The Bush tax cuts expire at the end of this year. In effect, if Congress does nothing Americans will have a tax increase in 2011. Republicans have argued that not extending the lower Bush tax rates would be a foolish thing to do and could harm the fragile recovery.
Deutsche compared the situation to Japan in the 1990s, when the government let tax cuts expire and cut stimulus, leading to another leg down in the recession and ensuring the nation’s “lost decade” of no economic growth.
The left loves to use the conservative argument that we need to address Obama’s record deficits as a reason for raising taxes. Chris Matthews did just this on MSNBC this evening.
When we talk about federal deficits and debt, it is important to emphasize that the underlying cause is too much spending, not insufficient taxes. While it is politically difficult to cut spending enough to eliminate the deficit overnight, it is possible to reduce spending and, at the same time, increase tax revenues by promoting pro-growth policies including permanent lowering of tax rates and eliminating the threat of ever more government intrusion in private enterprise. Rep. Paul Ryan’s Roadmap for America’s Future is one example of a long-term plan to return our federal government to fiscal sanity.
In the late 1990s, it was economic growth, not tax increases that raised revenue from federal taxes to the point where we had a few years of surpluses.
Today President Obama and his allies in Congress pursue the opposite course. Every issue is used to justify increasing government spending. The resulting record deficits are then used to justify tax increases except that, in this case, they don’t talk about raising taxes, but rather about “ending the Bush tax cuts.”
Interesting enough, Democrats now support keeping some of the Bush tax cuts and only letting the lower rates expire for incomes above $200,000 or $250,000. Funny, according to Democrat propaganda over the past decade, all of Bush’ tax cuts where just giveaways to “the rich.” Now Democrats emphasize that they would keep most of the cuts which they now admit go to middle and lower income earners.
The argument that raising the taxes on people making more than $200,000 won’t harm the economy is contradicted by economic analysts such as those at Deutsche Bank. Many people in this income bracket are small business owners who do not separate their personal income from their business income. Reducing their incomes will decrease their reinvestment in their business which, for the average American, means less jobs, lower pay and less economic growth. This is just one practical argument against increasing taxes on whoever the Democrats consider rich.
Extending the Bush tax cuts beyond 2010 should now be the highest priority item before Congress.
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