Monday, November 29, 2010

Pros/Cons Of Extending Bush-Era Tax Cuts

The US Congress has returned to Washington for their lame-duck session and the number one issue on the agenda is whether or not to extend the Bush-era tax cuts, which will expire at the end of the year. What are the pros and cons of extending these tax cuts and is it a good idea to extend tax cuts to all income individuals - including the super rich? The biggest thing on the pros side of extending President Bush's tax cuts to everyone is that many of the people included as rich in the US tax code system, include small business owners - who create most of the new jobs in this country. Simply put, it would be a huge mistake to raise the taxes of job creators at this point in time - since the added money they would pay in taxes would be taken by the government, instead of being invested in the hiring new employees.

The biggest issue on the cons side of extending the Bush-era tax cuts to everyone is the massive federal deficit that has grown "big time" over the past ten years. Both Republicans and Democrats alike understand that the days of massive US government deficits must come to an end, but while the GOP believes the solution to this problem involves massive cuts in government spending - most Democrats believe the solution resides in higher tax rates for the rich. That is why it is entirely possible that the 2010 lame-duck session of Congress might not reach an agreement on extending the Bush-era tax cuts, which will cause the taxes of every American to go up on January 1st, 2011. Washington politicians have known for 10 years that these tax cuts were expiring at the end of 2010, but instead of getting ahead of the issue - they just ignored the problem until the last possible minute.

When President George W. Bush's tax cuts went into effect, the US economy was in recession and they did have the effect of playing a small role in helping put Americans back to work. If the US Congress allows those tax cuts to expire, just as the economy is starting to recover and that decision pushes the United States back into a recession - it could be many years before the America people will see good financial times again. In Washington D.C., it has always been easier for politicians to raise taxes than to cut them. While there are pros and cons to extending the Bush-era tax cuts, I believe the pros outweigh the cons because there is so much wasteful government spending that needs to be cut first - before the American people are asked to sacrifice even more of their hard-earned money to the US federal government.

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