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The state of play on the Bush tax cuts

I'm not expecting any real action on the Bush tax cuts until the lame-duck session of Congress. But you are starting to see politicians stake out position between President Obama's preference of extending the middle-class tax cuts indefinitely while letting the tax cuts for the wealthy expire and Mitch McConnell's insistence on extending the tax cuts for everyone, forever.

Chris Van Hollen, the House Democrat who's leading the party's election effort, wants to see a one-year extension of the tax cuts for the wealthy [Edit: Van Hollen's office clarified that the congressman's first choice is Obama's proposal, but he is open to considering this compromise if Republicans propose it]. Something of a counter-offer emerged today from Lindsey Graham, a Republican senator, who said he could support a three-year extension of all the tax cuts.

I'll note that for all the members of Congress who calls themselves deficit hawks, not one, to my knowledge, has proposed letting the tax cuts expire this year or an extension designed to force their expiration in three or five years.

By Ezra Klein  |  September 14, 2010; 1:56 PM ET
Categories:  Taxes  
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Comments

Sen. George Voinovich has called for them to expire now, actually.

Posted by: michiganmaine | September 14, 2010 2:42 PM | Report abuse

All this talk is a waste of time.

The Dems are spineless cowards who will buckle on this issue, and the GOP knows it.

Here's my prediction: The tax cuts for everyone will be extended for at least one more year, the Dems will then get blamed for the added debt, and then later, when the extension again comes up for a vote, the GOP will extend them permanently WITH YET ANOTHER tax reduction for the wealthy (probably in the form of an elimination of the estate tax) and Obama will sign it into law out of fear he will otherwise be impeached (though he will be impeached anyway despite his attempts to satisfy the new GOP congress/senate).

Posted by: lauren2010 | September 14, 2010 3:00 PM | Report abuse

John Boehner and his allies may hold the middle class tax cuts hostage. its good to see that lieberman is finally onboard. Give us your two cents on this at http://www.beyondmytwocents.com

Posted by: beth25 | September 14, 2010 3:03 PM | Report abuse

Can anyone explain to me why the Dems will not push this issue before the election? Do they really fear that they can't counter a 'tax raiser' attack when what they would be doing would be to GUARANTEE PERMAMENT LOWER RATES FOR 98% OF THE COUNTRY? If they are really that gutless/dumb/craven, I don't see much point in keeping a Dem majority.

Posted by: exgovgirl | September 14, 2010 3:06 PM | Report abuse

Ezra, I know the whole "deficit hawks support unlimited unpaid-for tax cuts" can be confusing. Let me break it down:

For deficit hawks, there is always enough money for foreign wars and rich people. And there is never a dime to spare for the sick, the poor, the elderly or long term domestic investment.

Got it now?

Posted by: vvf2 | September 14, 2010 3:06 PM | Report abuse

Why not a compromise.

Permanently extend all the tax cuts for those who make less than $250,000.

Then, for one year, increase the marginal tax rate by 1% from the Bush tax cut level for all income from $250,000 to $500,000.

For one year, increase the marginal tax rate by 2% above Bush tax cut level for all income from $500,000 to $1,000,000.

Then do not extend Bush tax cuts for any income in excess of $1,000,000.

This type of compromise addresses some of the issues the Repubs bring up, without being totally over the edge. Additionally, the Dems need to limit the extension to one year so as not to get caught up in tax politics in 2012.

Posted by: drosenfeld | September 14, 2010 3:09 PM | Report abuse

By the way, can we start referring to these as the Bush tax hikes? After all, taxes are going up at the end of the year due to a law passed by Republicans and signed by Bush.

Ezra, you have been very clear in explaining the status quo and your phrasing of 'an extension of the Bush tax cuts' is technically correct. But wouldn't it also be correct to talk about 'a delay in the scheduled Bush tax hikes'?

'Normal' is either the rate people pay now (in which case, we are facing a tax hike written into law by Republicans), or the rate people paid in 2000 (in which case, Obama is not talking about raising taxes on the rich, but on returning them to normal--and nobody talks this way).

People discuss the current law as though it is a fact of nature, something that just 'is' and has to be dealt with. But this particular law (the ending of the cuts) is not just a fact of life. It was cynically written by many of the same people who are now talking about how terrible it is.

I just wish more people (progressive bloggers and Democratic politicians in particular) would do a better job of pointing this out.

