Still Waiting For An Answer on 2011 Tax Rates … The Political Process of Today

By Joshua K. Beecher, Guest Blogger

I wish I could be describing for you some highlights of tax law changes for 2011 to help with your year-end planning.   As you undoubtedly know, this subject is still being argued strenuously by all concerned, in spite of the “Tax Deal” that President Obama made with Republican leaders on Capitol Hill this week to address the expiring tax cuts put into place when Bush was in office.  It matters not which side of the aisle you find yourself, and what your personal thoughts are on the “Tax Deal” itself. 

Rather than debate the merits of whether or not those tax cuts should have been extended or not, I wish to focus on the process itself and how truly counterproductive Washington has become.

First we have the Republicans who started playing the “game” a few weeks ago when they stated that they would no longer listen to, vote on, or conduct any business (regardless of its merits or whether or not it was of benefit to the nation) at all until the issue of the tax cuts was addressed and settled.  Continue that same sentiment into last week, and the Senate Republicans shot down a bill that would maintain the tax cuts for anyone making under $250,000 a year; not only were they not going to conduct any business until the issue was addressed, but they weren’t going to view anything acceptable unless it was just an overall extension of the cuts as is.

Now enter the Democrats, many of whom are on their way out the door come January, and in no mood to play the Republicans’ game.  They choose to ignore the Republicans’ threats and hope to strike a deal on their terms. 

Not wanting to be left out of the fun, President Obama and the White House enter the scene over the weekend.  During his campaign, Obama swore off all errant moves made by Bush, and promised to correct our course; many Democrats of course believing this was the death sentence to Bush’s tax cuts.  However, coming off humiliating losses last month on Election Day, Obama eyes his future, and attempts to seize control once again.  He sees the opportunity to cut a deal (to bolster his long-term prospects), and does so; with the caveat of extending out unemployment payments to the millions receiving them across the country.

So, in summary, where does that leave us today?  Well, today Obama is attempting to sell the bill to his very own party members in Congress stating that it would be foolhardy and “borderline immoral” to allow benefits to run out for the long-term jobless.  This is supposed to be a deal in regards to the tax cuts, yet all the White House wants to discuss is the victory in protecting unemployment benefits for the “long-term” jobless.  In addition, he does toss in the fact that raising taxes on the middle class would be foolish at this time as well, but the Republicans are of course to blame for the fact that the “rich” are once again off the hook.  House Democrats are now saying they want to shoot the bill down for the fact that the President gave up too much; that while there should be compromise this is not a good representation of it.  And finally the trusty Republicans were so desirous to show their constituents that they protected these most cherished tax cuts that were set to expire that they agreed to some truly steep concessions on the side of unemployment benefits and social security cuts.  Everyone has their good news to spin in their favor, and everyone has their ability to demonize and place blame on the other. 

No longer do we discuss what’s truly good for the nation in Washington, we rather attempt to ensure political careers, and make sure the other guy looks bad (trying to make themselves look good by comparison.)

One side note to further illustrate the point.  Back in the stimulus package of 2009, the Federal Government changed a tax credit of up to 30% on the construction of commercial renewable energy projects to a grant which could be paid in cash 2 months after the completion of the project.  You have probably never heard of this seemingly meaningless piece of legislation, and you are further probably not aware that this grant program is set to expire at the end of the year along with the much touted Bush tax cuts.  Why does this have anything to do with our current discussion you might ask?  Well, everything really.  According to research and reports put out by the Solar Energy Industries Association (SEIA) that grant has been enormously successful in creating jobs, not to mention in furthering our independence in the energy sector. 

Many companies attempting to gain financing for these types of projects are non-profit entities, and as such must come to the table with what’s called “tax equity”.  Another major fallout in Wall Street’s collapse was financing for these projects due to the lack of a market for “tax equity”; however, these grants close that gap, and have been the main driver for the growth experienced in the sector since being put into place in February 2009.  Since their inception, the program has provided $1.3 billion to 1,170 solar projects across 42 states, as well as providing $15 billion to 211 wind-power developments in 38 states.  SEIA’s research shows that with solar jobs alone this growth as increased jobs (across the nation) by over 100% from 46,000 workers in 2009 to 93,000 in 2010.  (No data is provided on wind-power related jobs created over the same time period, but one can assume that the results would be similar.)

This is just one of many examples demonstrating how Washington continues to miss the mark on truly discussing and enacting real legislation to assist the American people.  Here is something that supports the private sector and private development, that doesn’t require a public subsidy once in place, is creating jobs at a huge growth rate and increasing our ability as a nation to cut ties to our dependence on foreign oil supplies for our energy needs; however, it’s something that no one wants to discuss in Washington (even though it’s supposed to be an important initiative of the President.)  Over this past weekend, Senate Finance Committee Chairman Max Baucus proposed a one-year extension to the program, and was shot down.

Again, I do not wish to say that the tax cuts were not something important to discuss and extend (I’m of the belief that they are a good thing and that ending them now would also end whatever fragile economic recovery is underway).   However, what cost did we pay to maintain those tax cuts, and was the cost truly worth it? 

·         Article in the Los Angeles Times on the renewal of the Federal Treasury Grant Program: http://latimesblogs.latimes.com/technology/2010/12/federal-treasury-grant-program-nearing-expiration-solar-and-wind-power-industry-urging-renewal.html?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+TheTechnologyBlog+%28Los+Angeles+Times+Technology+Blog%29

·         Report from SEIA on the job growth creating by the Fed’s Grant Program: http://www.seia.org/galleries/FactSheets/Factsheet_TGP.pdf

·         SEIA report showing the widespread benefits to many states of the Fed’s Grant Program: http://www.seia.org/galleries/pdf/TGP_Awards_12.7.10.pdf

·         Discussion of Obama’s uphill battle he faces in selling the Democrats on the “Tax Deal”: http://news.yahoo.com/s/ap/us_tax_cuts

·         Lastly, very interesting op-ed piece on the long-term (macro view if you will) effects that social networking is having, and will continue to have, on our society.  Would love your thoughts and feedback on what you think of what they label the “Zuckerberg Revolution”: http://www.latimes.com/news/opinion/commentary/la-oe-gabler-zuckerberg-20101128,0,7889675.story

Get Your Tax or Financial Questions Answered In A Future Blog Post 

I choose topics for my blog posts based on the questions I receive most frequently from you.  I appreciate your input!  Feel free to comment at http://www.dougbeecherstaxandmoneyblog.blogspot.com/

Important Note!   The information in this article is intended to inform you of some of the financial opportunities provided in the tax laws or elsewhere.  These laws are very complex and thus this article is not intended to give you specific advice for your personal situation.  If you need such advice, please contact a qualified professional.

© 2010, Joshua K. Beecher, all rights reserved. This article, either as a whole or in part, may not be reproduced or transmitted in any form without the prior written permission of the copyright holder. When such permission is granted, the user must state that the material was used by permission of the copyright holder.