With mid-term elections approaching in November, there is increased debate over the tax cuts from the Jobs and Growth Tax Relief Reconciliation Act of 2003 (JGTTRA) that are set to expire at the end of this year. On July 14, the Senate Finance Committee held a hearing on extending those tax cuts.
Pete Davis, a veteran analyst of the Washington-Wall Street connection, writes on the group blog Capital Gains and Games that the scuttlebutt amongst “top Hill staff of both parties” is that Congress is likely to wait until a lame duck session in December to pass a one-year extension of the tax cuts for those who earn under $250,000 a year. The one-year extension versus a more permanent solution is one of the biggest points of contention.
At the hearing, Sen. Max Baucus (D-MT), Finance Committee Chairman, said in his opening statement, “The big questions before us now are whether we should make some of these tax cuts permanent, and if so, which ones?” According to Web CPA, a resource for professional accountants, some of the elements that need discussion include:
[… L]owering income tax rates for all taxpayers, doubling the child tax credit from $500 to $1,000 a child and making the credit partially refundable, increasing the amount families could claim for the dependent care credit, eliminating the marriage penalty, and making it easier to deduct student loan interest. Other expiring tax cuts involve capital gains and dividends.
Sen. Charles Grassley (R-IA), the Finance Committee’s ranking minority member, said in the hearing, “There’s a lot of talk about extending some, or all, of the 2001 and 2003 tax relief on only a temporary basis. I question whether that really addresses the problem of uncertainty. Perhaps it just kicks that problem down the road a bit.”
Doug Holtz-Eakin, president of American Action Forum, agrees with Grassley. You can view video of his discussion about the tax cut extensions with Dean Baker, co-director of the Center for Economic and Policy Research, and Bloomberg‘s Peter Cook on YouTube. Holtz-Eakin was director of the Congressional Budget Office under President George W. Bush’s administration, when the tax cuts were first enacted.
Former Federal Reserve Chairman Alan Greenspan was also in office at the time that JGTTRA was first enacted, and has supported the original legislation. He has since changed his mind, however, and thinks that all of the tax cuts should be allowed to expire, saying, “[U]nless we start to come to grips with this long-term outlook, we are going to have major problems. I think we misunderstand the momentum of this deficit going forward.”
Sens. John Kyl (R-AZ), Minority Whip, and Mitch McConnell (R-KY), Minority Leader, think the cuts should be extended, arguing that it will increase government revenue. Sen. McConnell supported Sen. Kyl’s position last week of extending the tax cuts for incomes over $250,000, and insisting that they need not be paid for. Sen. McConnell said:
That’s been the majority Republican view for some time. That there’s no evidence whatsoever that the Bush tax cuts actually diminished revenue. They increased revenue, because of the vibrancy of these tax cuts in the economy. So I think what Senator Kyl was expressing was the view of virtually every Republican on that subject.”
Source: “Senate Deliberates Fate of Expiring Bush Tax Cuts,” Web CPA, 07/14/10
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