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OpEdNews Op Eds    H3'ed 9/16/10

The Late Great Tax Debate

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We have embarked upon a debate over how to handle the looming prospect of George W. Bush's cuts to marginal tax rates being sunsetted as of December 31, 2010. This debate, like all debates, has two opposed arguments. There is the Democratic Party's argument that goes unarticulated, and there is the Republican Party's argument that is made up from whole cloth and designed to deceive.

The Democratic argument, despite its dearth of publicity, is straightforward and easily explained. The Bush tax cuts are due to expire at the end of the year. Democrats wish to extend the tax cuts for Americans earning less than $250,000 per year. That would be 98% of American workers keeping that tax cut.

The Republican argument is somewhat more complex, as in, "Oh, what a tangled web we weave when first we practice to deceive." I'll try to break it down, though.

Republican Claim #1: Any tax cuts that are not extended constitute an Obama tax increase. Actually, any tax cuts that are lost will be because Bush Republicans voted to allow it to happen. These tax cuts, that they don't think they have to pay for, were originally passed by what they have so recently maligned in the Senate by using the budget reconciliation rule. Since the bill was scored as a drain on the Treasury, it was, according to the rule, subject to a ten year sunset provision. That means that the tax breaks ending are an integral part of this Republican bill, so any "tax increase", if it must be labeled as such, would be a Republican tax increase.

Republican Claim #2: If taxes go up on the top two percent of earners, they will stop hiring and investing, resulting in stunted job creation. Hmmmm. There's one where we can consult the historical record for guidance. During the eight years of the Bush administration (when the Bush job creating tax cuts were passed) the economy of the United States added a net 1,950,000 jobs. This was less than 10% of the rate at which jobs were added to the economy during the eight years of his predecessor's administration.

The Clinton administration added 22,744,000 jobs to the economy. One may argue that the Clinton years saw a high tech bubble that enhanced hiring in that economic sector, but one would have to acknowledge that the Bush years had the housing bubble to help them. Jimmy Carter's administration presided over the addition of 10,500,000 jobs in four years, so what are the Republicans crowing about?

We may safely conclude that the highly touted job creating power of these tax cuts is nonexistent, at least on these shores. It seems that Chinese employment rates did pretty well during Bush's administration.

Republican Claim #3: Allowing the Bush tax breaks to lapse will hurt small businesses that do most of the job creation. Perhaps it will, but it won't be many, and we can expect that they won't be hiring, even if they keep the tax breaks.

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I am a lifelong resident of the Chicago suburbs, with a several year hiatus to serve in the Navy when my Vietnam era draft notice turned up. I had been told that guys with last names like mine were among the preferred cannon fodder in the Army, so (more...)
 
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