Not that they actually will, but the Bush tax cuts are supposed to end along with the current calendar year. Those making $200,000 and above each year would say goodbye to the Bush tax cuts under Obama’s proposal, while everyone else gets a two year extension. Republicans oppose taking the Bush tax cuts away from wealth Americans. They say it will further damage a weak economy. To reduce the deficit, Obama claims tax breaks for the upper crust have got to go. Whether or not extending the Bush tax cuts for everyone or just the middle class will spur growth or reduce the deficit is a moot point to some experts, who don’t consider either approach a solution. Regardless of who may be right, Congress is too distracted to do much about it. With November elections drawing near, fearful Democrats who want to be re-elected have put off voting on an issue that involves taxes.
Some details about the president’s proposal
Obama’s plan to raise taxes for the rich may not sting as much as Republicans claim. Some of the details were made evident by Bob Williams writing for the Christian Science Monitor. He writes that to ensure no one making less than $200,000 gets a tax increase, the Obama tax plan extends the 28 percent bracket. This cuts taxes for even the richest taxpayers by a few hundred dollars. Extending the bracket trickles upward. It creates a little daylight for those who make just a little more than $200,000 to escape higher tax rates. The Tax Policy Center said only 1.7 percent of households will pay more under the Obama tax plan than if Congress extends all the Bush tax cuts. Williams wrote that the reason nearly 95 percent of that 1.7 percent would pay more isn’t because of ordinary income. They get hit when the tax on capital gains and dividends goes from 15 to 20 percent. If a Republican stalemate lets the Bush tax cuts expire, the top dividend rate hits 39.6 percent.
The jury is still out on tax cuts
To spur the economy into growth, tax cuts are heading in the wrong direction, said Diane Lim Rogers on CNN . Tax plans from both parties, she contends, commit the U.S. to a future of shrinking government revenues, less saving and long-term economic malaise. The Obama tax plan is being advertised as saving $700 billion that would have gone to the rich, but it still costs $2.2 trillion in tax breaks for the balance of taxpayers. Lim Rogers writes that deficit-financed fiscal policies (read: economic stimulus) have a bigger bang for the buck in terms of boosting demand for goods and services and creating jobs. What is being overlooked, she said, is that short-term tax cuts will make the deficit problem worse down the road. This is because the U.S. government can’t be trusted to let expiring tax cuts expire–as it is proving now.
CS Monitor: http://www.csmonitor.com
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