Wednesday, November 3, 2010

The tax increase everyone forgot

The Congress and administration have argued endlessly over extending the Bush tax cuts and in the end went home to try to retain their power in the election and did nothing. The argument was about whether to continue the tax cuts for the very rich. That would cost roughly $68 billion: the cost of covering the last 1.7 percent vs. the government pulling that much money out of the private sector and squelching economic recovery.

But nobody is talking about the nearly $80 billion hit that expiration of the 2009 stimulus bill will inflict, Bob Williams writes at the Tax Policy Center.
The stimulus bill (the American Recovery and Reinvestment Tax Act of 2009) provided $287 billion in tax cuts for 2009 and 2010 but most provisions expire at the end of this year. (Congress extended some of the business tax cuts during the summer.) The big kahuna is the Making Work Pay credit—nearly $60 billion a year going to most workers—but partial exemption of unemployment compensation, expansion of EITC and education credits, and greater refundability of the child credit deliver nearly $20 billion more. Taxes will jump for more than 95 percent of Americans when those cuts evaporate come January.

Why does a $68 billion tax increase on wealthy taxpayers throw Congress into total gridlock but no one mentions a tax hike almost 20 percent bigger?
Why? We've got the best Congress our taxes can buy.

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