New York (CNNMoney.com) - Odds are good that the middle-class will get to keep their tax cuts. The question now is for how long.
The 2001 and 2003 tax cuts expire in six months. President Obama had promised to make them permanent for the majority of Americans. But the reality of the federal budget's impending shortfalls is making that a hard promise to keep.
Indeed, some influential players in Washington have signaled that it's no longer a given that the tax cuts will be made permanent, at least not right away.
The most prominent Democrat to suggest as much is House Majority Leader Steny Hoyer, D-Md. In a speech last month, Hoyer said point-blank that lawmakers can't ignore the budget consequences of extending the cuts.
"We need to have a serious discussion about their implications for our fiscal outlook, including whether we can afford to permanently extend them before we have a real plan for long-term deficit reduction," Hoyer said.
In May, conservative economist Martin Feldstein, who was President Reagan's top economic adviser and now sits on Obama's recovery advisory board, wrote in a Wall Street Journal commentary that while he favors temporarily extending the cuts for everyone, the country can't afford to make them permanent.
The cost of doing so for everyone would top $3 trillion over 10 years. Making them permanent for families making less than $250,000 - which tracks with Obama's promise - would cost less but not much less: an estimated $2.2 trillion.
Two prominent Senate Democrats recently told The Hill, a newspaper that covers Congress, that the $250,000 threshold is not necessarily a done deal with Congress.
Sen. Byron Dorgan, D-N.D., who chairs the Senate Democratic Policy Committee, said he didn't think there was "any magic" in $250,000. Sen. Dianne Feinstein, D-Calif., noted "you could go lower ... why not $200,000? With the debt and deficit we have, you can't make promises to people."
Meanwhile, the House Ways and Means Committee is considering a one-year extension of the tax cuts for families making less than $250,000, according to a report in Congress Daily. The extension would be accompanied by a two-year "patch" to protect the middle class from getting hit by the Alternative Minimum Tax. The estimated cost of those measures combined is $270 billion over 10 years.
Looming over the debate about extending the tax cuts is the mid-term elections in November.
Republicans who like to campaign as deficit hawks are portraying the potential change in direction on tax cuts as a betrayal of Obama's promise to the American people. Spending, they say, is what needs to be cut to tame the growth in debt.
Budget and debt experts, however, have said repeatedly that the magnitude of changes needed to bring better balance to the U.S. fiscal situation will require changes both to the spending and tax sides of the ledger.
They acknowledge that an immediate increase in taxes could harm the economic recovery. They favor extending for a short period of time but not making them permanent. Any long-term extension would constrain lawmakers as they consider broader tax reform.
Republicans and fiscally conservative Democrats have blocked benefits for the long-term unemployed because they would add $33 billion to the deficit. So it's easy to think there would be even more opposition to a one-year extension of the tax cuts that would cost almost 10 times as much.
Ironically, though, there could be less pushback.
"Sometimes it's easier to do things that are bigger rather than smaller," said Clint Stretch, managing principal of tax policy at Deloitte Tax LLC. For instance, he said, it might be easier to vote for a $270 billion package because it will benefit far more Americans than the far less expensive extension of unemployment benefits.
But there will likely be plenty of objections along the way, especially in the Senate, Stretch said. Among the potential points of disagreements:
Should the tax cuts be extended temporarily for everyone, or everyone except high-income households? Should the cuts be extended for one or two years? And should the extension be paid for, even though it's not required?
The jury is also out on when Congress will take up formal legislation on the issue. Since the legislative agenda is so back-logged, especially in the Senate, a tax-cut extension bill might not come up for a vote until after the mid-term elections.
But there's good reason to believe it may come before, Stretch said. "It's hard to understand why you'd want to campaign defending your inaction on the middle class."
I think all of the Bush tax cut provisions need to be axed, for everyone, not just the upper income individuals. This means, among other things, dropping the Child Tax Credit down to 500 from 1000 dollars, making it non-refundable, the lower rates for anyone making under 250k.
We as a nation need to face the fact that massive spending (by both Democrats and Republicans) got us into this mess, and that both spending reduction and increased government revenue is key to getting our country back on track fiscally. That should also mean those not currently paying any income tax (46% of this country) need to start paying up, even if it's just a little bit.
Anyone with any sense knew Obama would break his promise about the tax cuts–he said it for the sole purpose of conning more people to vote for him.
"We shall tax and tax, and spend and spend..."
Though that's usually attributed to Obama's hero, that socialist Franklin Roosevelt, it was actually said by a guy who worked for Roosevelt. Regardless, Obama has spent the last couple of years "spending and spending," and you can't do that without, in the long term, taxing and taxing.
So here it comes, folks: Those tax cuts will go away, which is basically a tax increase, and look for more tax increases shortly after the next election. Obama, of course, is doing his best to put huge tax increases on energy. There are new taxes on businesses already set to take effect in 2011. This, no doubt, the thicker and more vindictive of wits among you will cheer–until those businesses start passing those tax increases on to their customers, you.
The tax-man cometh, and you idiots, by voting for him, invited him to stay a while, free-loading on your pay-cheques and soaking up the contents of your wallets.
