Bush Tax Cut Debate Finds Vulnerabilities on Both Sides
The debate over the Bush tax cuts will be incredibly interesting over the next few months, because both sides think they have outflanked the other in the debate. For example, the NRSC sure thinks they have a tiger by the tail: they are pressuring Democrats to explain their position on the tax cuts, including a new mini-site, Don’tRaiseMyTaxes.com. Of course, the taxes may rise because Republicans under the Bush Administration put a sunset on their tax cuts for budgetary reasons.
Meanwhile, the Obama Administration has stood fairly firm against extending the tax cuts for high-income earners. Paul Krugman offered some good numbers bolstering that side of the debate today:
And where would this $680 billion go? Nearly all of it would go to the richest 1 percent of Americans, people with incomes of more than $500,000 a year. But that’s the least of it: the policy center’s estimates say that the majority of the tax cuts would go to the richest one-tenth of 1 percent. Take a group of 1,000 randomly selected Americans, and pick the one with the highest income; he’s going to get the majority of that group’s tax break. And the average tax break for those lucky few — the poorest members of the group have annual incomes of more than $2 million, and the average member makes more than $7 million a year — would be $3 million over the course of the next decade.
I think we have a fight that will be decided by which side of the debate wilts under the pressure or just sounds ridiculous defending their position. We have evidence on both sides. Some Democratic challengers, like Robin Carnahan (D-MO) and Jack Conway (D-KY), have broken with their party and supported a temporary extension. Notably, no incumbent has followed this path, which may be attributable to the big money donors and bundlers that challengers must find to contribute to their campaigns. On the other side, Republican stalwarts like Mitch McConnell twist themselves into knots defending their position to elite media types (who seem to have gone all hippie on this issue):
MCCONNELL: What are you talking about, paid for? This is existing tax policy. It’s been in place for ten years. […]
GREGORY: For a final time, I’ll go back to my question which is, the extension of the tax cuts would cost $3.2 trillion. That’s borrowed money, that adds to the deficit. Do you have a plan to pay for that extension?
MCCONNELL: You’re talking about current tax policy. Why did it all of a sudden become something that we, quote, ‘pay for’?
Nobody’s fooled by McConnell’s invocation of current tax policy. Everyone knows that he voted to let them expire in 2001. And, they know that Republicans do not hold the upper hand legislatively on this: if they reflexively oppose any legislation, their preferred method of doing business, all the tax cuts will expire.
I don’t know quite how this will turn out, but it’s worth noting that the rich have made some contingency plans:
Arch Brown has converted his traditional retirement accounts into plans with better tax advantages. Andrew Ahrens has been buying gold and silver and selling stocks. Archie Anderson might speed up the sale of two equities himself. Mike Henry is considering selling timber.
The four are among a growing group of high-income taxpayers who assume they will see higher taxes next year, no matter what Congress does to address the expiring tax cuts from the George W. Bush administration. More than four months before the expiration date, they are making plans to mitigate any impact.
Mr. Brown, a Tucson, Ariz., businessman, said he is working on the assumption that “the tax rates for people like me who have income over $250,000 will go up.”
Let the loophole-finding begin.