Here we are sitting two months from New Year’s eve and we still have no clue what is happening with the Bush Tax Cuts. These Tax Cuts have been in effect since 2001 and nearly 10 yeas later, Congress is scratching their heads, wondering what to do.
It is no wonder that the American economy is suffering when the government can’t put together a plan to deal with these cuts during a 10-year period.
U.S. Treasury Secretary Timothy Geitherner said on Tuesday that it would be irresponsible for Congress to adjourn this year without extending Bush Tax Cuts for the middle class but he remained opposed to a permanent extension of the tax cuts for the wealthiest Americans.
This seems to be the most consistent message from Washington including President Barack Obama. Obama has favored extending the cuts for the middle class while eliminating them for those making more than $250,000 a year. Republicans favor an extension across the board.
The issue with the Republicans extending the cuts across the board is that the deficit is out of hand. Ezra Klein of the Washington Post has an interesting view:
“In February, Congress will have to vote to lift the debt ceiling. Republicans are already looking toward this moment eagerly. Sen. Jim DeMint, for instance wants to use it as leverage for “returning to 2008 spending levels” and repealing Obamacare.” Of course, part of the reason the debt ceiling will have to rise is that extending the Bush tax cuts will cost about $4 trillion—all of it on the deficit. If Republicans want the tax cuts, Democrats should force them to accept the consequences of their vote and stand shoulder-to-shoulder on the debt ceiling. For Democrats to vote to extend Bush’s tax cuts and then let Republicans hammer them on raising the debt ceiling borders on self-parody.”
The Republican argument is that we need to keep more money in the public’s hands so that they will keep the money flowing through the system. Allowing the tax breaks to expire could be a blow to the economy and stunt the snail-paced recovery.
The Obama plan would have the tax cuts extended except for the top 2% of income earners. This would allow most to continue with their tax situation not changed, but the rich would carry a higher tax burden. According to the New York Times, taxpayers with income of more than $1 million for 2011 would still receive on average tax cut of about $6,300 compared with what they would have paid under rates in effect since 2001.
I understand that this is a very difficult choice and both parties have great arguments, clearly there will be upset people on both sides of this argument regardless of how this plays out, but how did we not have a plan for this? How was this not handled over the last 10 years? Approximately 3,600 days have passed and now we have 50 days to come to a conclusion.
I’m a great procrastinator until someone else is dependent on my work. This is affecting an entire nation. Shouldn’t it have been at the top of someone’s to-do list?
Disclaimer: Every effort has been taken to provide the most accurate and honest analysis of the tax information provided in this blog. Please use your discretion before making any decisions based on the information provided. This blog is not intended to be a substitute for seeking professional tax advice based on your individual needs.