Tuesday, December 07, 2010

Extending the Bush Tax Cuts

I've been having a conceptual problem with the politics involving the extension of the Bush tax cuts.

The argument for extending the tax cuts for income over $250,000 has been that increasing taxes at that level will hurt at the margins for small businesses. This seems sensible.

The argument for allowing the tax cuts to lapse has been that millionaires and billionaires don't need the break. I get that to a certain extent, although someone making $250,000 isn't necessarily a millionaire, and they're certainly NOT making millions in any given year. After all some Wall Street jerk making a $10,000,000 bonus isn't going to get hurt by a few extra percentage points on his income taxes.

I don't see why a compromise (prior to Obama's announcement yesterday) couldn't have been reached whereby tax rates wouldn't be raised on those making less than a million a year. (Or two million or three million... The idea is the important part, the level is negotiable.) That would help the smaller businesses at the margins and still tax the real whales. It would at least be an attempt at fiscal prudence.

I did hear that idea floated a couple of times but it didn't seem to catch on. The whole thing has been proposed as a strict dichotomy - either extend the tax cuts for everyone, or only for those making less than $250,000. No room for negotiation, just those two ideas. The whole thing makes me suspicious that both sides have actually been planning on extending everything but wanted the show to set up their talking points for the next election cycle.


I have one other thought about these extensions. Suppose the tax cuts are allowed to expire for the wealthiest segment. Are the Buffets, Gates, and Brins of the nation really going to pay that much more income tax? Or will their tax attorneys and accountants merely find different ways to shelter their money?


The more I think about it the more suspicious I get of the whole thing. It seems like nothing more than show.

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