As we prepare to go off the edge of the fiscal cliff (no big deal, I argue here), one thing all parties agree on, amazingly enough, is that they want to keep the Bush tax cuts. These are the tax cuts the Democrats have vilified, and President Obama campaigned against. Now, everyone wants them to stay.
President Obama wants to keep them for everyone except “the rich,” which he defines as having a household income above $250,000. Republicans in Congress appear to be willing to go along with the president, but want to redefine rich so the income threshold is higher. $400,000? $1 million? It hardly matters (except, of course, to the people who will pay the higher taxes). The difference in revenues from extending the tax cuts for those with incomes below $250,000 and for everyone is small enough that it is overshadowed by the rounding error in spending estimates.
It is not clear at this point how the fiscal cliff will be resolved, but one thing that is clear is that the Bush tax cuts will become permanent for almost everyone. The Democrats — and the president — who once vilified them are now fighting to keep them! Isn’t it interesting that President Bush’s tax policies are the thing that the Democrats are fighting the hardest to keep as they negotiate the federal budget?
About the author: Randall G. Holcombe
Randall G. Holcombe is Research Fellow at The Independent Institute, DeVoe Moore Professor of Economics at Florida State University, past President of the Public Choice Society, and past President of the Society for the Development of Austrian Economics. He received his Ph.D. in economics from Virginia Tech, and has taught at Texas A&M University and Auburn University. Dr. Holcombe is also Senior Fellow at the James Madison Institute and was a member of the Florida Governor’s Council of Economic Advisors.