Bush tax reductions, the shortage, economic growth and also the Obama plan

With visions of endless government surplus, the Bush tax cuts were implemented. They expire along with 2010, with visions of endless and growing government deficits on the road ahead. The Obama tax plan would extend for two years the Bush tax cuts for every person except those who make at least $200,000 a year. Republicans oppose taking the Bush tax cuts from wealth Americans. They say it will further damage a weak economy. Obama says he can’t reduce the deficit and offer tax breaks for the wealthy. Neither deficit reduction or economic stimulus will result from either party’s tax strategy, a few experts believe. But the debate is suspended for now. With November elections drawing near, fearful Democrats who want to be re-elected have put off voting on a problem that involves taxes.

What the people in politics aren’t telling you

Republicans are looking out for the rich constituents who pay for their reelection campaigns. But taking away their Bush tax cuts may not be the hardship being advertised. Bob Williams, writing for the Christian Science Monitor, clarified some of the details. He writes that to ensure nobody making less than $200,000 gets a tax increase, the Obama tax plan extends the 28 percent bracket. For some of the more wealthy working class individuals, this measure could cut their taxes by various hundred dollars. It also provides a small cushion against higher taxes for people just over the $200,000 threshold. Only 1.7 percent of American working class individuals, as outlined by the Tax Policy Center, will see a higher tax rate under the Obama tax plan. Ordinary income has nothing to do with higher taxes for the wealth! y. Williams writes that they’re concerned with income most Americans are unfamiliar with. They get hit when the tax on capital gains and dividends goes from 15 to 20 percent. If the Democrats call the Republican bluff and also the Bush tax cuts go away, the wealthy will finish up paying a top rate of 39.6 percent on dividends.

Why tax reductions could be the wrong idea

Tax cuts of any kind aren’t the way to solve the economy’s issues, as outlined by Diane Lim Rogers writing on CNN . Tax plans from both parties, she contends, commit the United States to a future of shrinking government revenues, less saving and long-term economic malaise. Obama has said that rescinding the Bush tax reductions for the wealthy will trim $700 billion from the shortage in a decade. Nevertheless, the cost of stretching the cuts for the rest of the population–$2.2 trillion-more than cancels out any savings. Lim Rogers writes that deficit-financed fiscal policies (read economic stimulus) have a bigger bang for the buck in terms of boosting demand for goods and services and creating jobs. What is being overlooked, she said, is that short-term tax cuts will make the deficit problem worse down the road. If people in politics are so scared of losing votes to a tax increase now, she figures they cannot be expected to find their courage later.

Further reading

CS Monitor

csmonitor.com

CNN

cnn.com