12/17/2010 12:57 am ET Updated May 25, 2011

Rep. Jared Polis Explains the Story Behind the Story on the Tax Compromise Bill

Congressman Polis was kind enough to talk to me last night and explain what was going on behind the scenes on the tax compromise bill from the Democratic House perspective. It's a fascinating story with several parts posturing, several parts negotiating, and a sprinkling of making a point. It's not politics as we learn it in the textbooks, but it is politics as it is actually practiced. And thank you to Jared for laying out what was actually going on. (I think how Jared and others in the House handled this bodes well for their being able to negotiate well from the minority over the next two years.)

Jared first discussed all the efforts involved in the lame duck session, and how crazy it is trying to move all that through. First is the omnibus appropriations bill or a continuing resolution, the DREAM Act, DADT, the defense authorization bill that might come back from the Senate without DADT, and then the tax bill. He has been so busy that he was never in his office all day with all the meetings going on, including for the steering and policy committee which is presently working out who all the Democratic ranking committee members will be.

The Tax Compromise
I then asked Jared what he was doing, thinking, voting, etc. over the last couple of weeks on the tax bill. He started off by saying the big items in the bill at first were addressing the expiration of the Bush tax cuts and revising the estate tax. And he stated that he supports the bill. Then he went into the full history (the next several paragraphs is my paraphrase of Jared's explanation):

In November of 2009 the House passed an estate tax that he found reasonable. He not only supported it but was a floor manager of the bill. Instead of the estate tax dropping to 0% for 2010, it would have been set it at 45% on everything over $3.5 million. The Senate did not act and so the estate tax has been at 0% this year. Jared said the 0% inheritance tax "in my mind is a travesty" (very good to hear such strong words on this).

Next, about a month ago the House passed a very clean tax bill that let the cuts expire on income over $250,000 and retained them for the first $250,000 of income. This was a bill he ran on and supported. It went to the Senate where it got 53 votes and therefore failed to overcome a filibuster. So we were then facing a course where all the tax cuts expire, which was not a course he supported. A family making $40K would see their taxes go up $1K/year, a family making $60K would see an increase of $1.5K. Jared also pointed out that this was the platform both he and President Obama ran on and this is an area where he fully supports the President.

So Congress was then looking at a significant increase in taxes when people are struggling to stay afloat, coupled "with something that is even more onerous... the expiration of unemployment benefits." Specifically, there are several thousand Coloradans a week who will roll off unemployment starting next week, "right before Christmas," if this is not renewed. Polis then added, "I have no confidence that Republicans would renew unemployment benefits."

My $0.02: I think it's a key point that Jared (and therefore certainly many other Democratic members of Congress) believe that with a Republican majority there will be no extension of unemployment benefits. And that is a very reasonable assumption. As such, continuing extended unemployment benefits becomes now or never.

Therefore that required a trade. President Obama wanted the middle class tax cuts and extended unemployment benefits. What was the price for that? Tax cuts for the wealthy, "which seems to be their legislative priority." The Republicans held the Democrats hostage because they had the power to do so. In addition, "my party, the Democratic party, did not do very well in the election and they're coming to town." And so come January, Democrats are likely to get less or nothing.

There's no advantage in waiting for a worse deal later. He understands philosophically the desire to let the Republicans screw it up, but in responsibility to his district, he cannot let unemployment benefits run out and allow a tax increase to hit the middle class. And the President had limited leverage because of the upcoming change in Congress.

I then asked if the tax cut for the millionaires was the only part the Republicans cared about. Jared replied "it seems to be... yeah that's what they want, they want some adjustment on the estate tax as well." He then said that there was bipartisan support for adjusting the estate tax because the minimum next year is $1 million and that's a problem for many family farms and other small family businesses. What is in the bill is not as good as the House bill last year (35% above $5 million vs. the House's 45% above $3.5 million).

My $0.02: Jared is rich, moderate, and a strong believer in the power of the free enterprise system. If anyone is going to find common ground with the Republicans in Congress, Jared will. And he sees them as interested solely in giving more to the rich. I'd say that's a pretty clear indicator of Republican intent.

One of the things the progressive caucus wanted to get in the bill was to continue the renewable energy tax credits. This was "one of the reasons you saw our caucus, the Democratic caucus, doing some posturing." That gave us some leverage in negotiating some changes. This posturing led to an agreement by the Republicans to add the renewable energy grants, a couple of renewal energy tax credits, etc.

I asked if some of the last week was primarily a negotiating ploy. Jared replied "we wanted to show there was ambiguity as to if it could even pass the house ... I thought that was a good idea, not that the remarks to the press were not genuinely heartfelt ... but the reason we all joined in on this was that strategically they should not take the House Democrats for granted." That there had to be some concessions to the House Democrats.

