Pro-con: Should all Bush tax cuts be extended?

taxcutsThe Bush tax cuts were a huge success, and failing to extend them for all Americans — not just families earning less than $250,000, as President Obama proposes — would be a terrible mistake. Contrary to White House propaganda, George W. Bush achieved a lot of growth prior to the financial crisis, and lower taxes for all helped. The Bush prosperity was the byproduct of several multi-decade policy trends that freed markets and empowered individuals to innovate and create wealth. The country faces a huge deficit not because Bush cut taxes but because Obama has made permanent much of the stimulus spending that was supposed to be temporary. Perhaps Obama should dust off Bush’s 2007 budget and spend less, finally fix trade with China and craft policies that permit regional banks to compete with the Wall Street behemoths that thrust the global economy into chaos. Raising taxes now would kill the economic recovery, push unemployment well above 10 percent and boot the real problem, runaway spending, to Obama’s successor. — Peter Morici, University of Maryland professor, in the Baltimore Sun

The Bush tax cuts should be extended permanently for families with annual incomes of less than $250,000 and should be phased out slowly for those making more than that. Raising taxes on anyone now, when the economic recovery is so fragile, would be a mistake. Our fiscal problems are daunting, and tax increases will probably need to be part of the eventual solution, but if the recovery were to unravel and a new recession were to begin — a possibility that can’t be dismissed, particularly if tax rates increase — our problems would become overwhelming. Allowing the tax cuts for high-income households to expire over, say, a three-year period would not harm the economy. No more than 3 percent of households would be affected, and these effects would be small; the increased rates are unlikely to change decisions about working and investing. Besides, the economy performed admirably during the 1990s when upper-income households paid these same higher tax rates. — Mark Zandi, chief economist at Moody’s Economy.com, in the Washington Post