At 2 a.m. the Senate passed in an 89-8 vote The American Taxpayer Relief Act of 2012 that does not cut the deficit but does make permanent the Bush tax cuts for families earning under $450,000. Taxes will rise on all those earning above that level. Capital gains taxes will rise, the Alternative Minimum Tax has been patched and unemployment benefits extended for another year.
Though it's unlikely to happen, here's a modest suggestion for Congress as they take another pass at spending cuts in Feburary. If you want to give Americans a break: stop the subsidies for bread and circuses.
First the bread (or more precisely, the milk). In the days leading up to last night's vote, Americans were treated to a spate of headlines that was nothing more than a variation on the Washington Monument Strategy, "Don't make us charge $7 a gallon for milk!"
Dubbed, "the dairy cliff," unless Congress agreed to extend dairy price supports from the 2008 farm bill, a 1949 law would automatically be triggered 'forcing' lawmakers to charge double for milk. Why not just scuttle the 1949 law? Because it was put there as poison pill to benefit the lactose lobby. The trigger helps lawmakers avoid reforming crop subsidies. All told, dairy subsidies cost $4.9 billion between 1994 and 2011. So, misguided price floors instituted in 1933 will continue to stimulate dairy overproduction, waste resources, and ensure higher prices for consumers in 2013.
Congress also extended its largesse to Hollywood. Approved in last night's deal is an extension of a 2004 tax credit for film production companies. The credit applies to both film and television and allows companies to deduct between $15 and $20 million per production. If anyone thinks that $430 million in movie tax breaks helps stimualte employment, consider this study of state film credits by left-of-center Center for Budget and Policy Priorities. Basically, film companies bring their own production companies to town, take the breaks, and leave -- and you pay for it.
Ezra Klein notes several other "weird" special interest victories: including credits for NASCAR, railroad tracks, mining safety equipmement, $1.6 billion in tax-free financing for Goldman Sachs headquarters, and subsidized rum. Congress has extended the rum exicse tax with revenues that are directed to help the industry in the U.S. Virgin Islands and Puerto Rico.
There's also an economic development tax credit for American Samoa.
And the feared spending cuts contained in the sequester? That's been pushed to Feburary, just as the U.S. hit its debt ceiling of $16.7 trillion on New Year's Eve.