U.S. House Speaker Nancy Pelosi has told members of the House to interrupt their summer break and be back at work on Monday. The purpose is to push through a $26 billion stimulus package for cash-strapped states with crashing economies.
However, currently the buzz is that there are no plans to address the December expiration date of the Bush tax cuts, despite some warnings from Pelosi's own Democratic Party not to let them expire. The "Bush tax cuts" were so named because Congress approved President George W. Bush's tax cut proposals in 2001 and 2003.
Senators Evan Bayh (D - IN), Kent Conrad (D - N.D.) and Ben Nelson (D - Neb) don't favor letting the tax cuts expire. All spoke out within the last couple of weeks stating reasons such as ending the Bush tax cuts in a downturned economy would (a) not increase public confidence and/or (b) not help stave off the federal deficit.
Treasury Secretary Timothy Geithner, on the other hand, does not feel that letting the tax cuts expire will further slow the economy, according to White House Correspondent Jake Tapper in his ABC News blog.
CPA warns dismal outlook if Bush tax cuts expire:
William R. Bischoff is a certified public accountant in Colorado Springs for PPC, part of the tax and accounting business at Thomson Reuters. He reported at Reuters that, in his opinion, the Bush tax cuts should be left in place, for reasons such as the following (no direct quotes):
- It's not true that only people in top tax brackets will face higher rates when the tax cuts expire. Congress must take some action on re-defining the percentage tax brackets, or the rates will automatically go up for everyone.
- The marriage penalty (married couples paying more taxes than singles) will automatically increase.
- The Obama administration has promised to increase long-term capital gains tax from 15 percent to 18-20 percent only for marrieds with income of $250,000 or more and singles with income of $200,000 or more. However, Bischoff states again that no action has yet been taken to ensure this increase hits only those people. If not well-defined within the tax code, then every taxpayer will be hiked up to 18-20 percent, with taxes on dividends increasing from 35 percent to over 39 percent.
An analysis of why people at $200,000 or more should not pay higher taxes:
-Many of these people are the "small business owners" the government wants to target. These people own businesses that pay hundreds of citizens' salaries and health benefits. They'll have to lay off more employees or charge the rest of us higher prices for their goods if the government takes more money from them. In the end, we all pay.
-Entrepreneurs making, say, $200,000 to $500,000 probably work harder than the CEO of some Fortune 500 company, who makes $6 million just in bonuses.
-If we punish them with more taxes, we're just inviting a new level of mediocrity because people will never again want to strive for a better life. In the end, we all lose.
Sources:
"It's Official: House Coming Back From Summer Break For State Aid Vote," Matthew Jaffe, ABC News "The Note," 8/4/10.
"Democrats dissent on Bush cuts," Martin Vaughan and John D. McKinnon, Wall Street Journal, 7/22/10.
"What to Expect if Bush Tax Cuts Expire," William R. Bischoff, Reuters, 7/30/10.
"Treasury Secretary Says Letting Bush Tax Cuts for Rich Expire Will Not Slow Economic Growth," White House correspondent Jake Tapper, ABC News Blog, 7/24/2010.
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