In 2008 the above OMB-sourced graph made the rounds in blogs like Fundmastery. In a helpful summary of a Wall Street Journal article, “The Coming Tax Bomb”, Fundmastery noted what was expected to come when tax cuts in effect for ten years ran out at the end of 2010:
- A huge boost in tax rates on dividends
- A large jump in capital gains rates
- The marriage tax penalty would be back
- The child tax credit would be reduced
- Estate tax exemptions would be cut drastically to $600,000
As this deadline creeps toward us, Washington has been dragging its feet on what to do. Many Democrats argue that these are only tax cuts for the rich and should therefore be allowed to die. Back in 2002 when the House voted on whether these tax cuts should be made permanent, Lynn Woolsey voted with the majority: she said no. She wanted then (and presumably wants now) that the taxes being cut be reinstated.
But would these reintroduced taxes really only affect the “rich”? Bill Bischoff, The Tax Guy for Smart Money sets us straight in a July 7, 2010 article:
You may have been led to believe that only individuals in the top two brackets will face higher federal income taxes when the Bush cuts go bye-bye. Not true! Unless Congress takes action and President Obama goes along, rates will go up for everyone — not just a sliver of the wealthiest Americans.
The fact is that as long as Lynn Woolsey and similar-thinking politicians reign in Washington not only will out-of-control federal spending continue unabated, but our taxes will rise, rise, rise. The Bush tax cuts that may be allowed to expire aren’t the only taxes the Obama/Pelosi/Reid-led group that includes Woolsey intends to force on Americans (more specifics on those other taxes in future posts). But those tax cut revocations alone would be enough to “kill” whatever recovery the economy tries to make, according to analysts interviewed for a recent CNBC article:
In a worst-case scenario, allowing the Bush tax cuts to expire and failing to fix the AMT could result in (1.5 percent) of fiscal drag in 2011 on top of the 1 percent fiscal drag we expect to occur as the Obama fiscal stimulus package unwinds,” Deutsche said in a note to clients. “If the recovery remains soft/tentative through early next year, this additional drag could be enough to push the economy to a stalling point.
That graph we started with also makes an appearance in a new book, Seeds of Destruction: Why the Path to Economic Ruin Runs Through Washington, and How to Reclaim American Prosperity. Written by R. Glenn Hubbard and Peter Navarro, two economists from opposing political parties, the book is a smart, clearly-written primer for Americans wanting to understand more about our complex economy. The authors explain the fix we’re in and provide no-nonsense paths for extricating ourselves. When Navarro and Hubbard include the graph in their text, they commentate:
The hikes are more than twice as large as President Lyndon Johnson’s surcharge to finance the war in Vietnam and the war on poverty. They are also more than twice the combined personal income tax increases under Presidents George H. W. Bush and Bill Clinton.
These two economists, one a Democrat and one a Republican, agree that greater taxation is not the way to make our country’s economoy healthy again. But Lynn Woolsey doesn’t see with post-partisan eyes. She thinks, wrongly, that reinstating these tax cuts would only affect the “rich” (those who make over $250,000). She wants to make the rich pay — but by attempting that, she is also soaking the rest of us. We can’t afford that. We can’t afford Lynn Woolsey in Congress!