Battle lines are being drawn by both US political parties around this issue, as both sides try to deliver fodder to their loyal base. Republicans are adamant to expand the tax cuts to everyone, whereas Democrats want to limit the cuts to families making $250k/year.
First let us look at the Republican argument which frames this as tax increase on the wealthy, while in reality it is the non-extension of tax breaks. There is a distinction here, if you remember why the original tax cuts were passed by George W. Bush. Thanks to the Internet, we can go back and look at the rationalization from the right. a) It is not that big of a tax cut – only 5% of total revenues – said the Cato Institute. b) Budget surpluses Republicans inherited from Clinton administration means the people are overcharged and they need a refund, said George W. Bush, and c) tax cuts promote jobs (pick your favorite Republican stump speech).
Fast forward to 2010: a) the same argument of rolling back taxes should be true now. In fact, since the economy has grown, it is a smaller percentage of total tax revenues. b) Just like many experts warned, the surplus has turned into huge deficits. By the same arguments, the refund should not be extended, since there is no surplus now, and c) 9.8% unemployment with end in sight. If you can somehow explain tax differences account for job losses in the US and extremely fast job growth in India and China, this one is DOA.
May be the majority of the population doesn’t care about facts or can’t digest them. This shouldn’t giver license to both parties from at least framing debate around facts.
Fact: The difference between Democrats and Republicans amounts to 3.6% marginal rate on people making over $250k. What does it mean? It means, every $250k OVER the first $250k, gets 3.6% increase. This means, family making $500k would see $9k increase/year in their tax bill. That is less than $800 per $42k they make a month. Hardly crippling. See table below from the tax policy center
When one side starts repeating half-truths loudly and other side is meekly mumbling something, people, especially busy or inattentive people will draw conclusions that louder person is right. Democrats – join the debate and state your case or let’s copy Chinese and go to one party system. At least something will get done.
One final thought, I find this whole idea of giving Congress power over taxes absurd. It leads to unnecessary and absolute powers which always gets misused. You know what they say about absolute power.
Strategy, Marketing, Orthogonal thinking, Newton's law 