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Friday, April 27, 2007

Republicans and the Expiration of Tax Cuts

John Berry says if the tax cuts Republicans passed into law expire, they "have only themselves to blame, because the expiration dates were set originally to mislead the public":

Congress Wrangles Over Bush's Expiring Tax Cuts, by John M. Berry, Commentary, Bloomberg: The high-stakes revenue wars have begun again, with some Republicans complaining that the Democrats controlling Congress are planning the biggest tax increase in U.S. history. ...

[T]he potential tax increases worrying the Republicans will occur ... because many of the tax cuts enacted since President George W. Bush took office six years ago will expire in the next two or three years unless legislation extending them is passed.

If that happens, Republicans have only themselves to blame, because the expiration dates were set originally to mislead the public about the amount of revenue loss involved. Of course, from the beginning the plan was to argue that letting the cuts expire would impose tax increases that would harm the economy and cost jobs.

Long-term demands on the government -- such as paying Social Security and Medicare benefits to retiring baby boomers -- mean some increases probably are in store. Nevertheless, it's highly likely that many of the tax cuts benefiting low- and moderate- income taxpayers ... will be extended.

In the tax debates, the link between tax cuts or tax increases and growth is frequently exaggerated. The impact of either depends on the economic circumstances of the time.

Do you recall Rush Limbaugh's offer to bet $1 million that President Bill Clinton's 1994 tax increases would plunge the country into a recession? Didn't happen. ...

In 2001, when the bill was being debated, Bush and Republican congressional leaders -- with the help of some Democrats -- played all sorts of games to make the cuts appear smaller when calculating the impact over the next 10 years.

Some of the cuts were to be phased in and then eliminated in the 10th year. Perhaps the most egregious give and take was played with the estate tax. Its bite was to be reduced gradually through 2009, then repealed altogether in 2010 and then re- imposed fully in 2011. ...

Democrats should challenge Republicans to identify what cuts they would make to social programs in return for making these tax cuts permanent -- not some game this time to hide the full impact of the tax cuts -- but the cuts required to make the tax cuts permanent like they desire. The programs that will need to be sacrificed, not output growth and employment which are not substantially impacted by tax changes of the type and magnitude we are talking about, is what's on the table.

    Posted by on Friday, April 27, 2007 at 09:54 PM in Budget Deficit, Economics, Politics, Taxes | Permalink  TrackBack (0)  Comments (5)

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