While our political class keeps the debate on taxes, the people now recognize the problem is, and has been, unrestrained government spending. Cut the spending across the board. No sacred cows.
I don't like paying taxes, but I like the decifit and debt even less. I say that these tax cuts should expire slowly over the next 6 years give or take some. Either gradually return all the rates to what they were or have each tax bracket get raised so that all of them are back to what they were by the end of 2015 or 2020.
We would have less of a debt problem if the Bush administration and the Republican controlled Congress actually paid for things that they passed. The conflict in Afghanistan was a necessary war while Iraq was a war of choice. The Medicare part D was never paid for as well as many pork barrel spending on things that were requested that were to ensure Republicans got re-elected to Congress. That is where they lost their understanding and being fiscal conservatives.
Give with one hand, take with the other
Typical Big Government, can't or won't find areas of spending cuts. Force multiple trillion dollar bailouts onto the taxpayer when they didn't want it. And then raise the taxes on those very people who are suffering because of it.
Those "tax cuts" are deceiving, as many deductions have been lost, and for myself, I have become acutely aware, that my taxes have quietly gone up, while I was supposedly getting "tax cuts".
I am now paying the highest taxes, ever, in spite of the fact, my income has been largely stagnant, for years.
Anyone who really thinks their taxes have not increased, needs to examine them a little closer.
Solution-$150,000 FOR FAMILIES
$ 50,000 FOR SINGLE
slobama tax increases are coming....
So, after reading this article, you can come up with only 1 conclusion –
Obama – YOU LIE!
All of us, including me, need to step up to the plate and let these cuts lapse. I understand that talking about raising taxes is unpopular but at some point they become necessary. You often say that if you fail you fail and that you accept that. You say if you are going to be a one term president you accept this.
That is how the Republicans want you to go down. Well, if you must go down, then do so on your terms. Make the tough and often inconvenient decision and make us pay for what we, as a people, spend. Living within our means does not simply mean cutting spending; it also means paying our fair share. As a middle class American that is my responsibility.
If we end this welfare for the rich, 6 trillion dollars returns to the coffers. That was the estimated loss by the US Gov. auditors. Why do we have to always carry the burden!
Please remember the Obozo promise during the campaign (of course it was broken by his signing of the SCHIP bill) and then check out how it will really affect you. Guess what, he lied again!
Clearly Congress better not even think about extending this IGNORENT tax-cut-for-the-rich.................................................Working America has paid for the wealthy long enouph. How stupid is this?
Where are the facts to back up the story?I have never heard Obama say at any time that he was in favor of making the Bush tax cuts permanent at the end of this year when they are due to expire.He has maintained at ever question on this issue that they need to be left to expire.Now, he trying to say he doesn't want them to expire but is prevented because of the debt the country has. Nothing but lies. !!!!
What's the problem? Let them expire. According to the Bush haters, the wealthy were the only people to whom Bush gave tax cuts.
Another Obama lie-–No one making less than $250,000.00 will get a tax increase.
Let's see...what correlation can we find between tax policy and job creation.
Reagan – Cut taxes, jobs increased
Big George – Kept the tax cuts, jobs lost
Clinton – Raised taxes on the wealthy big increase in jobs
Little George – Cut taxes like a mad man large decrease in jobs
There appears to be little if any correlation between taxes and jobs. Let's see if there is a correlation between tax policy and the deficit....you tea baggers are big on the deficit arn't you?
Reagon – Cut taxes, created the deficit
Big George – Kept the tax cuts continued to increase the deficit
Clinton – Raised taxes on the wealthy turned the deficit into a surplus
Little George – Cut taxes turned the suplus back into a deficit
Wow Wee there seems to be a DIRECT correlation between tax policy and the deficit!!!
Four stories here: (1) Democrats still don't understand that raising taxes in a recession will deepen and prolong it. (2) The admission that $2.2 trillion of the $3.0 trillion Bush tax cuts are for people under Obama's $250,000 threshold proves that the "tax cuts for the rich" talking point is, and always has been, a bald-faced lie. (3) Democtrats still don't understand that maintaining the existing tax rate is not the same thing as spending money, and finally, (4) The leftstream media continue to report on items they consider to be "news," while rampant racism in the Department of Justice goes unreported. Do you think CNN would ignore such a story if the evil George Bush were President?
A return to Reagan and Clinton era tax levels– which were themselves greatly reduced from previous levels– would make the most sense. Economic growth was not hampered by those levels, and the return would go far in reducing our deficit.
The Bush era cuts were what got us into this fisal mess. It's time to repeal them.
I say eliminate the tax-cut for everyone. Send everyone a bill for the deficit as it stands now and totally eliminate it. Send Republican a bill for 90% of it since 90% of it was incurred under their watch. Simplify the tax code so not to grant special favors to special interest groups. Quit encouraging home ownership by allowing interest deductions. Stop encouraging over-population with dependent exceptions. Figure out a budget and then send everyone a bill based on their proportionate income. No more billion dollar a year hedge fund salaries getting taxed at 15% while the rest of us paid through the nose.