| The politics of tax cuts is not as daunting as it may | | | | many middle income families. The actual difference |
| seem for the Obama administration. Tea party | | | | between the parties relates only to the two highest |
| activists, along with conservative Republicans, are | | | | tax brackets, limits on personal exemptions and |
| doubling down for the mid-term Congressional | | | | itemized deductions, and treatment of long-term |
| elections on the issues of federal spending and taxes. | | | | capital gains and dividends for families with incomes |
| The most effective play for the Democrats here | | | | greater than $250,000. |
| may well be a well-timed Obama administration | | | | Extending the Bush tax cuts will have the beneficial |
| reversal of policy to embrace the extension of all the | | | | effects of adding more stimulus and reducing |
| Bush tax cuts. It makes good sense from both a | | | | uncertainty about taxes, both of which could give a |
| political and policy perspective. | | | | much needed boost to a struggling American |
| Politically, it could well take the steam out of the | | | | economy. Both Democratic and Republican Party |
| Republican/Tea Party narratives -- that Obama is too | | | | plans will also add to the deficit. Current estimates by |
| liberal, a Socialist, wants an ever expanding role for | | | | the Office of Management and Budget are that the |
| the federal government, and is trying to "steal" our | | | | Democratic plan would cost $3.0 trillion in lost revenue |
| money through increasing taxes. A quick pivot on this | | | | over 10 years, while extending all the Bush tax cuts |
| issue now, along with continuing to pound Republicans | | | | would result in $3.7 trillion in lost revenue over 10 |
| for their recent opposition to small business incentives | | | | years. The difference of $700 billion over ten years |
| to create jobs, could be just the political recipe | | | | works out to be about $70 billion each year. And an |
| needed to stave off defeat for the Democrats in | | | | argument can be made that the currently sputtering |
| November. | | | | economy might well respond well psychologically to |
| In policy terms, there is actually not that much | | | | idea of extending all the cuts. Any resulting increase |
| difference between the parties on extending the | | | | in growth in the short run could have the effect of |
| Bush tax cuts. Both Democratic and Republican tax | | | | reducing the ultimate total of lost revenues. Limiting |
| plans extend Bush-era tax changes including reduced | | | | the extension of the Bush tax cuts to only two or |
| tax rates for families with incomes of $250,000 or | | | | three years would also reduce the long term impact |
| less, extending tax credits for children and students, | | | | on the national debt. In both political and policy terms, |
| reductions in the marriage penalty and estate taxes, | | | | then, embracing Bush-era tax cuts makes good |
| and changes in the alternative minimum tax (AMT) | | | | political sense for President Obama and the |
| that have meant eliminating the AMT penalty for | | | | Democrats. |