It's amazing that House Republicans have yet to budge even a little on taxes in this fiscal cliff standoff, considering the vast amount their base will stand to lose if the Bush tax cuts expire. You'd think the wealthy donors would be ramping up the pressure for some kind of a deal.
Let's look at what these wealthy donors stand to lose if the GOP stubbornly refuses to compromise and instead lets the Bush tax cuts expire.
Income tax rate. This is primarily what you hear discussed in the media. The top rate goes from 35% to 39.6%. Keep in mind, however, that salary for the super wealthy is a tiny sliver of their earnings - if indeed they have a salary at all. Still, it will hurt them in another way, as you'll see further below.
Capital-gains tax. This is the bread-and-butter for the wealthy that comes from the sale of stock and other specified transactions. That rate is now 15%. If the Bush tax cuts expire, these donors suddenly will have these gains taxed at 23.8%. This includes the pre-Bush capital gains rate of 20%, plus the Obamacare 3.8% surcharge for high earners. (This surcharge kicks in on Jan 1, cliff or no cliff.) Negotiating this down just a couple of points would save the super-wealthy millions. Motivation enough, one would think.
Tax on dividends. Dividends are payments made to shareholders by a corporation just for holding its stock. Currently, these are taxed as capital gains - at 15%. But when the Bush tax cuts expire, dividends will once again be taxed as regular income, not as capital gains, and these donors will then pay a whopping 39.6% on dividends - significantly more than double what they pay now. This not only will affect the wealthy, but it also will hurt corporations who pay these dividends, since their stock will become that much less attractive.
Estate tax. Don't have anything you'd call an estate? Well, these donors do, and creating them is their lives' passion. Currently, these donors' heirs are exempt from paying any taxes at all on the first $5.1 million of the estate. This exemption drops to $1 million when the Bush tax cuts expire. And beyond that $1 million threshold, instead of paying 35% as they do now, the donors' heirs will now give up more than half of the estate to taxes: a staggering 55%. Have $20 million? Your heirs will get just $9.5 million instead of $14.8 million.
So with all of this at stake, you'd think the House Republicans would be desperately dealing to salvage SOMETHING. For example, they could allow the income rate to increase to 39.6% in exchange for a break on capital gains or dividends or estate taxes. What exactly are these donors paying for if not that? Instead, it looks more and more likely that they will lose it all.
How is this happening? Don't House Republicans see what their donors stand to lose?
The answer is unsurprising: If a Republican goes on record as making any compromise with Democrats on taxes, it will all but guarantee his ouster by some Tea Party puritan in the primaries. And the only thing House Republicans care about more than their rich supporters is their own jobs.