The Enigma Variations on Extending the Bush Tax Cuts

Margaret Atkins MunroLet's Talk About MoneyLeave a Comment

I am a beneficiary of the Bush tax cuts, as are, probably, most of you. When the cuts were first enacted in 2001, we might have seen our federal taxes drop by hundreds of dollars, or maybe even by a thousand or two. All absolutely welcome tax relief, but was it really? As a response to those tax cuts, and the subsequent decrease in federal grants to states, cities and towns (remember, less money in the federal pot means less money to spread around), my state taxes have risen, both as a percentage of my income as well as in real dollars. Income taxes, sales taxes and real estate taxes have all increased here in the past ten years, giving a larger chunk of my income (and I suspect of yours, as well) to my local governments, both state and town. And I haven’t even mentioned the increased cost of fees for things such as registering my car or renewing my license. While not strictly taxes, these are still government costs I must pay, and they have risen measurably over the last 10 years.

In fact, I am contributing a larger percentage of my income in 2010 to overall taxes and fees than I did in 2000, before my federal taxes were cut. This doublethink could have come straight from George Orwell’s novel Nineteen Eighty-Four, in that we are expected to simultaneously accept two mutually contradictory realities.

I am perplexed, as I suspect are you, because overall increasing tax burdens are parading as tax cuts. But even more baffling to me is that so many people seem to support the extension of these so-called cuts across all income levels, even when doing so acts against their own best interest.

One of the axioms in politics is that people will vote their pocketbooks. When presented with a choice, the vast majority of voters will opt for that which is in their best economic interest. There are exceptions to this rule, of course: voters with an eye towards national defense may well choose a candidate who supports funding the Defense Department at whatever cost, and voters with school-age children have a vested interest in sending more money to the local school district. But as a general rule, “voting your pocketbook” has always held up.

I do not understand how extending the Bush tax cuts to the top 2% of income earners helps my pocketbook in any way, and the jobs that were supposed to be created by this policy just haven’t appeared. Instead, giving the wealthy additional tax breaks actively hurts me. It creates larger deficits, and increases the national debt, which burdens me, my children, and my grandchildren down the road. A larger national debt undercuts our national security, and increases international instability and the U.S.’s standing in the world. Tax revenues used to pay interest on our debt are not available for things like military spending, securing our borders, or even education and basic research. And what will happen when there aren’t enough buyers for our ever-increasing debt? What will be the result if China, for example, decides that Canadian bonds represent a safer haven for their money than the U.S. Treasury?

I am also curious, about politicians who argue that higher taxes will hurt small businesses. What, exactly, is their definition of a small business. I consider that I run a small business, as do most people whose taxes I prepare. We clearly fall into the middle class range of taxpayers; I’m not sure I consider that someone who is taking $250,000 in profit or wages out of his or her business to be in the same category as me, and I suspect that someone who is bringing home millions has very little in common with me. Small business is just that – small – and the vast majority of small business owners will be protected by the proposed extension of the tax cut to people earning $250,000 or less.

The reason for the Bush-era tax cuts, the surplus generated during the final years of the Clinton administration, has vanished, and with it, any reasonable argument for continuing a policy of deficit spending unless those same dollars find their way directly back into our faltering economy. The Bush/Cheney doctrine that “deficits don’t matter” is patently false; deficits do matter, although they are sometimes unavoidable. Giving tax cuts to the wealthy, who do not spend all that they earn, is not only avoidable, it’s counterproductive; all tax relief should be targeted to those who spend every penny in Main Street businesses, rather than to those who would stash their windfalls in their Wall Street investment accounts.

So, here we sit, three months away from the expiration of all the Bush-era tax cuts, apparently being held hostage to the all-or-nothing approach. And it makes absolutely no sense to me – not from a practical standpoint, and not from an emotional one. Extending already unaffordable tax cuts to the wealthiest two percent of taxpayers is completely nonsensical, and runs counter to the self-interest of the other ninety-eight percent.

I cannot comprehend why we are even discussing this!