Maybe it’s the holiday season, but if the reports are true President Obama and congressional Republicans have reached a compromise on extending the Bush tax cuts that gives taxpayers and the economy a wondrous gift.
While details are sketchy and ever-so-important, President Obama announced he has agreed to extend all the Bush tax cuts for two years, through 2012. The necessity of economic growth trumped the ideology of redistributionism, though the President did take plenty of jabs at the wealthiest Americans. The compromise also includes the unfortunate resurrection of the death tax, but at a less punishing rate of 35 percent combined with a $5 million exemption. Two things to remember as the debate turns over to Congress: keeping current tax policy is not a tax cut, it’s preventing a tax hike, and would let all Americans keep more of their own money. Since this isn’t a tax cut, it doesn’t need to be “paid” for. The unfortunate part of this compromise is that it is not a permanent extension which would have been far better for the economy.
In exchange, the President got a 13 month extension of Unemployment Insurance benefits — without having to offset the cost – as well as a temporary 2 percentage point reduction in the payroll tax in lieu of an extension of Obama’s ghastly “Make-Work-Pay” tax credit left over from the failed stimulus bill. Other important issues such as the extension of the AMT patch may also be included in the deal, but that is unclear. A few more targeted tax cuts were included such as immediate expensing for business investment – a sound policy that should also be made permanent.
If the details bear out, this is a compromise worth embracing. It now falls to Senate Majority Leader Harry Reid and Speaker Nancy Pelosi to decide whether they follow their President’s lead or go their own way, leaving taxpayers a tax hike chunk of coal for the new year.
Enough already of the job killing tax agenda. It’s time to do the right thing for the taxpayers and for the economy. In President’s words: it’s time to speed up the recovery and get people back to work.
Co-authored by J.D. Foster.