Senate Budget Committee in the spring, these tax subsidies cost a billion dollars a day.

If the super committee cannot agree on such revenue-raising measures, they should do nothing. The $1.2 trillion in automatic spending cuts that would result from the super committee’s failure to reach agreement are not the worst possible outcome. Half of the automatic spending cuts would come from defense spending (which has increased by 70 percent since 2001). If the super committee comes to an agreement that avoids the automatic cuts but lacks revenue increases, the consequences could be far worse. For example, the committee could choose to focus cuts instead on public services that working Americans rely on in order to protect powerful defense contractors.

Further, President Obama and responsible members of Congress will have another opportunity to take an anti-deficit stance at the end of 2012, when they can demand that the Bush tax cuts will either expire for the rich or expire entirely. The Bush tax cuts expire under current law at the end of 2012, and proponents of the tax cuts have no power to extend them without the support of President Obama and the Democratic leadership in the Senate.

The Budget Control Act

The Budget Control Act, signed into law last week to raise the debt ceiling, reduces the deficit and lifts the ceiling in two stages. First, caps on discretionary spending (both defense and domestic) are in effect and will save $900 billion over ten years. Second, a Congressional “super committee” of six Senators and six Representatives, divided evenly by party, must by Thanksgiving come up with measures to save between $1.2 trillion and $1.5 trillion over ten years. Whatever plan is approved by a majority of the committee could then be passed by a simple majority in the House and Senate and sent to the President.

If this process fails (or fails to save as much as $1.2 trillion) then automatic triggers will go into effect that sequester $1.2 trillion of spending (or the difference between what the super committee’s plan saves and $1.2 trillion) over ten years. The spending sequestered would be divided evenly between domestic and defense.

Republican Super Committee Members Pledge No Taxes. Will Democratic Members Start with Compromise?

There is no responsible way for Democratic members of the super committee to “compromise” without convincing Republicans members to violate their pledge. The United States is one of the least taxed countries in the industrial world. (Only Mexico and Chile collect less taxes as a share of their economy.)

The Democrats generally seem vastly more likely to cave on their core principles, given their recent agreement to raise the debt ceiling without any guarantee of increased revenues.

It’s true that Congress has a very difficult time providing immediate solutions when the political parties have irreconcilable worldviews. But there is a process to resolve that, and it’s called an election. And this process will work if voters know which lawmakers prioritize tax breaks for corporations and wealthy investors, and which lawmakers prioritize Medicare, Social Security, education and the other public services that working Americans rely on.

Photo via Gage Skidmore and The White House Creative Commons Attribution License 2.0

At the end of last week, Standard & Poor’s (S&P), one of the three major credit rating agencies, downgraded the credit worthiness of the United States for the first time and specifically stated that allowing the Bush tax cuts to expire for the wealthy would justify a return to the highest possible rating.

S&P’s report says that its “upside scenario,” which could allow the rating to be upgraded to “stable” “incorporates $950 billion of new revenues on the assumption that the 2001 and 2003 tax cuts for high earners lapse from 2013 onwards, as the Administration is advocating.”

S&P: The Broken Clock

Of course, S&P is right that allowing the Bush tax cuts to partially expire for the rich (at least) would improve our fiscal situation. But S&P’s accurate observation on this point is akin to the broken clock giving the correct time twice a day.

It’s worth pointing out that this is one of the rating agencies that convinced an awful lot of people that mortgage-backed securities were perfectly safe in the run up to the economic collapse that triggered bank bailouts by the Bush administration. Investors seemed entirely unconvinced by the report on Monday, when they traded in stocks and bought up the very Treasury bills that S&P claims now carry some risk of default. Some observers have even suggested that S&P’s downgrade is a threat to prod Congress and the Administration to undo the stricter regulations on credit rating agencies that were enacted as part of the Dodd-Frank financial reform.

Perhaps the most damning indictment of S&P’s report is the $2 trillion mistake that the Administration identified, which S&P responded to by simply changing the rational for its downgrade from an economic one to a political one. S&P told the Administration that the $2 trillion mistake did not substantially alter its conclusion. But as observers have noted, the report makes clear that ending the Bush tax cuts for the rich (which would only save $950 billion) would alleviate the need for the lower rating.

