Bush tax reductions, the deficit, economic growth and the Obama strategy

Not that they actually will, but the Bush tax reductions are intended to finish along with the current calendar year. For the so-called rich who make more than $200,000 a year, the Bush tax reductions continue, while the so-called middle class gets to keep them under Obama’s scenario. Republicans say raising taxes on the rich will stifle economic recovery. The president has a talking point of his own. As outlined by Obama, shortage reduction and tax reductions for the affluent don’t mix. Some analysts say the Obama tax plan won’t make a difference in reducing the deficit, when tax cuts in general won’t help the economy. It will be awhile before anything concrete happens on the issue. With November elections drawing near, fearful Democrats who want to be re-elected have put off voting on a problem that involves taxes.

Obama’s tax strategy beneath the cover

Republicans are looking out for the rich constituents who pay for their reelection campaigns. However taking away their Bush tax cuts may not be the hardship being advertised. Bob Williams at the Christian Science Monitor took a close check out the information. For example, for making sure that people who make less than $200,000 do not get hit with more taxes, more incomes fall to the 28 percent tax bracket. For a few of the more wealthy working class individuals, this measure could cut their taxes by a number of hundred dollars. Stretching the bracket trickles upward. It creates a little daylight for many who make just a little more than $200,000 to escape higher tax rates. According to a study by the Tax Policy Center, Obama’s proposal to rescind the Bush tax cuts for the rich will increase rates for just ! 1.7 percent of working class individuals. Williams wrote that the reason nearly 95 percent of that 1.7 percent would pay more isn’t really because of ordinary income. They get hit when the tax on capital gains and dividends goes from 15 to 20 percent. If the Democrats call the Republican bluff and the Bush tax reductions go away, the wealthy will end up paying a top rate of 39.6 percent on dividends.

Tax reductions: answer, or issue

To spur the economy into growth, tax cuts are heading in the wrong direction, said Diane Lim Rogers on CNN . Committing to either the Republican or Democratic tax plans, Rogers writes, will result within the government losing revenue for years, keeping Americans from saving and an economy stunted within the long term. Obama has said that rescinding the Bush tax cuts for the wealthy will trim $700 billion from the shortage in a decade. Nevertheless, the cost of stretching the cuts for the rest of the population–$2.2 trillion-more than cancels out any savings. To solve the unemployment issue, Lim Rogers writes that increasing the shortage by financing public projects makes much more sense than simply cutting taxes. What is being overlooked, she said, is that short-term tax cuts will make the deficit problem worse down the road. Lim Rogers is doubtful that the government could be counted on to let the extended tax reductions expire, especially when elected officials ! refuse to do this now.

Further reading

CS Monitor

csmonitor.com

CNN

cnn.com