The mid-term elections are nearly two weeks old and Congress is re-convening for what is known as a lame-duck session. This is considered to be the final phase of what is known as the 111th Congress. Normally, not much is accomplished by Congress, it is sort of a short couple of weeks before Christmas where some lose-ends are tied up or minor items are corrected or finished.
If there is one thing though this year, it is the issue as to what to do about taxes. The party in charge in Congress, the Democrats decided to kick ‘this can down the road’ and not deal with it before the election for whatever reason and it is now becoming critical.
But first, we must address the language as the terms are incorrect. The current tax rates for income earners have been in place for more than seven years but are falsely called the “Bush tax cuts” and that is wrong. But since Bush bashing by Democrats was in vogue during the past few years, why not tie this one to Bush as if there was something bad or evil about tax cuts. Between 2001 and 2003, Congress enacted tax rate legislation and President George W. Bush signed it into law. Of course, they were tax cuts from prior rates and took millions of previous taxpayers off the hook of paying income taxes among other things. Unfortunately, these new tax rates were not permanent but term-limited, meaning, they will all expire on December 31, 2010 and will increase to the tax rates before 2001/2003.
Therefore, we should not be talking about extending the “Bush tax cuts” but instead, we should be speaking of tax increases for everybody if nothing will be done about them by the end of the year. It was Democrats back then who pushed for this date because they know it is much harder to raise taxes and they generally speaking do not like low tax rates since they would like to spend more money instead of less. President Bush probably agreed to this ‘term-limitation’ of the new tax rates back then because he could figure out that they would at least not change but stay the same while he was in office.
This brings us to today and the possibility of raising taxes for everybody in America since the rates will all go up as of January 1, 2011. So, what to do now, should we extend the current rates or let them elapse resulting in increased taxes for all? The Republicans want to extend the rates for everybody while the Democrats – President Obama and most other Democrats in Congress – want to extend these tax rates only for the middle class. These are people by their definition who make less than $250,000/year. The Democrats want to raise taxes on the so called “rich people”, everybody who earns more than a quarter of a million dollars annually. This has been the debate up to date. The Democrats claim that “we cannot afford the extension of current rates for the rich people” . As if this was their money in the first place. Huge numbers have been flying around as to how much this is. Obama is repeatedly mentioning an amount of $700 billion over the next ten years. What he does not mention is that this is a drop in the bucket when one considers that the Federal budget during those ten years will be approximately forty to forty-five trillion dollars. The 700 billion bucks are at most only 1.75 percent of the overall. But, according to the Democrats: We cannot afford that!!
It will be interesting to see what the outcome of this will be. We here at Common Sense University know one thing: Raising taxes during a recession is bad news and does nothing to get us out of it. But then common sense is a commodity that rarely can be found among politicians and the people we elect to run the country.