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Why didn't the GOP take any bows for the budget deal?

By harping on the negatives of the deal, Republicans failed to get credit for protecting most of their constituents

Jan 7, 2013 @ 2:03 pm

By Robert Hordt

Boehner, fiscal cliff, budget deal
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Boehner: Averted a direct hit ((Photo: Bloomberg News))

The fiscal cliff negotiations are going down as a major setback for congressional Republicans — President Barack Obama got his tax increase on the rich and the GOP got no spending cuts — but it seems to me the Republicans could have come off a lot better.

Rather than whining about the Obama administration's not tackling entitlement funding — and warning about the tough battle ahead over the debt ceiling and budget deficits — Republican lawmakers should have been taking some of the credit for the positive elements of the fiscal cliff legislation.

And make no mistake, there are a lot of good things for GOP's core constituency in the American Taxpayer Relief Act of 2012.

Let's start with marginal tax rates. The fact that the threshold on higher income tax rates was moved from $200,000 to $400,000 (and from $250,000 to $450,000 for couples) was a victory for many of the upper-middle income people Republicans traditionally speak for.

GOP legislators could have also taken credit for minimizing the impact of taxes on dividends. Many observers expected dividends to be taxed at the same rate as ordinary income, but that proved not to be the case. Capping the rate at 15% for most taxpayers, and at no more than 20% for wealthy taxpayers, was one of the true achievements of the tax bill.

And how about estate taxes? Sure, the tax rate on estates jumps to 40% from 35%. But that's a win when you consider that the rate was due to go to 55%, and the exemption was set to drop back to $1 million, from $5 million.

Don't forget the AMT. Had nothing been done, the dreaded alternative minimum tax would have ensnared another 30 million or so middle-income and upper-income taxpayers in its clutches for 2012. Not only does the new law boost the level of exemption, it indexes future exemption levels to inflation, something that critics have been advocating for years.

The bottom line is that the GOP could have — and should have — grabbed its fair share of credit for averting the fiscal cliff and cutting the best deal it could, given Republican lawmakers were negotiating with a president who had just been re-elected. Instead of accentuating what was done, the Republican leadership decided to harp on what was not done, leaving taxpayers and voters with the sense that all of Washington had indeed let them down again.

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