A Dozen Reasons Conservatives Hate This 'Fiscal Cliff' Deal

January 2, 2013 - 12:18 PM

Republican Study Committee (RSC) Chairman Rep. Jim Jordan explains why conservatives oppose, and why he voted against, the fiscal cliff deal crafted by the Senate and passed by the House.

"Unfortunately, it also allows taxes to increase for many families and small businesses," Rep. Jordan said after the bill passed the House on Tuesday.

Jordan also called the bill (H.R.8) "worse than doing nothing":

"On spending, which is the real problem, this classic Washington deal is worse than doing nothing. We'll never get the budget balanced by delaying the few spending cuts that were agreed to in the summer of 2011."

The RSC released a list of a dozen reasons why conservatives reject the fiscal cliff deal:

1.      Affirmatively Provides for Tax Increases

2.      Delays Spending Cuts from the Budget Control Act

3.      Death Tax

4.      Extends Unemployment Benefits

5.      Extends Stimulus Provisions

6.      Tax Inequality

7.      Class Warfare

8.      Marriage Penalty

9.      Disproportionately Impacts Small Businesses

10.  Extends Farm Bill

11.  Threatens Economic Growth and Jobs

12.  Commission on Long Term Care

Here is the RSC's analysis of each of these conservative objections to the fiscal deal:

Affirmatively Provides for Tax Increases: If this legislation is enacted, some American families and small business would face higher tax rates in 2013 on regular income and income from capital gains and dividends than they have faced in recent years, a situation conservatives have historically and universally advocated against. An Obama administration "fact sheet" on H.R. 8 asserts, "for the first time in 20 years, Congress will have acted on a bipartisan basis to vote for significant new revenue."

Delays Spending Cuts from the Budget Control Act: Some conservatives may be concerned that H.R. 8 would delay FY 2013 sequestration for two months. The cost of that delay would be offset by lowering the discretionary spending caps for FY 2013 and 2014 and through increased short-term revenue by allowing 401(k) to Roth IRA conversions. Some conservatives expressed concern at the time of passage of the Budget Control Act that it exchanged an immediate increase in the debt limit in exchange for future spending cuts that may not occur. Similar concerns may arise here as additional current spending is offset by unspecified future spending cuts.

Death Tax: After many years of effort, conservatives succeeding in eliminating the death tax for one year, 2010. This legislation would permanently reestablish the death tax at a 40% rate with a $5 million exemption.

Extends Unemployment Benefits: The legislation provides the eleventh extension of the "temporary" expansion of the unemployment compensation program created in 2008. Many conservatives will be concerned that this $30 billion extension is not paid for. Many conservatives argue that extended unemployment benefits increase incentives to remain unemployed.

Extends Stimulus Provisions: The legislation would extend for five years three "temporary" refundable tax credits that originated in the stimulus bill: the American Opportunity Tax 2 Credit, expanded Earned Income Tax Credit, and increased refundability of the Child Tax Credit. This $134 billion in stimulus spending would not be offset.

Tax Inequality: If enacted, many conservatives have argued that this legislation would lead to an increase in the share of taxes paid by higher earners. That may increase the number of Americans who do not experience the full cost of the federal government, but benefit from it. The Obama Administration "fact sheet" declares, "the agreement will ensure we have the most progressive income tax code in decades."

Class Warfare: Some conservatives have argued that this legislation affirms Democrats' efforts to engage in class warfare by explicitly singling out high earners for more revenue.

Marriage Penalty: The new permanent tax brackets set at $400,000 for single individuals and $450,000 for families would continue to penalize married Americans as the bracket for married filers is not set at twice the amount of the single bracket. Many conservatives fought for tax reforms in 2001 and 2003 that eliminated the marriage penalty for lower-income filers, and hold that the principle of equal treatment for income of married and single taxpayers should be universal, not only for certain income groups.

Disproportionately Impacts Small Businesses: The legislation would allow increased tax rates for many small businesses, while providing some large corporations with tax breaks through the "extenders" package. These include tax breaks for wind energy, motorsports racing tracks, film and television productions, and cellulosic biofuels production.

Farm Bill: Some conservatives may have issue with the one-year extension of the Farm Bill due to the continuation of direct payments and the cotton program. Additional opposing arguments are that it extends indefensible direct payments and programs that need to be either reformed or terminated.

Economic Growth and Jobs: Many conservatives have expressed that increased revenue flowing to the federal government from taxpayers during a period of economic distress could negatively impact economic growth and increase the unemployment rate, particularly if investment income is impacted.

Commission on Long Term Care: The legislation would provide for a new Commission on Long Term Care. Some conservatives may be concerned that a commission seeking the establishment, implementation, and financing of a high quality system to ensure the availability of long-term services for individuals could provide support for the creation of a new entitlement program, similar to the Medicare prescription drug program. Other conservatives may feel the federal government has enough commissions and should decommission several before funding additional commissions.

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