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“There Is No Reason to Extend the Tax Cuts for the Wealthiest Americans”

Posted on by Karina

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% of working families).

President Obama and Democrats in Congress are committed to fiscally responsible tax policies, including ensuring middle-class American families and small businesses continue to see tax relief. As Speaker Pelosi explained at her weekly press conference last week, “if we want to lower taxes for the middle class and reduce the deficit and create jobs, extending the tax cuts at the high end are not in furtherance of reaching those goals.” The Washington Post agrees.

Washington Post Editorial – Extending the Bush tax cuts wouldn't help the economy:

The tax cuts passed under President Bush are about to expire. The deficit is at a once unimaginable level. In a saner political environment, that would counsel revisiting the sustainability of all the tax cuts. Certainly, given the yawning debt, there is no reason to extend the tax cuts for the wealthiest Americans

Analyzing the best bang-for-the-buck policies to stimulate the economy, the Congressional Budget Office found that the least effective was extending tax cuts for the top brackets. The reason is obvious. “The higher-income households . . . would probably save a larger fraction of their increase in after-tax income,” the CBO said…

…Those truly worried about the nation’s dire fiscal picture should seize this moment to lock in those substantial, badly needed, savings.

Steven Pearlstein – On tax fight, Obama can’t afford to lose:

…Given the fragile state of the economic recovery as well as the competing imperative to bring deficits under control, the right policy would be to extend the lower rates for another two years while limiting them to lower- and middle-class households…

Republicans, of course, are already vowing that they won’t support anything less than a permanent extension for all taxpayers, claiming that anything less would be a “massive” and “jobs-killing” tax increase…

In reality, raising marginal tax rates on the rich wouldn’t be a huge deal. Even Douglas Holtz-Eakin, top economic adviser to John McCain’s presidential campaign, told the Senate Finance Committee earlier this month that excluding upper-bracket households from a one-year tax-cut extension would only reduce employment by 300,000 in 2012 and raise the unemployment rate by one-tenth of 1 percent. That’s more like statistical noise than the economic calamity conjured up by Republicans…

Indeed, if Republicans were truly interested in stimulating the economy and creating jobs, cutting marginal tax rates turns out to be one of the least cost-effective strategies. In January, the Congressional Budget Office calculated that $1 million in tax cuts would generate between one and four additional jobs in the economy, compared with six to 15 jobs from increasing unemployment assistance, three to nine jobs from providing aid to states and four to 10 jobs from investing in infrastructure — all ideas that Republicans opposed as unaffordable. Go figure…

Ruth Marcus – Why Congress should let the Bush tax cuts expire:

…Think back to the beginning of the Bush administration tax cuts. It seems almost impossible to believe, but the argument then was that the budget surplus was too large. There was, or so President George W. Bush assured us, ample cash to cut taxes for everyone and protect the Social Security surplus and set aside $1 trillion over the next decade for “additional spending needs” and pay down the national debt…

“The people of America have been overcharged, and, on their behalf, I’m here asking for a refund,” Bush told Congress in February 2001.

You know what happened next. The refund came. The supposed surplus evaporated. The Social Security surplus was spent. Instead of being paid down, the $3.3 trillion national debt ballooned to $9 trillion.

The only thing that remained the same was the clamor for tax cuts. Same argument, different rationale. The Bush tax cuts are set to expire at the end of this year, and the argument now is that they must be extended — for everyone. This time not because the fiscal bottom line is too healthy but because the economy is too shaky…

But the Republican position seems even more intransigently divorced from reality. Perhaps there is some magical point at which Republicans might accept the reality that the government needs more revenue than it is currently set to take in — but I haven’t heard it yet…

Senate Minority Leader Mitch McConnell proclaimed the other day that the Bush tax cuts actually raised money. “There’s no evidence whatsoever that the Bush tax cuts actually diminished revenue,” the Kentucky Republican told Brian Beutler of the Web site TPMDC. “They increased revenue, because of the vibrancy of these tax cuts in the economy.”

Here’s some evidence. Tax revenue fell from 21 percent of GDP in fiscal 2000 to 17.5 percent in 2008. (I’m leaving out the recession-induced plunge, to under 15 percent this year and last.)…

…The economic and fiscal circumstances may change, but the prescription remains the same. And the patient is too ill to tolerate another dose of this quack medicine.

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