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In The New Year
Updated On: Feb 06, 2013

January 2, 2013

Dear Sisters and Brothers:

As you know, the House of Representatives last night approved the Senate-backed compromise legislation to raise $620 billion in new taxes over the next decade.  The compromise measure developed by Vice President Biden and 

Senate Republican Leader Mitch McConnell will make tax cuts for the middle class permanent, continue unemployment assistance for the long-term unemployed, extend critical tax credits for working families, and delay for two months the massive across-the-board spending cuts in military and domestic programs for two months, known as sequestration.  This bipartisan agreement brings much-needed revenue by requiring the wealthiest to pay more in taxes, while offering an economic lifeline to the vast majority of working and unemployed Americans and their families.

Unfortunately, it did not raise as much new revenue as we wanted and it also sets the stage for major battles over spending cuts in the months ahead.  Looming in the next two months is the need to extend the federal debt ceiling which Tea Party Republicans have pledged to use as a new opportunity to extract further cuts in spending. 

Here are some of the highlights of the deal:

 

  • Income tax rates:Extends tax cuts on incomes up to $400,000 for individuals, $450,000 for couples. Earnings above those amounts would be taxed at a rate of 39.6%, up from the current 35%. Extends Clinton-era caps on itemized deductions and the phase-out of the personal exemption for individuals making more than $250,000 and couples earning more than $300,000

 

  • Alternative minimum tax:Permanently addresses the alternative minimum tax and indexes it for inflation to prevent nearly 30 million middle- and upper-middle income taxpayers from being hit with higher tax bills averaging almost $3,000.

 

  • Other tax changes:Extends for five years critically important improvements to the child tax credit and earned income tax credit, and provides a tax credit of up to $2,500 for college tuition.  Together, these will benefit 25 million low- and middle-income families.

 

  • Unemployment benefits:Extends emergency jobless benefits for the long-term unemployed for one year.  More than two million workers were scheduled to exhaust their unemployment benefits at the start of this year.

 

  • Social Security payroll tax cut:Ends the 2-percentage point cut in the payroll tax first enacted two years ago.

 

  • Estate tax:Raises the estate tax rate from 35% to 40%, with the first $5 million in value exempted for individuals and $10 million for couples.  These amounts are indexed for inflation.

 

  • Capital gains, dividends:Raises from 15% to 20% the tax on capital gains and dividends for income exceeding $400,000 for individuals and $450,000 for families.

 

  • Across-the-board cuts:Delays for two months, $109 billion in across-the-board cuts in Pentagon and domestic spending. However the delay is paid in part with additional cuts in domestic spending.

 

  • Medicare physician payments:Eliminates a scheduled cut in Medicare payments to physicians, ensuring that beneficiaries continue to have access to care.

 

Just as important as what was in the compromise legislation are the elements that were not included.  We were able to protect seniors and others from changes in Medicare, Medicaid and Social Security.  But make no mistake: those programs are still at grave risk.  In the weeks ahead, we must remain vigilant. Republican leaders in Congress have vowed to continue their demands for deep, drastic cuts to vital services that protect our communities – including funds for public schools, public safety, transportation, scientific research and college loans. They have made it clear that cuts in programs for veterans, seniors, students and low-income citizens will all be on the table.  This means that Social Security, Medicare and Medicaid remain at risk.  We must do everything in our power to protect these lifeline services.

There are alternatives to unnecessary, reckless cuts.  Billions of dollars can be saved, for example, through reforms that would not directly affect benefits and programs that Americans rely upon.  Allowing Medicare to negotiate drug prices is one example.  The tax code continues to be rigged in favor of wealthy individuals and corporations.  That needs to be fixed before we cut the earned benefits of seniors on Social Security or deny health care to America’s poorest children.  And the Defense budget must be scrutinized as well.  We need to continue to work closely together during these challenging times and focus on real solutions in the budget debates ahead of us.   

Our International staff has been in regular contact with our affiliates throughout the lame-duck session of Congress.  Moving forward we will intensify our efforts to engage our leaders and activists in these battles.  We will continue to press Congress and President Obama to focus on job creation, which is the best way to stimulate our economy. Together, we will do everything we can to protect working families as the new Congress and the administration struggle with these issues. 

Lee A. Saunders

President

AFSCME

 

 

 


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