Anyone who has watched the
Republican presidential candidates debate, or has recently seen the remaining
frontrunner pitching his
campaign, has seen those candidates talking about the "need" to "make the
tax cuts permanent." However, this is a completely
phony issue, for reasons I will explain here.
Here is the background. On June 7, 2001, the
Republican-controlled
Congress passed, and
President Bush signed into
law, the
Economic Growth and Tax Relief Reconciliation Act of 2001. This law included a total restructuring of the system of
progressive income tax in the U.S., in a collection of tax cuts aimed at different interests (although most of the benefit went to the top
percentage). When they passed this tax cut, they included a
sunset provision, which makes the tax cuts only temporary, so is set to expire in 2011 with the pre-cut taxes coming back when it expires. What the candidates are talking about when they say they want to make the tax cuts permanent is to eliminate the expiration, so the pre-cut rates do not return in 2011. However, this is a phony issue on multiple levels:
First: If the new taxes set up in the tax cuts are such a great idea, why make them expire
at all? Why not just make them permanent at the time? The simple answer is that there is another law in place which makes it harder to pass legislation that will have a bad effect on keeping the
budget balanced
if that
legislation will be in effect for
more than ten years. So, Congress sidestepped its responsibility to admit whatever bad effects might come ten years down the road by building in that expiration date. However, Congress
could have made the tax cuts permanent at the time, it just would have had to be out in the open about the
long term effects.
Second: If those tax cuts were really working out so well, Congress could have passed a law to either extend the expiration date or make them altogether permanent in 2002, or 2003, or 2004, or 2005, or 2006. Apparently it wasn't such a pressing issue to do so in all those intervening years, even though everyone knew about the expiration date.
{Note: a reader has pointed out that there were votes amending portions of the Act in 2003 and 2006. The 2003 amendment did not effect any sunset provisions; the 2006 amendment, the anachronistically titled "Tax Increase Prevention and Reconciliation Act of 2005" did strip the sunset provisions for a few items in the package, and passed by a fair margin (54-44 in the Senate). Who knows if the total package could have been further extended or even made permanent then.}
Third: The tax cuts don't expire until
2011. if this wasn't a pressing issue for the past 7 years since they passed in the first place, why is it a pressing issue
now? Why not wait another two or three years to see exactly what the economic situation is closer to that expiration date? Why not let them expire, even, and then reenact them if it turns out that having them was better?
{Note: a reader has suggested numbers 2 and 3 contradict each other; I prefer to think they contrast each other - if this was important, it should have been acted on before - but it wasn't, and the sky hasn't fallen because of that, which shows that there's no real reason to act on it now}.
Fourth: The
slogan "make the tax cuts permanent" doesn't really mean "
permanent" because it would just be Congress passing a bill, which they could turn around and repeal the next day!! There's never anything "permanent" about it; the tax rates are in a constant state of
flux or
potential flux.
Fifth, and finally: Like I mentioned before, the law which reduced the taxes in 2001 was actually a whole package of different tax cuts. Some aimed at
poor folk, some at
middle class, some at the
wealthy, some for
corporations. There is no "all or nothing" requirement here; Congress could make
some of the tax cuts permanent and let others expire (or wait and see for others).
So there are five reasons, in a nutshell, why this is a phony
baloney issue, and one that should not sway anyone with an
ounce of
common sense to see through the
rhetoric.