Congress Passes The Obama Tax Non-Increase Bill

A tax hike is averted, but only for two years – not enough time or certainty to “create” jobs but certainly better than a tax increase.

Majorities of both parties supported the bill. Voting in favor were 139 Democrats and 138 Republicans, while 112 Democrats and 36 Republicans voted against it. Eight lawmakers didn’t vote.

The tax-cut plan extends through 2012 all Bush-era tax reductions on income, capital gains and dividends. It continues expanded unemployment insurance benefits through 2011, cuts payroll taxes by 2 percentage points during 2011 and lets businesses write off 100 percent of capital investments between Sept. 9, 2010, and Dec. 31, 2011.

Classic Pelosi:

“I’m sorry for the price that has to be paid by our children and our grandchildren to the Chinese government to pay for the increase in the deficit that the Republicans insisted upon.”

We’ve recently covered this ground before but Nancy is fooling almost no one. The government creates a deficit by spending money it doesn’t have and in this case money it was never going to have and in either case is not entitled to. Voters made that clear to everyone but Nancy Pelosi.

Some early reactions:

The tax-cut deal, along with larger-than-projected gains in U.S. retail sales, prompted economists to raise their forecasts for gross domestic product and consumer spending, which accounts for about 70 percent of the world’s largest economy.

Michael Feroli, chief U.S. economist at JPMorgan Chase & Co. in New York, increased his 2011 growth forecast half a percentage point to 3.1 percent. Tom Porcelli, a senior economist at RBC Capital Markets Corp. in New York, raised his by one percentage point, also to 3.1 percent.

Deutsche Bank Securities economists, led by Joseph LaVorgna, said the tax agreement would increase inflation- adjusted growth by 0.7 percentage point, to a 4 percent annual rate for the fourth quarter of next year.

Only after the fact will we find out what earmarks were hidden in the 1900 pages but for now the passage of this bill brings short-term stability for taxpayers, many of which have been planning all year for higher taxes next year.

In light of this, it will be interesting to see if there will be a last minute boost to holiday shopping – I predict that very thing.