The data for this post was compiled by Michael Linden, Associate Director of Tax and Budget Policy at the Center for American Progress Action Fund.
Yesterday, the White House agreed with Congressional Republicans on a “framework” for extending the soon-to-expire Bush tax cuts. In exchange for a two-year extension of all the tax cuts — including those for households making more than $250,000 per year — the deal includes a 13 month extension of unemployment benefits, a two percent cut in the employee side of the payroll tax for one year, and a retention of some expanded tax credits included in the 2009 Recovery Act.
To get Republicans on board, Obama also agreed to a two-year cut in the estate tax (which he characterized in a statement as a “more generous treatment of the estate tax than I think is wise or warranted”).
So, in order to get desperately needed help for the long-term unemployed and to provide the middle-class with tax relief in a weak economy, Obama agreed to tax cuts for a small, wealthy portion of the population that the Republicans were willing to go to the mat for, even if it meant that everyone’s taxes went up if the Bush tax cuts expired.
For comparison’s sake, here is a chart detailing both the number of people (in millions) who benefit from each side’s priorities, as well as the total cost (in billions). Obama’s components of the tax deal (extended unemployment benefits, the payroll tax cut, and the extended credits) will cost $214 billion to aid 156 million people. The Republicans priorities (extending the Bush tax cuts for the rich and cutting the estate tax), meanwhile, will cost $133 billion, but only benefit roughly 4.8 million people.
Excluded from this analysis is extension of the broad-based Bush tax cuts, on which everyone agreed. The total package will cost about $900 billion over the next two years, entirely financed through deficit spending.
As CAPAF’s Michael Linden and Michael Ettlinger noted, the various components of the tax deal (outside of the broad Bush tax cuts) will save or create about 2.2 million jobs. If, however, the GOP’s priorities were discarded in favor of further cuts in the payroll tax, that number would increase to 2.7 million, an addition of 500,000 jobs.
Of course, the lost revenue of the bonus tax cuts and the estate tax cut could also have gone towards reducing the deficit, which Republicans spend so much time complaining about, while simultaneously expanding by cutting taxes for the rich.
It’s unclear, at the moment, what Congress will do with this package, as both House and Senate members from both parties have expressed opposition. Sen. Bernie Sanders (I-VT) said yesterday that he would filibuster the package.
Read more about the tax deal in today’s Progress Report, “Tough Pill To Swallow.”