Extending tax cuts for the wealthiest Americans would imperil the fragile economic recovery, Treasury Secretary Timothy Geithner said, as the Obama administration pushes to let the Bush-era policies expire at the end of the year. The tax cuts should be extended for almost everyone. The exception is for married couples making more than $250,000 or a single person making $125,000 or more.
Geithner was justifying the administration's proposal to extend the George W. Bush tax cuts except for those making more than $200,000 a year. The Bush tax cuts for the middle class need to be extended, according to Geithner, to maintain incomes. However, long-term economic prospects require a signal that the federal government will get serious about its debt, so the rich need to pay more. Taking more from the rich won't be economically damaging, according to Geithner, because they are less likely to spend the difference.
The tax on dividends, for example, is currently 15%, but it could increase to as high as 39.6% if the 2001 and 2003 tax cuts expire. On top of this, a new 3.8% tax on investment incomes for high-income earners begins in 2013 to help pay for ObamaCare. The administration's arguments for higher taxes on capital center on fairness and the need for deficit reduction. Mr. Geithner argued that the wealthy tend to save more of their tax breaks than do other groups, so in letting their taxes rise; there would be minimal impact on economic activity.
If President Obama is interested in promoting growth now and in the future, he should commit to retaining the low tax rates Congress passed in 2003. A Treasury estimate shows the 10-year cost of extending the middle-class tax breaks is about $3 trillion. Extension of the breaks for higher earners adds $679.6 billion to the tab.
Geithner was justifying the administration's proposal to extend the George W. Bush tax cuts except for those making more than $200,000 a year. The Bush tax cuts for the middle class need to be extended, according to Geithner, to maintain incomes. However, long-term economic prospects require a signal that the federal government will get serious about its debt, so the rich need to pay more. Taking more from the rich won't be economically damaging, according to Geithner, because they are less likely to spend the difference.
The tax on dividends, for example, is currently 15%, but it could increase to as high as 39.6% if the 2001 and 2003 tax cuts expire. On top of this, a new 3.8% tax on investment incomes for high-income earners begins in 2013 to help pay for ObamaCare. The administration's arguments for higher taxes on capital center on fairness and the need for deficit reduction. Mr. Geithner argued that the wealthy tend to save more of their tax breaks than do other groups, so in letting their taxes rise; there would be minimal impact on economic activity.
If President Obama is interested in promoting growth now and in the future, he should commit to retaining the low tax rates Congress passed in 2003. A Treasury estimate shows the 10-year cost of extending the middle-class tax breaks is about $3 trillion. Extension of the breaks for higher earners adds $679.6 billion to the tab.
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