Stating the Obvious: Congress Is Dysfunctional and Held Hostage by the Tea Party

All that being said, the report’s conclusions about America’s politics are correct, if rather obvious. “The political brinksmanship of recent months highlights what we see as America's governance and policymaking becoming less stable, less effective, and less predictable than what we previously believed,” the report admonishes. “The statutory debt ceiling and the threat of default have become political bargaining chips in the debate over fiscal policy.”

Of course Congress is less effective than ever. In fact, it’s utterly dysfunctional. No legislation of any significance can be passed in the Senate without a supermajority of members in support, which has not been the case historically (contrary to what many believe). As a result, President Obama’s proposal to extend the Bush tax cuts entirely for all but the richest two percent failed to pass last year despite support from a majority of the House and a majority of the Senate.

Now Republicans have established that they will vote against any increase in the debt ceiling (which is comparable to refusing to pay a credit card bill after you knowingly made half your purchases on it) unless they receive major policy concessions that most Americans do not support.

Tea Party lawmakers are willing to hold the legislative process hostage. In fact, the Republican Senate leader now uses the words “hostage” and “ransom” to describe the party’s legislative strategy regarding debt ceiling negotiations. House Republican Whip Eric Cantor responded to S&P’s report by exhorting his party to hold firm against any proposal to raise revenue.

Despite the many shortcomings of S&P, last week’s downgrading of the U.S.’s credit rating ultimately is the Tea Party Downgrade.

The three Democratic Senators appointed by Harry Reid to sit on the “super committee” established under the debt deal voted for the President’s disastrous budget compromise in December of 2010 that extended the Bush tax cuts for another two years.

Sending these three in to negotiate with members who passed an anti-tax litmus test to get there is worrying.

How did the three perform on other tax votes? Senators John Kerry and Patti Murray have a record of voting against costly and regressive tax cuts, while Senator Max Baucus has a mixed record. 

Baucus actually received a failing score on CTJ’s legislative report card during the Bush years because of his support for many regressive tax cuts.  On the other hand, Senator Baucus led the charge in 2010 to end the Bush tax cuts for the rich.

All three of these Senators deserve credit for voting last year to extend the Bush tax cuts only for those earning below $250,000, which was, at least, better than the Republican proposal to extend the tax cuts entirely.

If these are the Senators charged with holding the line against no-revenue-no-way Republicans, then they’re going to need some reinforcements.  

The so-called “Budget Control Act” that President Obama signed into law this week to increase the federal debt ceiling and reduce the federal budget deficit marks the second time the Obama administration has capitulated on tax policy to the most extreme elements in Congress, those who are least in touch with the American people and most willing to risk economic disaster to get their way.

While our political leaders should be doing all they can to boost consumer demand and create jobs, the administration and Congress have instead agreed to slash public services without guaranteeing any increase in revenue.

To be sure, a revenue increase could result from the process established under this deal, despite Republicans’ claims to the contrary. But anti-tax lawmakers have already demonstrated that they will risk everything — including economic catastrophe — to block any and all revenue increases. As a result, we believe the only hope for a balanced approach depends on President Obama finding the courage (which he has lacked so far) to allow all of the Bush tax cuts to expire at the end of 2012.

Read the full statement.

Lawmakers have made one important decision this week as the debt ceiling negotiations come down to the wire: the wealthy should not have to sacrifice even a dime of their tax cuts or loopholes to reduce the deficit.

Both Democratic Majority Leader Harry Reid and Republican Speaker of the House John Boehner have proposed plans to cut hundreds of billions in spending on government programs (from food safety to college tuition assistance) in order to raise the debt ceiling, without requiring any revenue be generated through ending tax loopholes or tax cuts for the rich.

Boehner’s plan requires an immediate $1.1 trillion dollars in spending cuts over the next 10 years in order to raise the debt ceiling this year, and would also require that we find another $1.8 trillion in cuts in order to raise the debt ceiling again in 2012.

