There were a couple of positive legislative developments in Washington this week. First, there was the passage of the arcanely named tax reconciliation bill. This bill extends the 2003 tax cuts.
These tax cuts include the 15% tax rate on capital gains and dividend income and an extension of the Alternative Minimum Tax (AMT) exemption. The AMT exemption had already expired and the 15% capital gains and dividend rate was scheduled to expire in 2008. The legislation which passed in the House (244-185) and the Senate (54-44) this week extends the AMT exemption for the current year (2006) only and extends the capital gains and dividend rate through the 2010 tax year. The bill included about 30 other assorted tax provisions which are narrower in their focus.
Now, I would have preferred to, and the House could have passed a permanent extension of the 15% rate, but the Senate would not have done so. Therefore, a 2 year extension was the best that we could get. This is policy by incrementalism. Republicans have not been particularly good at this in the past. But it works. We have the tax rates through 2010 and we can always try again next year for permanence. Furthermore, had the 2008 expiration been left in place, anticipation of a tax increase may have affected investor behavior and dampened the economy.Democrats (only 15 out of 201 of them voted for the bill) have been screaming all week that this bill is a tax cut for the rich which will increase the deficit. Here are some facts that you may not know to counter these inaccurate charges:
*Over 50% of Americans own stocks. So, this bill reduces the taxes of more than half the country. Is most of America "the rich?"
*That 50% does not include additional Americans whose retirement is invested in stocks, either through their employer, a government agency, an IRA or 401(k). The lower rates encourage higher dividend payouts and have helped the market approach an all time high, thereby benefiting retirement accounts.
*Opponents claim the tax cuts "cost" the government money. But since the 15% rate went in to effect federal, government revenue has increased. Government statistics confirm this. Paying dividends and incurring capital gains are often discretionary decisions. When the tax rate is high, you don’t want to do it. When it’s low, you do it more often. This has led to an increase in federal revenue of 15% last year and 11% so far this year. These increases in revenue happened because of the tax cut. These increases are notably much higher than the revenue increases that occurred after the Clinton tax increases. So, don’t believe the inaccurate rhetoric of the other side. These tax policies have benefited the economy as a whole; they have allowed people to keep more of their own money, and they have helped reduce the deficit.
Another interesting bill that passed this week was HR 5037, the Respect for America’s Fallen Heroes Act (Rogers-R-MI). Recently, antiwar protesters have been disrupting the funerals of soldiers killed in Iraq and Afghanistan. During a sacred time of memorial, grief and remembrance of those who have fallen, these misguided protesters have said things and carried signs defaming the very people whose sacrifice made their right to protest possible. And they have done this in front of grieving family members and friends. If you have seen any of what has gone on, it is truly disgusting.
A Supreme Court decision allows some control of protests on Veteran’s administration property, such as cemeteries. This bill prohibits protests, unless they are approved, from coming within 500 feet of a memorial service taking place on a federal cemetery.
It is good that this passed overwhelmingly (408-3). It is very sad that we ever had to pass it.