Money Matters - Simplified

Debate on Bush tax cuts rages

President Barack Obama and his Democratic allies in Congress want to extend the lower rates for individuals earning less than $200,000 or couples making less than $250,000.

Stage is set for a battle. The moot point is the expiring Bush Tax Cuts. The stakes are high as the congressional elections are to be held in November.

President Obama and Democratic leaders feel that eliminating tax breaks for the affluent will win them the voter’s favor on whom the recessionary forces have wreaked havoc.

The debate
The wealthy people on whom these tax breaks shower largesse constitute only two to three percent of the population.

The broad debate is whether to allow the tax cuts, enacted under President George W. Bush in 2001 and 2003 and due to expire in January 2011, to continue or not.

Pelosi argued that the Republicans attempted to block the extension of unemployment benefits citing budgetary and deficit concerns. However, they are not using the same logic when it comes to tax cuts for the wealthiest.

According to the non-profit Tax Foundation, the Bush tax cuts feature amongst the three major federal tax reductions since the end of the 2nd World War.

These cuts are in the same league as that of the Reagan tax cut of 1981 and the Kennedy tax cut of the 1960s.

Obama and some senior Democrats intend to extend the cuts only for families that make less than $250,000 a year.

Supporters and detractors
U.S. House of Representatives Speaker Nancy Pelosi avowed her support for letting lower tax rates for better off Americans to expire at year-end.

She said, "Our position has been that we support middle-income tax cuts. The tax cuts at the high end have increased the deficit enormously.”

Opponents to the move aver that the economy is too fragile for higher taxes.

While majority of the Grand Old Party, nickname for the Republican Party, is in favor of continuing the tax breaks, some of the Democrats also want to put off raising taxes for wealthier individuals for a period of two years.

A spokesperson for Democrat Ben Nelson, said, "He supports extending the expiring tax cuts at least until the economy is clearly recovering and supports addressing them before the fall elections."

Fiscally conservative Senate Democrat Kent Conrad said, "The weight of economic advice that's been given to me says … now is not the time to pivot in terms of raising taxes or cutting spending."

There is a possibility that the Democrats address the tax issue only after the November elections to steer clear of accusations of having raised taxes.

Pelosi argued that the Republicans attempted to block the extension of unemployment benefits citing budgetary and deficit concerns. However they are not using the same logic when it comes to tax cuts for the wealthiest.

"We have a clear distinction here. If we want to lower taxes for the middle class, reduce the deficit and create jobs, extending the tax cuts at the high end are not in furtherance of reaching those goals," averred Pelosi.