Keep the Tax Cuts or Not

One thing that came across crystal clear this weekend from the Republicans was that the Bush tax cuts will be extended. It does seem a little odd that the party of fiscal responsibility, saying spending has to go back to 2008 levels and calls for a 10 percent in federal workers salaries (but rather interesting no talk of cutting Congressional members and staff pay at the same rate (more on that later)), wants to extend the tax cuts for everyone. This means the rich would continue to receive the full Bush tax cut. Tax cuts that are worth around 700 billion dollars. Money that could certainly be used to cut the deficit.

There is the usual all or nothing approach. You either extend them or get rid of them. It does seem that there might be some room for a different way to do this. One idea is to keep the tax cuts for those making under $250,00 but return to pre-tax cut levels for those making more than that. Then there is the Republican plan of all the tax cuts stay. But there are also a couple of new ideas that are little more sophisticated then the all or nothing approach.

One of them is to raise the $250,00 level to $1,000,000. Those people making above that level would return to the old tax rate. Then there’s another idea of keeping all tax cut rates for now but in a couple of years restore the old tax rates to the most wealthiest people. Another idea similar to this is to phase out the tax cuts on the rich over several years.

I like combining the last two ideas. Raise the limit and then over time phase the tax cuts back in.

I’ve said this in a couple of 2political episodes that I cannot understand why we can’t have a more logical, flexible and sophisticated tax policy. Why is it all or nothing? I realize that makes it easy for each side to pedal what they’ve done to their base. It also allows each side to bash the other. But it would be nice every once in a while if the people in Congress could act like adults and really look out for what is best for the entire country not just their particular party.

Part of acting like adults would be reaching a reasonable compromise on the tax cuts. Extending some of them will help people in these troubling economic times. But slowly returning to pre-tax cut levels for those in the upper income brackets is the fiscally responsible course to take.