See Jonathan Chait’s “Republicans Back to Raising Taxes on the Poor.” They blame the President’s immigration plan.
The predicate for this unlikely conflict is that the tax code contains a bunch of breaks and deductions that were written as temporary, but that Congress usually decides to just renew every year. Most of those breaks benefit businessesÂ â€” the main one being a tax break for research and development. Also included in that package are several tax breaks for low-income workers that Democrats passed into law in 2009. Traditionally, the two parties have agreed to extend all the tax cuts together at once. It was not exactly what either party wanted â€” Democrats didnâ€™t like bleeding revenue from the Treasury every year, and Republicans didnâ€™t like extending tax cuts to low-income workers â€” but the compromise suited both sides well enough that nobody cared to blow it up. Now itâ€™s getting blown up.
Brian Faler and Rachel BadeÂ report that Obamaâ€™s immigration relief plan is the proximate cause. Newly legalized workers will pay taxes, and thus be eligible for tax breaks. â€œIf Republicans agreed to extend [those tax breaks] now,â€ Faler and Bade report, â€œit would look like they were voting to expand government benefits to illegal immigrants.â€
Yeah, those lucky duckies.
So first Republicans made the tax breaks for business permanent, while allowing the tax breaks for low-income workers to expire at the end of 2017. Since they would no longer be tied to tax breaks for the more affluent constituencies that have influence with Republicans, this would mean they would almost certainly expire. Families earning $10,000 to around $25,000 a yearÂ would loseÂ nearly $2,500 a yearÂ â€” a punishing blow to the working class.
Amazingly, Democrats in the Senate like Harry Reid and Chuck Schumer agreed to this plan. Before Thanksgiving, Obama threatened a veto, causing Reid to beat a hasty retreat.
Chuck needs to retire. He’s my senator, and I say so.
Meanwhile, the CEO community is apoplectic at the standoff. Business leaders by and large have occupied a middle ground between the two parties (which is an indication of how far right the terms of the economic debate have shifted since Republicans took control of Congress). They share the GOPâ€™s general ideological aims, but donâ€™t share its willingness to blow things up in order to achieve them.
A lot of business leaders have been pleading for immigration reform, actually, because they think it will be good for them. Still, they support Republicans.