Title says it all. That’s my view on the issue of Bush tax cuts. Let them expire, not just for the rich, but for everybody.
Although Greenspan has lot a credibility after the financial crisis, I agree with him on this. For his reasoning, listen to what he said on Bloomberg TV (fast forward to 2:47) or read second hand from the New York Times article.
President Obama’s former budget director Peter Orszag also said in his op-ed in New York Times that we should end the tax cuts, not now, but two years from now:
I say we should stop fooling ourselves with this kind of false delays. If we don’t have the resolve to end them now, we won’t have it in two years either. We might as well do the right thing and end them now.
We don’t have the money to extend the tax cuts permanently, not even for folks earning $250,000 or less. If people were against the tax cuts when they were enacted, they should just let them expire as scheduled, not extend them permanently in any shape or form.
The tax cuts were created in 2001 and 2003, in the middle of a stock market bubble burst, as temporary measures to stimulate job growth. Whether they accomplished their objectives is debatable. In any case, their mission is over. Everybody knew the laws would expire by the end of 2010 from day one. There is no expectation for them to continue beyond the sunset date. That was what the country bargained for. We should stick to it.
CCH published a summary briefing on how exactly the sunset affects taxpayers:
It included three hypothetical profiles and how the expiration will affect them. The numbers in the table below shows the change in taxes between sunsetting and extending the tax cuts and between Obama’s proposal and extending the tax cuts.
|(1) Married, $142k income||+$6,830||+$0||-$6,830|
|(2) Married, $355k income||+12,929||+$5,151||-$7,778|
|(3) Single, $76k income||+$1,598||+$0||-$1,598|
Higher-income households still benefit a lot more from Obama’s proposal than lower-income households. The cost of extending the tax cuts for ten years is said to be $4 trillion. Obama’s proposal is said to save $700 billion from that, which means it still costs $3.3 trillion. We can’t afford it.
A tax cut is great if we can afford it. It’s just like going on a vacation. I like the days when I’m on vacation. I don’t have to work. Paychecks still come in. It feels great. But a vacation always comes to an end, because I can’t afford to be on vacation forever. In terms of taxes, the country has enjoyed a long vacation in the last several years. Now it’s time to get back.
Refinance Your Mortgage
Mortgage rates hit new lows. I saw rates as low as 3.25% for 30-year fixed, 2.625% for 15-year fixed, with no points and low closing cost. Let banks compete for your loan. Get up to 5 offers at LendingTree.com.