Continuing its trend of bucking compassion and fiscal responsibility in lieu of tax cuts for the wealthy, the House of Representatives voted last week to pass the $56 billion reconciliation tax bill. This vote, which came on the heels of the vote to save money by slashing mandatory spending, culminated what seemed to be a month of illogical, hypocritical voting. Unlike the Senate tax bill, which centered on extending Alternative Minimum Tax relief (which is increasingly hitting upper middle-income taxpayers), the House tax bill was centered on a two-year extension of low tax rates on capital gains and dividends, the benefits of which will go predominately to the super wealthy. It is no wonder Rep. David Obey (D-WI) said that House actions "makes Mr. Scrooge look like Mother Teresa." The House voted mainly along party lines, 234-197 in passing this bill. Nine Democrats took the plunge and voted to increase the deficit while providing tax breaks for the wealthy, along with all but three Republicans. Those Democrats were Reps. John Barrow (GA), Melissa Bean (IL), Dan Boren (OK), Robert Cramer (AL), Henry Cuellar (TX), Lincoln Davis (TN), Bart Gordon (TN), Jim Marshall (GA), and Mike McIntyre (NC). The three Republicans voting against the tax cuts were Reps. Sherwood Bohlert (NY), Jim Leach (IA), and Fred Upton (MI). This bill, according to the Joint Committee on Taxation, will extend through 2010 the 15 percent capital gains and dividends tax rate at a cost to the federal government of $20.6 billion. Robert Reich, former Secretary of Labor under President Clinton, pointed out in his recent article Class Warfare With Taxes that the House's actions speak volumes on where the loyalties of its members lie, particularly in light of their choice to cut taxes on capital gains while the Senate used the reconciliation process to extend AMT relief. Reich says:

Most of the benefits of the House's proposed extension of the dividend and capital gains tax cuts would go to the top one percent of taxpayers, with average annual incomes of more than $1 million. Most of the benefits of the Senate's cut in the AMT would go to households earning between $75,000 and $100,000 a year, who would otherwise get slammed.

Reich goes on to point out that most likely, capital gains and dividends tax cuts as well as an extension of AMT relief will end up as part of final bill negotiations. He calls this skilled political maneuver an "elegant compromise" by Congress to pass both measures while exploding the deficit. Congressional Republicans say the costly tax cuts are needed to "grow the economy" and thus indirectly help people in need, but at the same time they slash mandatory spending on proactive programs that directly help people in the name of deficit reduction. National budget deficits need to be dealt with, but by a combination of reducing spending and rolling back irresponsible tax cuts--not the reverse Robin Hood tactics of this Congress. House Passes Additional Tax Cuts On Dec. 7, the day before the House passed the tax reconciliation bill, its members voted on three other tax cuts, bringing the total amount of tax cuts passed during these two days to $94.5 billion. As Concord Coalition executive director Robert Bixby aptly stated:

I don't think it makes any sense to go through all the difficulty they just went through with the budget-cutting bill, then give it all back in tax cuts. If they want to cut taxes, fine, but they are going to have to cut spending by at least that much to help the deficit, and clearly they are not willing to do that. They have to start looking reality in the face.

The bills passed were:

• H.R. 4096, which passed by a vote of 414-4.This bill extends AMT relief by one year at a cost of $31.2 billion. It was passed outside of the reconciliation process so that House GOP leaders would have enough room in the reconciliation tax bill to extend the costly capital gains and dividends tax cuts.
• H.R. 4440, which passed the House by a vote of 415-4. The bill, which will cost $7.1 billion over five years, will provide tax breaks for businesses in the "Gulf Opportunity Zone." Because of the work of Frank Wolf (R-VA) and other House members, GOP leaders exempted casinos, country clubs, hot tub facilities, liquor stores, massage parlors, golf courses, racetracks and tanning salons from the tax breaks.
• H.R. 4388, which will extend a provision allowing members of the military to use their combat pay to claim their earned income credit. The bill will cost $153 million.

Each of the bills passed with broad bipartisan support and little discussion of how the deficit will be impacted. The budget deficit is projected to reach between $331 billion and $350 billion in Fiscal year 2006 and remain above $300 billion each year through 2010, when most of Bush's tax cuts are set to expire. If the tax cuts are extended, these projected deficits will undoubtedly skyrocket above that figure. (In related news, the Treasury Department announced that November's deficit of $83.1 billion was the largest ever for that month.) When Congress will begin to face reality and enact tax policies that will put the country back on track is unclear, what is not is that such a policy realignment is becoming increasingly imperative to face the difficult long-term fiscal challenges looming in the not-so-distant future.