Allowing any of the Bush tax cuts to expire would be a foolish
Detroit News Editorial
November 14. 2010 1:00AM
The top item on the Congress' agenda in this month's lame duck session should be the renewal of the Bush-era tax cuts for allAmericans. That's a sound strategy that would encourage investment, bolster the capacity for economic growth and - most importantly right now - avert tax increases that almost certainly would disrupt the struggling recovery from one of our nation's worst recessions.
President Barack Obama has opposed renewal of those tax cuts for people earning more than $250,000 a year, arguing we can't afford them when the federal deficit is spiraling out of control. It appears now, however, that a compromise is brewing in which the tax cuts temporarily will be extended for everyone, and possibly for three more years.
While businesses and citizens would benefit more from the predictability of a permanently lower tax rates, a three-year extension would be better than continuation of the partisan debate over who most deserves to benefit from them. It's an argument that already has gone on too long. A stalemate that resulted in all of the tax cuts expiring at year's end might be a crippling blow to our fragile economy.
The tax reductions, approved by Congress during the first term of George W. Bush's presidency, lowered the rates paid in all income tax brackets, doubled the child care tax credit available to working families and eliminated the "marriage penalty" for couples filing joint returns. They also reduced capital gains taxes, eliminated a scheduled phase-out of personal exemptions for Americans earning more than $122,500 and prevented the loss of itemized deductions for those with higher incomes.
Opposition from congressional Democrats, who back then were in the minority, was that these tax cuts weren't paid for with matching reductions in federal spending. That remains a key objection today, when Obama and lawmakers are under acute pressure to deal with budget deficits and a federal debt exceeding $13 trillion and trending upward.
In a 2007 look at the impact of the Bush tax cuts, the Heritage Foundation noted that the gross domestic product and employment both surged during the first six quarters following approval of the second batch of cuts in 2003. The fact that the economy already was growing doesn't account for this sudden and dramatic improvement, its analysts said.
Obama, at least to this point, has steadfastly argued that tax cuts should be retained for middle-class Americans, who have been hard hit by pay cuts and unemployment, but not for higher earners. That selective approach particularly would penalize owners of smaller businesses, whose business and personal income taxes are one and the same, putting a damper on their ability to create jobs.
Arguments over the impact of tax policies will persist, but it seems clear that lower taxes are growth-friendly. They increase the rewards we all enjoy for working, saving and investing. Higher taxes have the opposite effect. For the sake of the recovery, Congress and the president should extend the tax cuts.
detnews.com |
