When Republicans go to Washington, it seems like they get a magic button to push whenever they don’t like something about the economy.
Faced with a budget surplus when he arrived in office, George W. Bush pushed his button and cut taxes on the wealthiest Americans. Facing a recession two years later, he pushed it again and cut taxes on the wealthiest Americans.
Now looking at enormous deficits, Republicans (and some Democrats) in Congress propose pressing the button again and cutting taxes on income earned above $200,0000 for individuals or $250,000 for families, financing the giveaway with more deficit spending.
Maine Sens. Olympia Snowe, who supported the 2001 tax cuts and opposed only the 2003 cut, and Susan Collins, who voted for them, both favor extending them this year.
It’s time to put the button away. The Bush tax cuts for the top tax brackets should be allowed to expire this year, both as a matter of fairness and good economic policy.
Proponents of the tax cuts have managed to frame the argument as if it were a question of whether to raise taxes during a recession. It’s not.
The question is whether the whole nation should borrow $700 billion over the next decade to give the top 1 percent of taxpayers a break.
Proponents say that this would stimulate the economy, but research doesn’t bear them out. While tax cuts on low and middle class earners do have a stimulative effect — because they spend the extra money in their pockets — the same is not true of the richest taxpayers. That’s why the Obama administration proposes continuing tax cuts to all taxpayers except those in the top two brackets.
The tax cuts on America’s wealthiest does stimulate one thing — the deficit. According to the CBO, the Bush tax cuts are the biggest contributor to the current budget deficit, costing more than the war in Iraq and the Medicare prescription drug benefit combined. Another concern is whether letting the tax cuts expire would impact small business owners and discourage hiring. But while most small business income is reported on individual tax returns, most small businesses would not be affected.
According to Howard Glickman, writing for the non-partisan Tax Policy Center, the average business income reported on individual returns is less than $40,000. The few successful enough to earn more than $250,000 a year would see a return to pre-2001 tax rates, from 33 percent to 36 percent and 35 percent to 39.6 percent.
Some call this a jobs killer, but Glickman says there is research that suggests otherwise. Some economists find that higher tax rates would lead these successful business people to invest and shelter their income in a way that would create jobs.
It is wrong to make middle income people, who may have lost jobs, home equity and retirement savings in this financial crisis, to pay for tax breaks for people who simply don’t need them.
Snowe and Collins should do the right thing, let these tax cuts expire and put the magic button away.
This editorial by Greg Kesich, which also appeared on page A6 in the Monday, Aug. 9, edition of The Portland Press Herald, originally misstated Sen. Olympia Snowe’s record on tax cuts proposed by former President George W. Bush. Snowe supported the 2001 tax cuts and opposed only the 2003 cut. The editorial was updated at 9:35 a.m., Aug. 9, to reflect this correction.
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