Posted by: jbandlow | September 14, 2010 3:09 PM | Report abuse

Brilliant move by the Democrats, here: start with a preferred policy and pre-compromise it. Then have the Republicans offer a more radical policy, and compromise again to meet the Republicans halfway between their demands and the watered-down compromise you already put on the table, watering yourself down even further. I'd hate for these guys to buy a car for me.

Posted by: constans | September 14, 2010 3:23 PM | Report abuse

Just out of curiosity, are we talking about marginal rate cuts only here, or rate cuts plus exepmtions and credits, and do we include the preferential rates on dividends and capital gains too? And what about the estate tax? I assume that is separate? Do we in fact have any actual bills?

Posted by: Mimikatz | September 14, 2010 3:49 PM | Report abuse

Van Hollen Arggggggg!!!! if you want to stimulate you cut taxes of non rich people. There is no clause in the Constitution which says tax rates must be Bush rates or Clinton rates. Van Hollen's proposal is worse in every way than a proposal to let the tax cuts on income over 250,000 expire on schedule extend cuts on income under 250,000 and have a temporary tax (refundable) tax cut of $300 per family.

Also that better policy would be excellent politics.

If they accept temporay tax cuts as a stkimulus, the Democrats should debate whose taxes should be temporarily cut. Optimal policy and public opinion are totally against a proposal that the temporary tax cuts be only for the rich.

What's wrong with Van Hollen ? Does he have an opponent in today's primary ?

Posted by: rjw88 | September 14, 2010 3:51 PM | Report abuse

Yes he does -- Robert Long (2 others dropped out). I respectfully suggest that registered Democrats in the 8th district who haven't voted, go vote for Long to send Van Hollen a message.

Posted by: rjw88 | September 14, 2010 3:59 PM | Report abuse

For crying out loud, the Democrats should force the issue in the next week or two with a bill that would extend the middle-class tax cuts (temporarily would be my preference). When the Republicans in the Senate block it, the Democrats can RUN ON THAT, pointing out that Republican insistence on tax cuts for the rich are causing everybody's taxes to go up. If the Democrats can't run on that and win, they need to go to messaging school.

Posted by: thehersch | September 14, 2010 4:28 PM | Report abuse

"if you want to stimulate you cut taxes of non rich people... let the tax cuts on income over 250,000 expire on schedule extend cuts on income under 250,000 and have a temporary tax (refundable) tax cut of $300 per family."

While on principle I support the right of households of all levels of wealth to keep what they earn, there is little stimulus effect from one time rebates to the non rich.

http://online.wsj.com/article/SB10001424052970204731804574385233867030644.html

There is no certainty of stimulus from tax cuts. The government merely borrows the money rather than taking it (although the borrowing represents a promise to take in the future). While production might have increased relative to the counterfactual with no tax cuts, we can never know for sure.

That said, there are behavioral effects, as the disincentive to earn/report income decreases (if you cut marginal rates) which should increase economic growth over the long run.

Posted by: justin84 | September 14, 2010 4:41 PM | Report abuse

I find it interesting that almost all comments seem to assume it is the government's money in the first place. Each person has earned the money and ought to keep it. Why aren't we discussing what most families in America are discussing -- ways to cut our budgets to live within our means? Why aren't we discussing the government (yes, that includes the military) cutting their budget to live within their means, rather than raising taxes on anyone at all?

Posted by: proud_conservative | September 14, 2010 4:57 PM | Report abuse

Does increasing the cost that the government charges American businesses and individuals for pursuing profit-seeking enterprizes definitively decrease the demand for profit-seeking enterprizes and thus causes unemployment/joblessness to go higher?

Does decreasing the cost that the government charges American businesses and individuals for pursuing profit-seeking opportunities definitively increase the demand for such enterprizes, and thus brings unemployment and joblessness lower?


Which makes better sense to do at a time when unemployment is rising excessively and the overall tax base that the government relies on to derive funds for this years and next years expenses is continually shrinking?

Won't we face bankruptcy if we don't start growing more jobs right now?

Isn't handing out funds to private sectors firms based on their capacity to impact the GDP a much more efficient stimulus that allowing one polarizingly partisan figure like Nancy Pelosi to allow her lobbyists decide how to spend billions?

Which choice tends to have more corruption associated with it---politicians/lobbyists choosing where money goes, or divying it up based on an entity's annual contribution to the nation's GDP?


Tax Cuts!!! Tax Cuts!!! Tax Cuts!!! By far the best way to get our nation back on track. When will Democrats wake up and read a book? (and stop listening to liberally biased academia more interested in imposing an agenda!!!)

