Timing is everything and the time is now

According to the the New York Times, there is an Epic Battle Looming Over the Expiration of the Bush Tax Cuts.  Here is an excerpt from the article:architecture,buildings,capitol buildings,capitols,congresses,domed buildings,domes,government,landmarks,legislatures,lights,nighttimes,photographs,United States,USA,Washington,Washington D.C.

Democratic leaders, including Mr. Obama, say they are intent on letting the tax cuts for the wealthy expire as scheduled at the end of this year. But they have pledged to continue the lower tax rates for individuals earning less than $200,000 and families earning less than $250,000 — what Democrats call the middle class.

Most Republicans want to extend the tax cuts for everyone, and some Democrats agree, saying it would be unwise to raise taxes on anyone while the economy remains weak. If no action is taken, taxes on income, dividends, capital gains and estates would all rise.

The issue has generated little public attention this year as Congress grappled with health care, financial regulation, energy, a Supreme Court nomination and other divisive topics. But it will move to the top of the agenda when lawmakers return to Washington in September from their summer recess, just as the midterm campaign gets under way in earnest. In recent days, intense discussions have begun at the Capitol. http://www.msnbc.msn.com/id/38400016/ns/politics-the_new_york_times/

It’s a matter of priorities

As we look at our nation from an economic perspective we have two critical priorities, 1) reducing a ballooning  Federal Deficit and 2) building an economy that is sustaining and creating more jobs.  In reading the preceding sentence, it may seem that these are two separate and distinct issues, when in fact they should be considered together. The question becomes one of a short term fix or a long term gain.

Where will the dollars do the most good?

Letting the tax cuts expire is a short term fix.  There is no question that the middle class (as defined above) needs help.  Lowering taxes for lower and middle income Americans may help reduce credit card debt or increase consumer spending a little per household. Yet raising taxes on “the rich” will reduce their consumer spending and investment capital.  Thus we get a little more spending from one side while reducing spending AND investment more on the other as we shift the net tax increase to the Federal Government to apply to the budget and hopefully the deficit. (This Net Gain is calculated as an Upper Income Tax Increase LESS  Middle and Lower Income tax reduction)   

The argument for renewing the tax cuts is simple, keep the money in the economy and in the hands of the people who can use it to invest in struggling markets, to support business growth, and most importantly to create and protect jobs.   In today’s economy, the capital to do this comes from the people.  Many of “the rich” are small business owners who are investing in their business, others are family businesses that may be crippled by estate taxes should a business owner pass away.  Still others are investors whose money goes into the capital markets to support the capital needs of larger businesses through the stock market or as angel investments.  Renewing the tax cuts so they do not expire leaves the money in the hands of the people who directly or indirectly support job growth.For when people are working THEY pay taxes which again the Federal Government can apply to the deficit.

The greatest Net Gain

Most decisions have pros and cons.  This one is no different.   The big question is where the American people and the country will get the greatest net gain.  Congress has three choices:

  • They can extend the tax cuts.
  • They  can let them permanently expire and then institute a new structure to help lower and middle income earners.
  • They can issue a temporary extension and pass the buck on the decision to the next session.

Why the time for the people to act is now

On August 9th the Senate and the House begin the Summer Recess that extends until after Labor Day. Our elected representatives are headed home to meet with constituents and in many cases to hit the campaign trail either for themselves or others.  If we have an opinion, NOW is the time to voice it.  Contacting your Congressman is easy.  You don’t even have to go to a rally or make an appointment.  Just reach out to them. Every phone call or email does have an impact.  Your Congressman may not personally read it but their staffers do and the feedback ends up in the briefings they get when it comes time to vote.  So what ever side of the battle you rest on, don’t miss your chance to be heard.  After all, the beauty of our system of government is that it is supposed to be representative of the people.  So help them do their their job and tell them what you think.


Thanks for stopping by.  Stay tuned…

Joan Koerber-Walker

Posted in Growth.