Democrats and Republicans both appear eager to force a showdown prior to the November elections over whether to extend Bush-era tax cuts for wealthy Americans.
Enacted in the early years of the Bush administration, those tax cuts are due to expire at the end of the year unless Congress approves an extension.
Led by House Speaker Nancy Pelosi, Democrats, however, seem happy to see the sun set on tax cuts that were, at the time of their enactment, a signature GOP achievement. But Republicans have begun a pitched election-year battle to force Congress to continue the lower taxes.
Independent analysts urge Democrats to allow the tax cuts to expire and use those funds, instead, to help prop up the faltering U.S. economy.
Democrats and Republicans are each eager the try to define the tax-cut issue as public opinion appears muddy heading into the 2010 midterm elections. One recent Fox News poll indicates a plurality of 44 percent would extend the tax cuts but a Pew Research survey finds that, when cast as a continuation of either Bush economic policies, or the policies of President Obama, the current president wins on a margin of 46 percent to 29 percent.
“Congressional Republicans — eager to return to the ‘exact same agenda’ of failed Bush economic policies that put us into this mess — continue to call for an extension of the Bush tax cuts for the wealthiest few despite the staggering $678 billion cost to the deficit, after voting against tax cuts for small businesses and 98 percent of working families,” House Speaker Nancy Pelosi says. “President Obama and Democrats in Congress are committed to sustaining a strong national economy through fiscally responsible tax policies — including ensuring middle-class American families and small businesses continue to see tax relief.”
Fred Thompson Becomes Tax Cut Spokesman
Meanwhile, conservatives have enlisted the star-power of former actor and ex-GOP senator Fred Thompson of Tennessee in a new campaign to pressure Democrats to change course and extend the Bush tax cuts.
The conservative League of American Voters says it has launched a national petition effort to renew the Bush tax cuts, with TV ads featuring Thompson appearing nationwide on the Fox News Channel and other news outlets.
The conservative campaign seeks to cast the lapse of tax cuts for the wealthy as a more broad-based tax increase.
“Our nation faces a massive automatic tax increase at the end of this year when the Bush tax cuts expire,” Thompson says. “When that happens, your income taxes could increase by 10 percent or more, capital gains taxes will jump more than 30 percent, and taxes on dividends will more than double. It’s not a pretty picture.”
Thompson’s conservative allies claim this “tax increase” would jeopardize the nation’s economic recovery, but other analysts argue the opposite is true.
“Letting President Bush’s tax cuts for families making over $250,000 expire as scheduled at the end of 2010, while temporarily redirecting this money to more efficient ways of boosting the economy while it is weak, would help the nation address two key challenges: short-term economic weakness (with nearly one in ten Americans out of work) and unsustainable long-term deficits,” Chuck Marr, director of federal tax policy at the Center on Budget and Policy Priorities, says in a recent policy analysis.
“Over the next year or two, policymakers could channel the savings from letting the tax cuts expire — about $40 billion in 2011 — to uses that have more ‘bang for the buck’ in creating jobs and promoting growth,” Marr adds. “For example, Congressional Budget Office (CBO) analysis suggests that using those savings for a combination of a job-creation tax credit and continued state fiscal assistance would generate three times as much additional economic activity as using them to extend the high-income tax cuts.”
If Congress were to extend the tax cuts for married filers with incomes above $250,000 and single filers with incomes above $200,000 — the top 2 percent of U.S. households — then deficits and debt will be about $1 trillion higher over the next decade than if it lets them largely expire, as President Obama has proposed, Marr says. In subsequent decades, extending the high-income tax cuts would increase deficits by even larger amounts, he adds.
The publisher of the news site On The Hill, Scott Nance has covered Congress and the federal government for more than a decade.