In the negotiations, the House Democrats were not involved, the House Republicans were not involved, the Senate Democrats were not involved. It was just the President and the Senate Republicans. So this was a way to push back and make the bill a little better. (And probably also a way to remind Obama and McConnell that they couldn't take the House for granted.)

But after that was done "not passing a bill is unconscionable and contrary to everything the Democrats stand for" to allow unemployment benefits to run out in the midst of a recession and to have a tax hike on low and middle income workers.

Don't Ask Don't Tell
I next asked about whether DADT will pass the Senate. Jared first talked about how wonderful it was they passed a stand-alone bill in the House, including 15 Republicans voting for it. He then pointed out that it has the votes in the Senate so it's merely a matter of timing and scheduling. But he said that first the Senate has to figure out how to keep the government open. But then, if there's time, then yes.

I then asked him to look 10 years out, every state will have gay marriage - at that point what will be the next major civil rights issue. He said that's hard to predict but quite possibly it could be poverty or education. Jared pointed out that the quality of a child's education is decided by the neighborhood they live in, that we have some fine public schools, but we also have some with a 60% drop out rate. (I think providing a quality education to all could well be the next civil rights struggle.)

Next Year
I first asked if he thinks this country can get serious about debt when the Senate will not allow a tax increase on millionaires. Jared replied that he was encouraged by President Obama's leadership in this including the fiscal commission and the ideas coming from several progressive groups. The tax bill makes things worse, but the big issues are medium and long term, not short term. So we do need to insure we don't bankrupt our country, but he's encouraged by the President's efforts on this.

I next asked about the housing crisis. Jared's immediate reply was that many families are barely scraping by and barely making their house payment. If the tax cuts expire we will see a lot more foreclosures as more families can no longer cover their mortgage payment. So if we don't renew the tax cuts for the middle class, the housing crisis will be worse. Ditto if unemployment benefits expire.

He then discussed how Colorado has had a long bottom for a couple of years, unlike Las Vegas, which is still in really bad shape. Talking specifically about Adams and Boulder County, we've had stagnation for awhile, but he doesn't think it will get worse. And a "very progressive" part of the tax bill reduces the payroll tax on the first $108K. This will again help people with their mortgage payments. So, while foreclosures are still high, they have dropped some and should continue to drop.

I followed up asking if the payroll tax cut will damage Social Security, by making it permanent and then having to reduce Social Security to match that cut. Jared replied "no." As a progressive cut it's good, as a strong stimulus it's good. He then discussed how Social Security has long term issues that we need to address. Yes it will move forward a year or two when they need to address Social Security, but we need to address it regardless. Addressing it will probably be raising the cap, means testing the benefits, etc. when they need to take steps to keep social security solvent.

Next I asked if he thought Congress next year would be able to do anything effective on jobs or effective stimulus. Jared first discussed the stimulative effect of the compromise bill. Then speaking of next year he said "I don't see any kind of jobs effort coming from the Republicans. They've certainly been devoid of ideas this session." He then added that if they presented any ideas, he would be thrilled to work with them on it.

My final question was does Washington have less of a gut feel for the recession as unemployment is stovepiped in certain segments and so our Congresspersons don't see it first-hand. He started off saying a third of the Democratic staff are out of work (because of the flip due to the election results). So they know many people specifically who are out of work and struggling to find a new job. He then discussed how Congress people see this constantly when they are back in their district, talking to people, etc. Jared runs in to people all the time who have lost jobs, can't find work, are underemployed, etc. So he is directly aware of how tough and desperate it is for many, speaking eloquently and emotionally about this.

Jared's Closing Statement
I asked Jared if there was anything he wanted to add. He talked about how next session is going to be interesting because he doesn't know what it will be like to be in the minority (I know - it sucks). "We will not be running the place, we will be responding, messaging." He then added the good news is the Democrats won't have the responsibility of governing but instead can attack the Republicans for their mistakes. "I say that wearing my political hat, but wearing my American hat I really hope they come up with some good ideas."

He then added that this tax bill is one of the most difficult bills he will vote for, because it has a lot of things in it he does not support. But that it is far better, not even a close call, passing a bill rather than allowing unemployment insurance to expire and presenting the middle class with a huge tax hike.

Full recording of interview (including 2 times when he had to put me on hold): JaredPolis.wma

Jared's letter to his colleagues regarding the bill (pie charts are evil but the letter is good): Dear_Colleague_Obama_Tax_Proposal22.pdf

First published at Congressman Jared Polis - the story behind the story on the tax compromise bill