Whether to extend the Bush-era tax cuts is the most important business for the lame duck Congress, for one simple reason. The public needs to know now how much its income will be taxed starting in January.
The best answer is clear: The cuts enacted in 2001 and 2003 should be extended for just one year for individuals with annual incomes up to $200,000 and couples up to $250,000. The tax cuts for higher incomes should be allowed to expire on Dec. 31.
With the economy still sputtering badly - largely due to depressed consumer spending - this is not the time to raise taxes for 98 percent of taxpayers. Washington shouldn't take money out of the wallets and purses of the vast majority of Americans who, unlike the wealthiest 2 percent, will go out and spend it.
But with the federal government mired in deficits and debt, it's also no time to make those tax cuts permanent - at a cost to the treasury of $3.3 trillion over the next 10 years. And it's certainly not a good idea for Washington to borrow the $700 billion over the next decade that it would take to continue generous tax breaks for those earning a quarter-million dollars or more a year.
Barack Obama drew the $200,000-to-$250,000 line in the sand back when he was a presidential candidate, and he's held fairly firm since. But Republicans pushing to make the tax cuts permanent may be in no mood to deal this month. They could delay action until January when they will be in the majority in the House and have additional Senate seats. And some Democrats are wavering.
Where to draw the income line?
Sen. Charles Schumer (D-N.Y.) floated a proposal this weekend to extend the cuts for everyone earning less than $1 million a year. And most members of Long Island's House delegation support cutoffs at incomes somewhat higher than suggested by Obama. Rep. Steve Israel (D-Huntington), for instance, wants to adjust for inflation the $250,000 that was first defined in the 1990s as the line between the wealthy and the rest of us. That would make $380,000 a year the cutoff for extending the tax cuts for couples.
Everybody likes lower taxes. And the inflation adjustment, while a tough sell nationally, would be popular in New York, where the high cost of living means that the one in 10 Long Island households making more than $250,000 a year aren't all living large. But trillion-dollar deficits and the $13.7-trillion national debt can't be ignored. Congress needs to use the breathing room provided by a temporary middle-class tax cut extension to adopt a realistic deficit reduction plan.
The co-chairmen of Obama's deficit reduction commission made it clear last week that Washington is oozing so much red ink that mopping it up will require tax increases - and not just for the rich - as well as deep, painful spending cuts in popular programs, especially big-ticket items such as Medicare, Social Security and the military.
Congress needs to heed the growing chorus of voters insisting that government live within its means. And for the taxpaying public, that means we're going to have to get used to paying for what we get. hN