Expiring tax cuts problematic for US lawmakers

“It seems increasingly likely that Congress will extend most, if not all, of the Bush tax cuts for at least a year or two,” said Howard Gleckman, research associate at the Tax Policy Center of the Urban Institute and Brookings Institution.

“As the economy shows growing signs of softening, lawmakers are less and less likely to take steps that will be seen as 'raising taxes,'” he added.

“But there is a way Congress could maintain the magnitude of the Bush tax cuts while moving around some dollars to enhance their short-term economic benefit. The goal of this shift would be to focus tax cuts on those most likely to spend the money.”

Sal Guatieri, senior economist at BMO Capital Markets, said the economic recovery is too fragile to allow taxes to rise, and that failure to extend the relief could undermine already weak consumer confidence.

“Given the fragile state of consumer confidence and how worried all Americans appear to be in their financial security, tax increases at any income level are probably unwelcome,” Guatieri said.

“There might be a time to raise taxes to address the fiscal deficit, but that time may not be the next few months, because we have yet to see self-sustaining growth in the private sector.”

Other analysts say that keeping the full rage of tax policies would provide a windfall to the wealthiest Americans with little economic benefit.

Nobel economics laureate Paul Krugman of Princeton University says proponents of the full extension “are eager to cut checks averaging three million dollars each to the richest 120,000 people in the country.”

“We're told that it's about helping the economy recover. But it's hard to think of a less cost-effective way to help the economy than giving money to people who already have plenty, and aren't likely to spend a windfall,” says Krugman.

1|2

PrintEmail

Write a Comment

Terms

Enter your comments - 3000 characters max

Type in image code

Submit

 Receive China Post promos
 Respond to this email