The Hill

Congress continues to debate tax cuts

Tess Wafflebaker

In 2003, then president George W. Bush implemented a $550 billion tax cut program. The program was designed to stimulate the economy and was intended to give money to taxpayers, which they could in turn put back into the economy through spending. Some of the components of this program include relief from the marriage penalty for working couples and incentives for small businesses through an increase in the amount that they can write off for new equipment, among others. The cuts are set to expire at the end of this year, and whether or not to allow them to expire has been the source of a heated debate in Congress. The extension is expected to cost upwards of $3.5 billion, and while the initial expenditure of $3 billion has been settled, the remaining cost, which would go back to high-income taxpayers, serves as the major source of disagreement. Democrats have decided to postpone the vote on whether or not to keep the cuts until after the upcoming congressional elections. Obama has said that he is in favor of extending the cuts for a majority of Americans, but wants to raise taxes for high-income taxpayers. The issue of cost is one of the most controversial aspects of this debate. After the elections conclude, Congress will decide whether or not the cuts will be extended, but either way, the American people can expect to see a change in the overall tax code.

• Marriage penalty: The difference between what you pay in taxes as a married couple and what you would pay as two single persons is often referred to as the marriage tax penalty.
• CBO: The Congressional Budget Office (CBO) is a federal agency within the legislative branch of the United States government. It is a government agency that provides economic data to Congress

• Argument for: The director of the Congressional Budget Office (CBO), Douglas Elmendorf, said that extending the cuts would be good in the short-term, but possibly negative in the long run. Elmendorf said that letting the tax cuts expire could be hard on the economy in the next two years. However, he said in the long run, extending the cuts could be detrimental insofar as added federal deficits could crowd out private investments and extending the program potentially has less benefits than other possible government action, such as the extension of unemployment benefits.
• Arguments against: Those who oppose an extension of the program argue that the program is designed to accommodate the wealthiest Americans who ought to be paying higher taxes.

Additional Reading:

http://www.washingtontimes.com/news/2010/sep/28/full-tax-cut-extension-good-short-term-worse-long-/

http://usgovinfo.about.com/cs/taxes/a/bushtaxcuts.htm

http://www.washingtonpost.com/wpdyn/content/article/2010/09/20/AR2010092005699.html