Wednesday, December 1, 2010

Tax Cuts

Obama and Republicans met today to discuss what to do about the Bush era tax cuts expiring. Its being reported that they spent their time discussing what other issues they could be brought to the table in order to get a compromise on the tax cuts, which according to this would be extending all the cuts for a few years.

The Republican position on the tax cuts is crystal clear. They want them all extended at pretty much any cost. The Democrat position is not as clear. The one thing every Dem wants is to extend the current income tax rate for people making $250,000 and below. The logic being that people need to keep as much money as they can right now because the economy needs them to spend money.

Where the Dems differ from the Reps is that they want to let the cuts on $250,000 and above expire. The logic there is that these people aren't likely to spend that money they would get from the current tax rate. They will simply save it instead of investing it back into the economy.

If the Dems compromise and give Reps full extension of the tax cuts they better get a lot in return. At minimum they should extend unemployment benefits. I really don't see why Dems can't play as hardball as Reps are on the tax cuts for the rich on this issue. They should also get the debt ceiling raised because the tax cuts will add a lot to the debt. Those two seem like easy no brainers to me. I just don't see why Dems can't get them if Reps are indeed willing to compromise.

If they aren't willing to compromise the Dems should split the vote on the different tax brackets and force Reps to vote against publicly popular policy. I don't think they should include the repeal of DADT. I'd save that for either the START treaty or the appropriations bill.

Dems have leverage here and they need to use it, both publicly and privately. There is no reason they can't be aggressive in public discourse. They should not let Reps get away with favoring tax cuts for rich people and not benefits for unemployed.

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