The voices of Tax Policy Center's researchers and staff
Maybe it's time to have a grown-up discussion about the Bush tax cuts.
Something big will happen to them before they expire in 2010. But they are not going to be made permanent. Nor will they be allowed to completely expire. For their own reasons, both political parties continue to argue over these absolutes, but this debate is silly and leads nowhere.
How do I know they won't be extended? Actually, President Bush himself told me. It is right there in his new budget. Well, some of it is, anyway. The budget projects that just the first eight years of continuing these tax cuts will add more than $2 trillion to the national debt. It doesn't give a full 10-year cost, but it will be in the neighborhood of $2.5 trillion to $3 trillion.
And that is without fixing the Alternative Minimum Tax. TPC figures it will cost well over $1 trillion to patch the minimum tax from now through 2016. For the decade from 2011 to 2020, it will be a lot more. But a rough guesstimate brings the total cost of continuing the Bush tax cuts to more than $4 trillion. Add in the interest we'll have to pay on the extra debt, and we are looking at a mind-numbing $5 trillion-plus. That would nearly double the public debt. It ain't going to happen, even with a Republican President, and even though John McCain promises he'll do it.
Similarly, even if the Democrats end up running Congress and the White House in 2009, they are not going to let all of these tax cuts expire. They won't be willing to take a pounding as big taxers.
So, what will happen? There are two possibilities. The first is that Washington pols will use the 2010 deadline as an opportunity to make broad changes in the tax code. By moving around so many pieces, it will be easy to reframe the debate as tax reform rather than as extending the Bush tax cuts.
Their second option will be piecemeal changes. Perhaps an AMT fix, finally. I can imagine Democrats boosting the top income tax rates, but retaining relatively low rates for low- and middle-income families, an idea Barack Obama has already backed. A Republican president, by contrast, might also let some of the top rates rise, while adding new incentives for savings and investment and preserving very low rates for capital gains and dividends.
These are big decisions, and it would be nice to hear candidates talk about them instead of continuing their tiresome "will too-will not" squabble.
Posts and comments are solely the opinion of the author and not that of the Tax Policy Center, Urban Institute, or Brookings Institution.