On Extending the Bush Tax Cuts

The politics of tax cuts is not as daunting as it may seem for the Obama administration.  Tea party activists, along with conservative Republicans, are doubling down for the mid-term Congressional elections on the issues of federal spending and taxes.   The most effective play for the Democrats here may well be a well-timed Obama administration reversal of policy to embrace the extension of all the Bush tax cuts.  It makes good sense from both a political and policy perspective.

Politically, it could well take the steam out of the Republican/Tea Party narratives — that Obama is too liberal, a Socialist, wants an ever expanding role for the federal government, and is trying to “steal” our money through increasing taxes.   A quick pivot on this issue now, along with continuing to pound Republicans for their recent opposition to small business incentives to create jobs, could be just the political recipe needed to stave off defeat for the Democrats in November.

In policy terms, there is actually not that much difference between the parties on extending the Bush tax cuts.  Both Democratic and Republican tax plans extend Bush-era tax changes including reduced tax rates for families with incomes of $250,000 or less, extending tax credits for children and students, reductions in the marriage penalty and estate taxes, and changes in the alternative minimum tax (AMT) that have meant eliminating the AMT penalty for many middle income families.  The actual difference between the parties relates only to the two highest tax brackets, limits on personal exemptions and itemized deductions, and treatment of long-term capital gains and dividends for families with incomes greater than $250,000.

Extending the Bush tax cuts will have the beneficial effects of adding more stimulus and reducing uncertainty about taxes, both of which could give a much needed boost to a struggling American economy.  Both Democratic and Republican Party plans will also add to the deficit.  Current estimates by the Office of Management and Budget are that the Democratic plan would cost $3.0 trillion in lost revenue over 10 years, while extending all the Bush tax cuts would result in $3.7 trillion in lost revenue over 10 years.  The difference of $700 billion over ten years works out to be about $70 billion each year.   And an argument can be made that the currently sputtering economy might well respond well psychologically to idea of extending all the cuts.   Any resulting increase in growth in the short run could have the effect of reducing the ultimate total of lost revenues.  Limiting the extension of the Bush tax cuts to only two or three years would also reduce the long term impact on the national debt.   In both political and policy terms, then, embracing Bush-era tax cuts makes good political sense for President Obama and the Democrats.

Jonathan Cykman, EzineArticles.com Basic PLUS Author

About cykman

Jon Cykman works in Washington, DC as a consultant, and is long-time student of American Politics. He started out handing out campaign materials for Hubert Humphrey during the campaign of 1968, and later went on to earn a B.A. in Political Science from the State University of New York, College at Purchase in 1978, and an M.P.A. in Public Affairs from the University of Texas, Lyndon B. Johnson School of Public Affairs in 1980. Jon retired from Federal Service after 31 years of service, and lives with his family in Ellicott City, MD.
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24 Responses to On Extending the Bush Tax Cuts

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  2. Now I am not positive I altogether agree with you on this article. Then again I am normally open to fresh concepts. May have to feel about it. Great blog by the way.

  3. Thanks, appreciate it.

  4. Liberals will advocate that taking other’s property in a free nation through taxation is not just acceptable, but morally correct, when in fact, the most egregious act a government can do is take a citizen’s property.

  5. Quyen Banh says:

    Whether you like the man (George W. Bush) or not, most people would agree that raising taxes in a recession is a bad idea. If you’re one of the people who thinks it’s fine because it doesn’t affect you, think again. If you have a job (or even if you don’t) it affects you because it affects people that employ people. One way or the other, everyone pays for a tax hike.

  6. answer says:

    It sounds like you’re creating problems yourself by trying to solve this issue instead of looking at why their is a problem in the first place

  7. So does obama support the tax cuts but only for small businesses or not support them at all?

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