A group of wealthy Americans are marking the ten-year anniversary of the tax cuts signed into law by former President George W. Bush by calling for an end to the reductions for people making over $1 million. The group Patriotic Millionaires sent a video message to members of Congress Tuesday asking lawmakers to raise their taxes in order to help reduce the deficit. But Republican leaders have said any discussion about tax increases are a non-starter and Democratic support for the break has been solid.
From The Wall Street Journal:
Despite the group’s efforts, the Bush-era tax cuts don’t show signs of going away anytime soon. Even President Barack Obama and the majority of Democratic lawmakers have supported maintaining them for middle-class people, defined as couples making less than $250,000. That’s the bulk of the budgetary cost.
Republicans last year forced a two-year extension of the tax cuts, including the breaks for higher earners, despite objections from the millionaires group. GOP lawmakers appear determined to avoid tax increases now as part of a deficit-reduction package under negotiation between the two parties.
University of Indiana Southeast economist Eric Schansberg says tightening the tax code might be a better option to reduce the debt without slowing economic recovery.
“An economist is going to be far more excited about closing a loophole than increasing a marginal tax rate because if you increase a marginal tax rate you’re punishing work effort,” he says. “If your goal is to take money from the wealthy it’s far better to do that through closing loopholes than increasing marginal tax rates.”
For the past several years, the Bush era tax cuts have been a political lightning rod tossed around by Democrats, who have charged the breaks increased the debt, failed to create jobs and only benefited the rich over the past decade.
However, Schansberg says while raising taxes on the wealthy would help lower the deficit those breaks also benefited middle-class Americans as well.
“Tax increases by themselves are not going to encourage economic growth and so the least bad would be something that’s along the lines of consumption. But once you start hitting consumption and productivity, which is what happens when you increase marginal tax rates that cannot be good for the economy,” he says.