Obama Kills Tax Cut Because It Didn’t Help Illegals

Neil Munro White House Correspondent
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President Barack Obama quietly killed a draft tax-cut because the GOP leadership wouldn’t agree to his demand that valuable tax breaks be given to millions of illegal immigrants, according to a Politico article about the secret negotiations.

Just before Thanksgiving, “the deal fell apart just as it seemed to be coming together… [because] Republicans worried undocumented immigrants targeted by [Obama’s Nov. 21 amnesty] would begin claiming the credits,” Politico reported.

The GOP leadership’s reluctance to award tax-breaks to illegals suggests top leaders may use the required December budget bill to deny funds to operate Obama’s promised amnesty. So far, GOP leaders have not said if they will block the amnesty funds — despite growing GOP grassroots pressure — partly because Democrats are threatening to block the complete budget if the amnesty is blocked.

The now-dead tax bill, dubbed the “tax extenders package,” is a grab-bag of tax breaks that are usually passed late in every congressional session. If the bill is not passed, businesses and voters will both face tax increases.

This year’s draft bill was expanded to include more tax-breaks for businesses, and was reputedly valued at more than $400 billion over 10 years.

Politico’s report said Democratic senators initially offered to approve the GOP’s demand for business-boosting tax cuts if the GOP agreed to extend the popular Earned Income Tax Credit for poor Americans.

But GOP leaders stepped back from the deal because they recognized that Obama planned to award the EITC money to illegals covered by his Nov. 21 executive order.

Senate leaders — such as Nevada Sen. Harry Reid and New York Sen. Chuck Schumer — then agreed to trade the business-tax breaks for tax breaks that would boost revenues for state and local governments.

But other Democratic senators denounced the deal, and also refused to reform the EITC system to exclude Obama’s illegals.

According to the IRS, two parents with three or more children would receive up to $6,143 in 2014 if they earn less than $46,997. Parents who earn less than the income threshold would get $3,305 if they have one child, and $5,460 if they have two children.

Most illegal immigrant households have very low income, and pay little in taxes. For example, in 2011, roughly 22 percent of immigrant households — both legal and illegal — were classified as living in poverty. In contrast, only 13 percent of American households were in poverty.

Also, the EITC program is already poorly monitored and may be subject to large amounts of fraud, according to critics.

GOP leaders reportedly refused to trade the EITC extension in exchange for the business tax cuts.

The tangled deal died when the White House demanded that the illegals should get the unreformed EITC tax payments. “An extender package that makes permanent expiring business provisions without addressing tax credits for working families is the wrong approach… Any deal on tax extenders must ensure that the economic benefits are broadly shared,” read a Nov. 24 statement from the Treasury Department.

Obama’s amnesty was blamed for the breakdown in Poltico’s story. “If the immigration announcement had been delayed, we probably could have gotten something done, a Hill aide told Politico.

But Democratic senators also played a role because they refused to reform the EITC rules to curb long-standing fraud or to exclude Obama’s illegals.

The crash highlights the the GOP’s increasingly assertive response to the president’s immigration policies.

Obama is offering work-permits, $2 trillion in taxpayer benefits and a quick route to citizenship to at least 4 million of the estimated 12 million illegal immigrants in the country. He is also trying to win business support for his plan by boosting the inflow of guest-workers sought by blue-chip companies.

Polls show that Obama’s immigration politics are very unpopular among GOP voters, swing voters and some Democrats.

In the face of Obama’s radical policies, the GOP base has become increasingly determined to block his policies. In 2013, the base pressured House Speaker John Boehner to not pass the Senate’s amnesty bill that would have roughly doubled the flow of legal immigrants and guest-workers into the nation’s stalled economy.

Obama’s immigration policies are welcomed by the business community and by major investors, whose wealth rises as immigrants nudges down wages, according to a June 2013 report by the Congressional Budget Office.

The voter vs. donor fight is likely to escalate as GOP leaders try to win the presidency in 2016.

Obama’s immigration priorities have dominated U.S. national politics for two years, partly because a handful of GOP politicians — such as Sen. Lindsey Graham and Sen. John McCain — have aligned themselves with business groups that want more low-wage foreign workers.

The business-backed focus on immigration has diverted GOP attention from other priorities that could have helped the economy, including tax cuts, careful deregulation and education reform.

The immigration fight has also widened the base vs. business split in the GOP. For example, the top Republican in the House, Rep. Eric Cantor, lost his seat in June 2014 when he was defeated in a primary by a local economics professor, Dave Brat, who campaigned against amnesty and and what he labelled crony capitalism.

The fight has now erupted in the Senate, where Sen. Jeff Sessions, the leading GOP voice against amnesty, is now facing a challenge by Wyoming Sen. Mike Enzi for the chairmanship of the critical Senate budget committee.

The chairmanship is important because Sessions could use it to pass a 2016 budget plan. Once passed, the budget would allow the GOP majority more leeway in the complex Senate’s complex debating rules to curb progressive spending priorities.

The chairman will be picked by a secret vote among the GOP members of the committee. The committee members include Sen. Graham and New Hampshire Sen. Kelly Ayotte, both of whom supported the Senate’s 2013 amnesty bill.

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Neil Munro