On Thursday evening, Senate Democrats passed up the opportunity to vote on extending the Bush tax cuts until after the November election. There is a split within the party between liberals and moderates about whether to extend the cuts for all Americans, or limit them to the middle class. With so many vulnerable incumbents, Democratic leadership want to wait until the “lame duck” session to vote. Taxes are a hot button issue in this election cycle, and many incumbents want to take a rhetorical stand against tax increases without actually having to vote on them.
In the meantime, this means more uncertainty for the economy, since individuals and businesses do not know what their obligations will be. The tax cuts expire on January 1, 2011 and would represent a massive increase on income taxes, estates, capital gains and dividends. Congress should be acting quickly to settle the question, because the uncertainty of the tax rates is increasing the collective nervousness of the economy right now.
The White House is focused on extending the tax cuts for “middle class” Americans only, while letting them expire for the high earners. However, some Congressional Democrats fear blowback for raising taxes on higher income taxpayers in a weak economy, since many of those in the upper brackets are small business owners. The Obama Administration is blaming Republicans for being obstructionists, and said they are “holding the middle class tax cut hostage.”
Extending the tax cuts for all Americans is critical in this struggling economy. A massive increase on “the wealthy,” most of whom are small business owners, would further stifle any chances of recovery. A recent report by the Heritage Foundation maps out the job and income losses that are likely to occur if the liberal “soak the rich” plan prevails.