Geithner Pushes Income Tax Hike for Wealthiest
By Heather M. Rothman
Publication Date: 07/27/2010
Treasury Secretary Timothy Geithner dismissed concerns July 25 that letting Bush-era tax cuts expire for the wealthiest taxpayers would hurt the economy, saying it is responsible policy that the economy can endure.
President Obama believes that “the right thing for the country, the fair thing, the responsible thing for the country now is to make sure we leave in place and preserve tax cuts that go to more than 95 percent of working Americans and complement those with a set of incentives for businesses to expand and hire,” Geithner said on NBC's Meet the Press.
Geithner said to make that possible, the tax cuts that go to up to 3 percent of the highest earners must expire as scheduled. “The country can withstand that. The economy can withstand that. I think it's good policy.”
Speaking on ABC's This Week, Geithner said he did not believe that extending the tax cuts only for those individuals earning less than $200,000 ($250,000 for couples) will slow economic growth. Republicans pushing for an extension for all taxpayers say it will help the economy rebound, while Obama and his allies say continuing the tax cuts for the wealthy will further hurt the deficit.
Without congressional action, taxes for virtually everyone in the United States will rise Jan. 1, 2011, when the tax cuts created under the Economic Growth and Tax Relief Reconciliation Act of 2001 (Pub. L. No. 107-16) and Jobs and Growth Tax Relief Reconciliation Act of 2003 (Pub. L. No. 108-27) expire.
The acts created a new, lower 10 percent tax bracket for everyone and reduced the tax rates for individuals with higher earnings, capping tax rates at 35 percent for the highest income earners. The 10 percent tax bracket would disappear and the top individual income tax rate will return to its pre-2001 level of 39.6 percent if all of the cuts are allowed to expire.
Obama, Boehner Trade Barbs
Obama used his weekly radio address to praise his economic plan and to jab Republicans and their priorities, calling House Minority Leader John Boehner's (R-Ohio) plan to create jobs “surprisingly short, and sadly familiar.”
Boehner, Obama said, supports repealing the recent health care law, opposes certain energy tax credits, and supports the extension of tax cuts for the wealthy. These are the “same policies that led us into this recession. They will not create jobs, they will kill them,” Obama said. “They will not reduce our deficit, they will add $1 trillion to our deficit. They will take us backward at a time when we need to keep America moving forward.”
In a statement, Boehner said that “out-of-touch and unable to sell his agenda in the face of near-double-digit unemployment, President Obama is resorting to partisan attacks, rather than working with Republicans to help the American people, who are asking, ‘where are the jobs?' ”
Outsiders Analyze the Numbers
According to the Tax Policy Center, if all of the 2001 and 2003 tax cuts expire, nearly 75 percent of Americans will see their tax bills rise in 2011.
The Center on Budget and Policy Priorities issued a report July 26 that concluded that Obama's proposal to allow the tax cuts to expire for the wealthiest taxpayers would help “short-term economic weakness” and “unsustainable long-term deficits” if the money was temporarily redirected to “more efficient ways of boosting the economy while it is weak.”
The CBPP said that letting the tax cuts expire would lock in long-term budget savings and said even a temporary extension “would be quite ill-advised” because “not only would it be a highly inefficient way to stimulate the economy now, but it would post serious long-term fiscal risks.” CBPP noted that an extension would put off a decision on permanency until the 1112th Congress, which the organization notes could be filled with more proponents of permanency because they are “expected to make major gains in the November election.”
The complete text of this article can be found in the BNA Daily Tax Report, July 27, 2010. For comprehensive coverage of taxation, pension, budget, and accounting issues, sign up for a free trial or subscribe to the BNA Daily Tax Report today. Learn more »
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