NVDAILY.COM | Opinion
Posted August 25, 2010 | 1 Comment
Tax cut witching hour
The approach of the midterm elections makes Congress unlikely to do much more than indulge in even greater partisan sparring, but one major issue -- the expiration of the Bush tax cuts -- demands action or tax rates will revert to their 2000 levels.
Republicans, naturally, want to make all of them permanent -- they chose not to in 2001 and 2003 to mask their true cost -- but the nonpartisan Tax Policy Center estimates that doing so would cost $680 billion in lost revenue over the next decade. That gap can't be squared with the GOP's newfound concern over budget deficits, but math and consistency never override Republicans' determination to cut taxes.
The Obama administration favors letting the tax cuts lapse for the wealthiest, who benefited most from the Bush plan, but wants to retain them for individuals earning less than $200,000 and families earning less than $250,000.
Taking a more austere approach, Alan Greenspan, the former head of the Federal Reserve, whose implicit backing helped the tax cuts gain adoption, advocates their total repeal. "I'm in favor of tax cuts, but not with borrowed money," he said last month. "Our choices right now are not between good and better; they're between bad and worse. The problem we now face is the most extraordinary financial crisis that I have ever seen or read about."
Other economists worry that letting the tax cuts expire could dampen the fragile recovery. But that concern is better addressed by continuing the tax cuts for the middle class, struggling to make ends meet, and letting them lapse for the richest, who are more inclined to save than spend.
The Tax Policy Center estimates that most of the tax cuts would go to the richest one-tenth of 1 percent of Americans, a tough sell for Republicans in this sour economy.
Democrats have the leverage to win this fight. Whether they have sufficient will to prevail, unfortunately, is questionable.