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Home Publications Blogs Beat the Press The Impact of Expiring Tax Cuts: Can We Get Names?

The Impact of Expiring Tax Cuts: Can We Get Names?

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Saturday, 13 November 2010 07:50

The Post told us about the prospect that the Bush tax cuts would expire in January:

"The stakes are enormous. Millions of taxpayers could see hundreds of dollars sliced from their paychecks in January unless Congress acts. Economists say expiration of the tax cuts would deal a devastating blow to the fragile U.S. economy, and has the potential to push it back into recession."

There can be little doubt that the impact of pulling money out of the economy at this point will be negative, and given that the economy is scraping against zero growth already, it would not take much to throw it into another recession. But it might be a bit much to describe this as a "devastating blow." The expiration of the Make Work Pay tax credit and other parts of the stimulus will also pull money out of people's pockets and slow growth. The Post has never issued similar warnings about this prospect.

It would have been appropriate to refer to actual statements of specific economists rather than present overblown adjectives as being the considered judgment of the economics profession. In the same vein the article later describes the $4 trillion cost of continuing all the credits for a decade as a "budget buster." This assessment should come from a participant in the debate, not the newspaper.

Comments (10)Add Comment
What does the bondholding class say?
written by tom volscho, November 13, 2010 8:22
In May of 2008, the rhetoric from the bondholder class was very similar:

"TAX ARMAGEDDON ON THE HORIZON?"

This is from a powerpoint from Ernst & Young.

http://events.sifma.org/uploadedFiles/Events/2008/wall2wash/WallStreet--WashTaxSlides.pdf

...
written by izzatzo, November 13, 2010 8:45
Hello. Boy Monarch here. Since you're talking about me and I'm back now, I have something to say about my tax break extensions and economical incentivisms.

One time when I was falling down drunk at a party of friends and relatives, I asked the hostess what sex was like after 50. After that I became President and stepped up the drug war to prevent people like me from ever asking questions like that again in public.

I learned that at Yale Business School. It's better to regulate negative externalities than to tax them because that way they pay for themselves.
...
written by denis gordon, November 13, 2010 8:54
It's Lori Montgomery, Dean. You can never go wrong predicting that she will get the full quota of unsourced "opinion" and scary overblown adjectives in to the first paragraph of anything she writes. I have made it one of my rules to skip anything with her by-line at the top.
With that attitude, Dean...
written by Jeff, November 13, 2010 9:15
...you won't be invited to speak at the Ruth Marcus Entitlement Lecture Series.
...
written by skeptonomist, November 13, 2010 9:39
The increased revenue will be pulled out of the economy only if it is used to retire debt. According to Keynesian theory, the current problem is that private spending and investment are too low, so the government has to contribute more. Politicians, both Republicans and Democrats, have a well-documented propensity to spend all and more of government revenue - the claims of opposition politicians that deficits are harmful and that debt must be reduced are usually a tactic to discredit the party in power. So the most likely outcome if taxes are raised and revenue is increased is that government spending will be increased, thus benefitting the economy.

This is Keynesian theory revised to take account of political realities.
Right
written by Mike B., November 13, 2010 11:42
I've been wondering why no one talks about the need to extend the expiring Obama tax cuts (like Making Work Pay), but only focus on extending the Bush tax cuts. Has Obama asked that Making Work Pay be extended? If not, why not?
Millions losing hundreds?
written by Sean G, November 13, 2010 2:26
The "millions of taxpayers losing hundreds of dollars" is fear mongering at its best. I believe the number for $40k/year is $600 per year. Which comes down to about $12 per week. Sure, that's hundreds of dollars a year, but the vast majority of people in the country would see a tax increase around that. "Millions" sounds like it's you and me, when in reality two million people are only a couple of percent of the taxpayers in this country.
Posted too soon...
written by Sean G, November 13, 2010 2:29
Not to mention, as far as I know NOBODY is talking about letting ALL of the Bush tax cuts expire. I'd like to see it happen, but I doubt the middle class will see any difference... it's only the upper tax earners that are seriously being considered here.
Kaplan University Post Scare Articles
written by gluggau, November 13, 2010 9:51
The well-paid, billionaire-identifying stenographers at the Kaplan University Post are worried, but not about the "small people" who might see "hundreds of dollars sliced from their paychecks." In fact, aren't they always telling us the lie that 50% of the populace doesn't pay taxes at all? No, it's the overlords who're terrified that they might see "thousands of dollars" levied from their windfalls. The Kaplan University Post can't say this, so they...project. You know. It's the conservative way.
Making Work Pay
written by Mike B., November 14, 2010 1:50
I looked up the answer to my own question above, and Obama has proposed extending Making Work Pay (the $400 tax cut) for another year. Let's see if that makes it as part of the deal.

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About Beat the Press

Dean Baker is co-director of the Center for Economic and Policy Research in Washington, D.C. He is the author of several books, his latest being The End of Loser Liberalism: Making Markets Progressive. Read more about Dean.

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