President Obama Looks to Extend the Tax Cuts

In a press release today, CRFB examines President Obama's announcement that he will push Congress for one year extension of the 2001/2003/2010 tax cuts for those making less than $250,000. This comes as Republicans in the House move to extend all of the tax cuts for a year with a vote this month. While extending only parts of the tax cuts would certainly cost less than a full extension, it would be a huge missed opportunity to discuss solutions for replacing the fiscal cliff with a smart and bipartisan plan to put debt on a downward path as a share of the economy.

Readers of The Bottom Line know that we are worried about the fiscal cliff as well, and the expiration of the tax cuts would be a drag on the recovery (albeit a policy with little bang-for-the-buck). But these approaches would significantly add to the debt and miss a chance for both parties to come together and develop a plan. We would much prefer a plan that sets in motion a process for enacting comprehensive tax reform as leaders also negotiate needed reforms to spending programs.

Note: These estimates do not include the AMT.
These temporary measures are not going to eliminate the uncertainty surrounding our debt and tax code. Only when both Republicans and Democrats are willing to meet this issue head on will we have a solution. As CRFB's President Maya MacGuineas keeps reminding us:

"We can't keep kicking the can down the road. Continuing to delay the hard choices not only increase uncertainty, but hurts our credibility as well. What we really need to do is use the fiscal cliff as an opportunity to overhaul the budget and the tax code to put the country on a more sustainable fiscal path."

Our press release on President Obama's proposal can be found here.