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The Real Point of Tax Cut Extension

December 2, 2010

Most pundits in the media today seem to be missing the real point of tax cut extension.  It seems that even some of our elected leaders are missing the same point.  Over the last few weeks, what I’ve heard from most political pundits are arguments about who spends the most money, how the rich are going to spend money anyway regardless of tax cuts, and why the middle class needs a tax cut more than anyone else.  However, I have heard very little about the real point of tax cut extension: businesses and investors need to know what their tax liability will be in order to start growing, hiring, and investing.

Certainly other aspects of tax cuts are important to leaving more money in people’s pockets and growing the economy.  However, hiring new workers and growing businesses relies on more than people just spending more money.  In order for businesses to open a new branch, expand their manufacturing, hire an employee, or take on any other type of long-term expenditure, they need to know how much money they will have available to do so.  Enter tax policy.  Too many of our elected officials are just talking about extending tax cuts to those who will spend it.  This misses the point.

President Obama and the Democrats have long stated that they only want tax cut extension for those under the $250,00 mark and the middle class that “work hard”.  First, this implies that those who make more than that do not work hard.  But also, this neglects the fact that many businesses and business owners, the very people we need to invest in our economy and hire more workers, make more than $250k.  This is the real reason we need to keep the tax cuts for everybody.  Not the class warfare rhetoric we hear from some in D.C.

Regardless, Democrats continue to hold power until next year.  All politics aside, tax cuts need to be extended for at least most people before the expire the first of the year.  So if it takes a compromise with only partial extension, that’s better than no extension.  Then, when Republicans take the house next year, they can push for tax cut extension for everyone, forcing Obama and the Democrats to oppose or veto it.

Bottom line, Americans are begging for continued tax cuts.

2 Comments leave one →
  1. Jim permalink
    December 7, 2010 9:40 pm

    It is beyond me how many times they say Bush tax cuts ruined our economy and yet Obama comes out saying that taxes will go up next year if something isn’t done. If it was these very cuts that tanked our economy, why would we think about extending them? The other argument that makes little sense is that $60B towards unemployment must be paid for but somehow tax cuts will cost $700B? It’s $60B spent right now vs somehow the tax cuts that cost $700B over time. The other argument is that tax cuts don’t create jobs. If you have a small business that employs people and your taxes go up, you raise prices or fire someone. A business doesn’t exist with piles of money to just give people jobs and pay the government. Once this tax debate is over at least people and businesses working on their next year’s budget will know what to expect going forward.

  2. December 9, 2010 2:11 am

    Thanks for the comment Jim. Absolutely agree. People who say the Bush tax cuts ruined our economy should look historically at the economic growth experienced during the period shortly after the tax cuts. I think many people would be surprised. Thanks again for the comment, and I encourage you to subscribe!

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