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Monday, March 14, 2005
A Closer Look At Extending Tax Cuts
In creating the budget blueprint for FY 2006, many members of Congress are looking to extend the dividend and capital gains tax cuts, which are slated to expire in 2008. The high costs of these tax provisions will add to our already record-level deficits and have negative long-term economic consequences. Economists at the Congressional Research Service and the Brookings Institution have concluded that extending these tax cuts would add to deficit levels and in fact cancel out many positive effects proponents of the tax cuts state they will have. Click here for more information.
While the administration and many Congressional GOP leaders are pushing to extend the dividend and capital gains tax cuts, they continue to ignore a tax problem that is increasingly affecting middle class tax payers: the alternative minimum tax.
The alternative minimum tax was originally created to prevent very wealthy people from exploiting tax loopholes and not paying their fair share. However, because the tax is not adjusted for inflation and because it applies mainly to people whose income tax bills are low relative to their income, it is affecting more and more people every year.
By 2010 it is estimated that people who make under $100,000 and owe the tax will pay an additional $1,321 in federal income taxes, while alternative tax payers who make between $100,000 and $200,000 will owe an additional $2,592.
As an editorial in today's New York Times points out, by 2010, the Bush tax cuts alone will cause an additional 17 million taxpayers to owe the alternative tax. By 2014, "assuming the Bush tax cuts are made permanent, 40 million taxpayers will owe the alternative tax, nearly half of whom would never have faced it but for the tax cuts." While Bush and many members of Congress push to cut taxes for the wealthy by extending the dividend and capital gains tax cuts, they are effectively raising taxes on the middle class. Click here to read the editorial. Click here for another good column from the National Journal on why Bush's proposed tax cuts are unnecessary given the current economic environment.
Posted by Becky Lewis
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