The American Taxpayer Relief Act was passed and conservatives around the nation immediately began calling for the heads of those conservative lawmakers who voted in favor of the bill.
I am a conservative CPA and I have had the opportunity to review the bill. The President’s proclamation of victory may be a bit premature. The reality of the bill and the conservative lawmakers’ strategy in backing may have actually been a stroke of genius.
For my fellow conservatives, I would encourage us to take a step back and see what really happened.
In reality, the American Taxpayer Relief Act made permanent many of the "Bush" era tax cuts and removed substantial uncertainty for the vast majority of Americans.
During World War II, President Roosevelt with advice from Gen. George Marshall, decided to fight a holding action in the Pacific and fight to win first in Europe.
In much the same way as leadership was exercised by Gen. Marshall before and during World War II which eventually led to the defeat of Hitler in Germany and the Japanese, today the conservative lawmakers had to deal with a popular President in order for our nation to survive to fight another day.
Whenever one negotiates, it is imperative to understand the opponents’ strategy.
In that regard, President Obama, Harry Reid, and Nancy Pelosi would have had no qualms about pushing for an end to the tax cuts in place since 2001.
It is an absolute myth of the media that the so called Bush tax cuts only affected the wealthy. The tax rates reductions were across the board for all income levels. Allowing these tax rates to expire would have been fatal to the conservative cause. The debacle of expiring tax rates would have been felt by virtually all Americans and blame would have been place with the Republican House.
In fighting a strategic battle for the preservation of our nation, the Republicans and conservative lawmakers who voted for the bill decided to play the game that Obama has been playing during his term and the Democrats have been playing for decades. Liberals have been playing chess and conservatives checkers, at least until now.
The permanency of so many tax cuts now effectively removes from liberals the weapon of blaming the "Bush" tax cuts for our nation’s woes. They are now made permanent by a Democratic President and a Democratic Senate.
Imagine if Congress had allowed the expiring tax codes to expire and reset. Imagine trying to reinstate those tax changes for any income tax bracket let alone for the wealthy in the next four years of the Obama second term.
Some specific tax provisions made permanent include:
• Individual income tax brackets affecting all taxpayers
• Capital gains and dividend benefits for all but the highest income Americans
• Alternative Minimum Tax has been indexed for inflation and will benefit millions of middle income Americans.
• Estate and gift tax benefits have been preserved at the higher levels
• Marriage penalty relief has been made permanent
• Liberalized child and dependent care credit has been made permanent
• Employer provided education benefits have been preserved
• Preserved student loan provisions and made them permanent
• The employer provided child care credit has been made permanent
The fiscal cliff was a Nancy Pelosi invention passed when the House and Senate were controlled by the Democrats. President Obama willingly signed the law setting up this artificial cliff to create a disaster for the conservative movement in future years.
The brilliant solution by the Republican Senate leadership thanks to Mitch McConnell and conservative senators such as Pat Toomey effectively neutralized Obama.
First, the American people would have never understood that the President was playing with them if Republicans allowed the tax rates to go up at this time. Most would have blamed the Republican House setting the stage for Republicans to lose the House of Representatives in 2014 and potentially further eroding the conservative position in the U. S. Senate.
It is critical that all conservatives remember that the Democratic senators elected when Obama took office in 2008 are up for reelection in 2014. If there is any hope of ever regaining control of the Senate and then strengthening the Supreme Court in the last two years of Obama’s second term, the conservative hemorrhaging had to stop.
Second, for the apparent victory of the President with the increase in taxes on those over $400,000 (really those over $250,000 due to deduction phase outs), the President basically got a 60 day reprieve before he has to fight the battle all over again with the debt ceiling limit.
On the debt ceiling limit, the Congress will find a substantially more favorable political climate. A majority of Americans understand the stupidity and folly of our current spending. That is abstract and not personal to them directly. It is a conceptual understanding that they can relate to because they understand that they cannot run their homes the same way. Opinion is on the conservative side most likely during this debate.
Third, the American people will now view Republicans as having reached across the aisle to solve this problem for the tax rates on January 1, 2013 and will expect similar concessions from the Democrats and the President.
The President’s only effective recourse is to get conservatives to turn on our own who voted yes for the American Tax Relief Act of 2012 and remove them from office in 2014 or at the next election.
Should the President be effective at inciting us to turn on ourselves, he will win the game of chess and we will lose a nation.
Col. Frank Ryan, CPA, USMCR (Ret) and served in Iraq and briefly in Afghanistan and specializes in corporate restructuring and lectures on ethics for the state CPA societies. He has served on numerous boards of publicly traded and non-profit organizations. He can be reached at [email protected] and twitter at @fryan1951.