Posted by: FastEddieO007 | September 14, 2010 5:22 PM | Report abuse

The BEST STIMULUS is always when federal money is IMMEDIATELY doled out to profit-seeking enterprizes based on their annual contribution to the nation's GDP.

The day a tax cut bill is signed, profit-seeking enterprizes have the money. Bill Gates can do more to lower unemployment with $1 billion dollars than all of Nancy Pelosi's legislation-writing lobbyist friends could ever dream of.....and these would be good honest jobs that will more likely evolve into high-salary paying ones....


All you Obama-bot ideologues got to get out of the way of a 250 year success story that is just wanting to go on.....

Posted by: FastEddieO007 | September 14, 2010 5:28 PM | Report abuse

How is this for accurate predictions? A graphic story of the Bush Tax Cuts produced in 2004 and put on YouTube in 2006:
http://www.youtube.com/leearnold#p/u/4/SA1f2MefsMM

Posted by: Lee_A_Arnold | September 14, 2010 10:23 PM | Report abuse

Nice propaganda Lee_A_Arnold....Josef Goerbbels would be proud of how your BIG LIE will help propel Obama to his progressive dictatorship.

The basic premise of your ideology here is that capitalism is bad because the rich can leverage their assets to make more money.

While its unfair that the rish are able to do this, in the history of the human race, its still the best deal out there. Stifling the rich from leveraging their assets only leads to less prosperity, which according to you is a GOOD THING since at least the rich are no longer getting richer.

Posted by: FastEddieO007 | September 14, 2010 10:40 PM | Report abuse

Fast Eddie, Unfortunately for your teapot theory, real wealth is created´╗┐ by anyone with an idea for business. The rich don't have any special dispensation for that. Investment money comes out of banks from small savers too, and there has never been a lack of money to invest in good ideas. Unfortunately for your theory, the rich already got the biggest tax cuts in the history of the world -- the Bush Tax Cuts -- and basically blew it: economic growth wasn't any better than it might have been otherwise. Then we bailed them out of the financial crash, and they still can't do anything right. So your fawning subservience to their cause is unbelievable. And unfortunately for your theory, tax cuts without spending cuts never pay for the deficits they make, and you and your Republican buddies are about as close to reducing deficits as you are to making sense.

Posted by: Lee_A_Arnold | September 15, 2010 1:24 AM | Report abuse

Actually the meltdown happened because the federal government failed to properly regulate high-risk home loans....in fact not only did they fail to regulate, they forced small banks to loan against their will...

Then small banks connected to powerful Democrats (like Pelosi's top donor Sandler couple) passed off all the bad home loans to big bank cronies, where they get mixed in with good assets contaminiating USA's most valuable assets.

Its called CLOWARD-PIVEN, the concept os using liberal policy victory to push our capitalist democracy into bankruptcy for the intent purpose of provoking fundamental radical change, most specifically away from capitalist democracy.

Obama-bots are following their ally to the south, Hugo Chavez to end our silly experiment in limited-government.

Posted by: FastEddieO007 | September 15, 2010 7:09 AM | Report abuse

THE MELTDOWN HAD NOTHING TO DO WITH ANY TAX CUTS!

ITS THE FUNDAMENTAL BIG LIE PUSHED BY PROGRESSIVES.

Look at GDP growth in the year that the tax cuts passed. If changing the direction of the economy after 9-11 & internet bubble. FACT!

Posted by: FastEddieO007 | September 15, 2010 7:13 AM | Report abuse

Cloward and Piven were actually present when Bill Clinton signed the Community Reinvestment Act, the law that forced small banks to ignore common sense and make horribly risky home loans en masse.

I'm quite sure they were smiling as the global economy collapsed due to a sudden sell-off of American assets that were contaminated by the these toxic mortgages.

Nancy Pelosi's banking buddies, the Sandlers had just sold off their toxic mortgages to Wachovia for billions.

Thank you LEE_A_ARNOLD for your support!

Posted by: FastEddieO007 | September 15, 2010 9:06 AM | Report abuse

The Dems are in a bit of a pickle here because extending the tax cuts for all will hurt them further with the base. If they were to extend for all but the top, however, and unemployement goes up AFTER the great tax debate, the GOP will be able to say "see, we told you so. Raise taxes on the job producers and they will not create jobs".

Remember...in politics perception IS reality.

Posted by: manapp99 | September 15, 2010 11:13 AM | Report abuse

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