Today, Speaker Paul Ryan announced the appointment of Representative Pat Tiberi as Chairman of the Joint Economic Committee. Tiberi released the following statement: “It is an honor to be n...
FISCAL CLIFF DEAL: NOT BALANCED BUT NECESSARY, NEXT FIGHT SPENDING
Capitol Notebook: A Column by U.S. Congressman Pat Tiberi (R-OH)
12:00AM on January 1, 2013 the Federal government began to go over the fiscal cliff when the largest At tax hike in United States’ history went into effect. The tax hike resulted from the reinstatement of higher Clinton-era tax rates on families and small businesses that had been originally been cut in 2001 for ten years. In December 2010, they were extended for two years. The tax hike consisted of one part of the fiscal cliff. The other part consisted of nearly $1.2 trillion in spending cuts over ten years scheduled to begin the next day, on January 2, 2013. Roughly half of those cuts come from the Defense Department. These spending cuts, commonly referred to as the “sequester,” were established as part of the Budget Control Act of 2011. The Congressional Budget Office and independent economists predicted the fiscal cliff would return unemployment rates to above nine percent and would force the economy back into recession. One study estimated it would cost Ohio 100,000 to 350,000 jobs. On the evening of January 1, 2013, I voted in favor of legislation approved by the Senate twenty hours before to permanently cut taxes back to their 2012 levels for most all Americans and hundreds of thousands of small businesses, as well as to replace the spending cuts in the sequester for January and February. Had the bill failed to pass, the average family would have paid $1,028 in higher taxes this year.
Several attempts to avoid the tax hike failed before Congress approved the legislation on New Year’s Day. In August of 2012, I voted for legislation to extend all of the then-current tax rates. However, the Senate refused to consider the bill. After the November election, Speaker John Boehner and President Barack Obama attempted to broker a broad deficit reduction agreement including both revenue increases and spending cuts but were unable to come to a consensus. In the end there were only two options: approve the bill or allow the largest tax hike in United States’ history on every working American to take effect.
Other tax cuts in this measure include:
· A Permanent Fix of the Alternative Minimum Tax (AMT). It’s indexed to inflation giving 30 million middle class Americans certainty that they will not be subjected to the AMT, a tax they may not have been aware of in the first place. The AMT began in the 1970s as a way to subject a small number of high income Americans to higher tax rates, but failed to index the AMT to inflation. For decades Congress has enacted one-year patches to prevent the AMT from affecting the middle class, but had never been able to reach consensus to make it permanent.
· Death Tax Certainty. I would have preferred the death tax be eliminated all together, but this measure permanently sets a $5 million tax exemption indexed to inflation, protecting many family businesses and giving Americans certainty in planning for the future.
· Permanent Child Tax Credit Increase. The higher tax credit supported by House Republicans was first enacted by Congress in 2001, raising the amount from $500 to $1000 per child and was made permanent by the fiscal cliff bill. The $500 level went back into effect on January 1st.
· Marriage Penalty Elimination. The measure permanently eliminates marriage penalties in the standard deduction and the fifteen percent tax bracket that stood to impact 32 million married couples beginning this year.
· Permanent Lower Tax Rates. The bill makes permanent the 10 percent, 15 percent, 25 percent, 28 percent and 33 percent tax brackets for Americans and small businesses. In addition, the 35 percent bracket is made permanent for taxable incomes up to $400,000 for single filers and $450,000 for joint filers.
· Permanent Lower Taxes On Investment. The bill lowers tax rates on capital gains and dividends to 15 percent for income below the top level. Capital gains and dividend income above that amount is locked in at 20 percent. The top rate for dividends would have been taxed at 39.6 percent for 2013 but for the bill. In doing so, the bill makes permanent an equalized rate below income tax rates for capital gains and dividends that House Republicans have long fought for.
I would have preferred that the top income tax rate be cut to 35 percent and the top dividend and capital gains rate be cut to 15 percent as had been the law from 2001-2012; but House Republicans had never been able to build enough support to permanently lower these rates. Indeed, even when Republicans controlled the House, the Senate and the White House we were unable to make the cuts permanent. In 2001 the cuts were opposed by Senate Democrats who threatened to filibuster resulting in the cuts only going into place for ten years. I have voted for seven bills since 2001 to make the cuts permanent, only for them to die from Senate filibusters. The legislation passed on New Year’s Day is a monumental victory for those who have advocated for permanent lower taxes for over a decade.
President Obama and Congressional Democrats held all of the cards in the negotiation over taxes. The only card Republicans had to play was to allow taxes to go up on everyone on January 1, 2013 by refusing to reach an agreement, resulting $3.8 trillion in new taxes. Let me be clear: had the House rejected the Senate legislation, every single working American would face higher taxes and the result would have been $3.8 trillion dollars in new tax revenue to the Federal government over the next ten years that would have likely gone to new spending, not deficit reduction.
The bill also deprived President Obama and Congressional Democrats of many of their demands on the sequester. The President pushed for a two year delay in the sequester, essentially doing away with the spending cuts altogether. The bill limited the delay to only two months and offset the delay. While President Obama was successful in including around $300 billion in temporary spending in the agreement, we were successful in making permanent $3.7 trillion in permanent tax cuts, allowing 99 percent of Americans to keep more of their money.
As a result House Republicans are now in a better position to take on President Obama on spending cuts when he does not have the leverage of taxes going up on every American worker. Congress and the president now will debate the debt ceiling, sequester and the annual appropriations process in the coming months. I, along with other House Republicans, intend to force the issue of spending cuts in these debates. President Obama will face the issue of spending cuts at nearly every turn. I believe the spending reductions in the sequester should be maintained, but replaced with more targeted cuts that would not jeopardize American security through arbitrary defense cuts. I also believe that reforms to entitlement programs must be on the table. More than half of federal spending goes to fund entitlement programs like Medicare, Medicaid and Social Security. To truly change the trajectory of spending in this country we must address entitlement reform (mandatory spending).
Some House Republicans chose to vote against the bill. They argued that the bill should have included more tax cuts, addressed the sequester, included entitlement reforms, included other spending cuts and denied President Obama any spending extensions that were not offset. I agree with all of these positions, but had every House Republican adopted this strategy the bill would have failed. This is not governing. Some House Republicans who voted against the bill even told me they were voting no but were “hoping the bill would still pass.” As your Representative to Congress my job is to work to get, and to vote for, the best outcome that can be reached. The choice on the evening of January 1, 2013 was to vote for an imperfect bill in order to provide permanent tax cuts for nearly all Americans or to reject the bill and see 100 percent of Americans pay the same Federal income taxes as when Bill Clinton was in the White House. I look forward to continuing to fight to reduce spending and to ultimately balance the budget for our children and the next generation of Americans.