Congressional showdown over taxes this fall
Share Now on:
TEXT OF STORY
Kai Ryssdal: Congress starts its summer recess in a couple of weeks. But we already know what Washington’s going to be arguing about when lawmakers get back to town. The Bush tax cuts of almost 10 years ago, they’re set to expire at the end of this year, which is conveniently an election year with a still squishy economy.
Our Washington bureau chief John Dimsdale has more on how that debate is gonna go.
John Dimsdale: Practically every working American is facing a tax increase, unless Congress says otherwise. The marriage penalty returns. Estate and capital gains taxes revert to higher levels. And the Alternative Minimum Tax, aimed at catching wealthy people with plenty of deductions, will start taking a serious bite, says Kevin McCormally, with Kiplinger’s Personal Finance Magazine.
Kevin McCormally: If Congress does nothing, we’ll go from four million people owing the AMT in 2009 to 27 million owing it in 2010. That’s a tax increase for 23 million people right there.
The Obama Administration proposes to extend the tax cuts for all but the wealthiest 3 percent. That includes many small business owners, and Johns Hopkins University professor Steve Hanke says the threat of a looming tax hike is prompting them to create as much income and production this year while taxes are lower.
Steve Hanke: This has been kind of a boost to the economy, but it will, of course, end up falling flat next year.
But the White House says keeping higher taxes for the wealthy sends an important signal that the government is ready to rein in the deficit to the tune of $2 trillion over 10 years. And University of Michigan economics professor Joel Slemrod isn’t so sure the higher taxes will hurt the economy.
Joel Slemrod: If moving back toward the Clinton-era income tax rates, promised Clinton-era economic performance, then sign me up.
Slemrod says the 90s proved the economy can thrive with the old, higher tax rates.
In Washington, I’m John Dimsdale for Marketplace.
Marketplace is on a mission.
We believe Main Street matters as much as Wall Street, economic news is made relevant and real through human stories, and a touch of humor helps enliven topics you might typically find…well, dull.
Through the signature style that only Marketplace can deliver, we’re on a mission to raise the economic intelligence of the country—but we don’t do it alone. We count on listeners and readers like you to keep this public service free and accessible to all. Will you become a partner in our mission today?