HOUSE DEMOCRATS, including some from Massachusetts, have a point about the proposed new version of the estate tax: The $5 million exemption — $10 million for couples — is higher than it should be, and the 35 percent rate is lower than in the past. But the dilemma facing the House as the days tick by before Christmas is not over optimal estate-tax rates. It’s whether to accept a sweeping compromise negotiated by President Obama and Republican leaders and endorsed by a big majority in the Senate.
Such compromises, by their very nature, leave both sides feeling bruised: Mitt Romney, among others, is urging House Republicans to go thumbs down on the deal for having too many giveaways to liberals. It is inconceivable in today’s Washington that House liberals and conservatives could ever reach a tax deal that both sides would happily embrace. This is the best splitting of the difference, however, and the Massachusetts delegation should support it.
Here’s why: The one-time, 2 percentage point cut in Social Security taxes is an enormous benefit to the middle class. (The rich won’t reap any windfall here: Social Security taxes only apply to the first $106,800 of income.) The extra $2,000 or so in the pockets of many families will provide a substantial lift to the economy. With an austerity-minded Congress ready to be inaugurated in January, a stimulus like this won’t be on the radar screen for two years. The economy needs the help now. At this moment, the economic benefits clearly outweigh the extra borrowing necessary to pay for it.
There are other solid provisions, such as extending unemployment insurance and renewing the Earned Income Tax Credit, which puts money directly in the pockets of low-income earners. There’s also the fact that the tax compromise is a bipartisan success story, backed by 63 percent of Democratic voters, 62 percent of Republicans, and 60 percent of independents, according to the Pew Research Center. In Washington, and the nation at large, it could usher in a much wished-for era of cooperation — or at least lower the heat between the two parties. Obama understands that the benefits of this compromise go beyond its provisions, to advancing the spirit of compromise itself.