“THE PROBLEM WITH SOCIALISM IS THAT YOU EVENTUALLY,
RUN OUT OF OTHER PEOPLE’S MONEY.”
- Margaret Thatcher
Sunday, November 14, 2010
Extending the Bush Tax Relief for Americans Earning Less than $200,000 a Year Is Not a Tax Cut
The President’s budget proposal calls for the repeal of the Bush tax cuts for high-income earners, and an extension—albeit temporary—of these tax cuts for “middle class” earners (individuals earning less than $200,000 per year and households earning less than $250,000 per year). One of the claims made by supporters of the Obama plan is that continuing or extending the Bush tax provisions is equal to a tax cut—which implies a cut in levels and rates of taxation below that of current law. But, given that an extension of current policy is exactly an extension of current levels and rates of taxation, it is clearly false to speak of tax cuts.
Allowing this current policy to expire for any income-earning group can be interpreted in no other way than as a tax increase. In other words, the extension is not meant to— and will not—lower tax levels and rates for these individuals and households below the levels in current law; but expiration most certainly will raise taxes for those affected by the expiration of the tax relief provision.
No matter how one views this policy debate, the notion that it is about whether to endorse a tax cut is logically—and factually— flawed. Rather, the debate is entirely about whether or not to allow the expiration of the 2001 and 2003 Bush tax cut laws for certain groups, or for all taxpayers. Thus, the end of the debate will yield one of two outcomes: Taxes will go up on some or all taxpayers; or taxes will remain the same for everyone.