The proposed spending cuts would place a such a harsh additional burden on lower income families that the usually mild mannered Bob Greenstein, Director of the Center on Budget and Policy Priorities, pointed out that Boehner’s plan was “tantamount to a form of ‘class warfare’” and that “it could well produce the greatest increase in poverty and hardship produced by any law in modern US history.”

The new push by both parties for a spending-cuts-only approach stands in great contrast to President Obama’s Monday night address to the nation, which called for a more ‘balanced approach.’

What makes this change in approach even more self defeating is the fact that the anti-tax ideologues have long since lost the public. In fact, well over 19 polls in just the last few months show that the public overwhelmingly favors increasing taxes generally, with larger percentages supporting raising taxes on just the wealthier individuals.

Even after extracting a pound of flesh from Democratic lawmakers, anti-tax forces may still not be satisfied. These groups are pushing for nothing short of passage of the ‘Cut, Cap, and Balance Act,’ hoping to hold the US economy hostage to force through their radical and economically disastrous plan.

The ridiculousness of the absolute anti-tax forces has become especially clear in light of their unwillingness to repeal egregious tax loopholes, such those given to oil and gas companies, hedge fund managers, and many others.

Ironically, the purpose of these extreme cuts is to reduce the ongoing budget deficits, but in fact all of the plans under serious consideration by Democratic and Republican leaders would actually INCREASE the deficit. The problem is that lawmakers simply cannot make up for the outrageous $5.4 trillion cost of extending all of the Bush tax cuts.

Though things are not looking good, hopefully Democratic lawmakers will stand up and not let themselves be blackmailed into accepting ludicrous cuts to spending while large loopholes and tax cuts for the rich remain in place.

Photo via  The White House Creative Commons Attribution License 2.0

Recent polling makes clear that most Americans do not agree with the Tea Party-backed members of Congress who believe the only “concession” they should make in deficit negotiations is to prevent a calamitous default on U.S. debt obligations. The question is, will the White House use this advantage and demand a balanced approach, or will it back down again to anti-tax, anti-government lawmakers who are outside the mainstream of public opinion?

More polling has been released indicating that a large majority of Americans want Congress to address the federal budget deficit with a combination of tax increases and spending cuts. The latest polling also shows that 82 percent of respondents understand that failure to raise the debt ceiling will do serious harm to our economy and far more respondents blame Republican leaders than Obama for being unwilling to compromise.

Last week, the Republican leadership in the Senate began pushing a proposal that would allow the President to raise the debt ceiling after symbolic but meaningless votes, with no guarantee of spending cuts. There has been talk of adding some amount of spending cuts to that plan to make it more palatable to Tea Party-backed lawmakers, but it’s unclear whether they can be satisfied with any compromise.

Republicans in the House have taken a particularly extreme stance. On Tuesday they passed the “Cut, Cap, and Balance” Act that would allow the U.S. to default on its debt obligations unless the U.S. amends the constitution to bar budget deficits, require a two-thirds supermajority of both chambers of Congress to approve any tax increase, and shrink the government to a level not seen in most of our lifetimes.

Meanwhile, the “Gang of Six” U.S. Senators who have been negotiating for months behind closed doors on deficit reduction finally released the outlines of a plan this week, although it’s not clear how or whether it could affect the negotiations over the debt ceiling.

Citizens for Tax Justice released a statement blasting the “Gang of Six” plan because it would reduce revenue by $1.5 trillion compared to current law, and because it includes a “territorial” tax system that would exempt corporate profits that are earned offshore, or simply shifted offshore into tax havens.

Unfortunately, the deal President Obama has been negotiating is even worse in the sense that he has proposed to extend $4.7 trillion worth of tax cuts and only raise $0.7 trillion in new revenue through tax increases, compared to current law. Republican leaders, who want to extend all the Bush tax cuts, would reduce revenue even more, as explained in a statement released by CTJ last week.

As of this writing, several media outlets are reporting that the White House is negotiating a deal with Speaker Boehner, possibly one with massive cuts in public services but no guarantee of any revenue increases.

We hope the reports are wrong, and we hope that we won’t see a repeat of the last major “compromise” that marked a capitulation to anti-tax lawmakers whose views were out of sync with the American people.