Senate Democrats will soon advance a plan to make permanent President George W. Bush's 2001 tax cuts for middle-class Americans earning less than $200,000, but let the tax breaks for the wealthiest Americans expire, two Senate party aides said Tuesday. They will also propose to reinstate a 45% estate tax on individuals for the next two years.
The emerging tax plan is designed, as much as anything else, to clarify the differences between the two parties as they hurtle toward the fall elections. Following on their success with the financial-regulatory-reform bill, Democrats are betting that Republicans will once again take up a legislative battle on behalf of the wealthy. "Republicans are going to have a real choice ahead of them," says a Democratic aide. "Are you for extending these tax cuts for middle-class families or are you against them because you want to protect tax cuts for the wealthiest 1% of Americans?"
This, of course, will be the second Obama tax cut in two years despite an already record low tax burden. The likely effect of permanent Bush tax cuts as shown by the Center for Budget and Policy Priorities (via Ezra Klein):
Tax cuts are the perfect example of a policy that is popular yet irresponsible. The cost is enormous, and the gain for the average citizen minimal.
Need I show more examples on this blog? Over and over we've seen how tax hikes amounting to pocket change for the average person can completely solve the budget woes of entire school districts. Instead, cities around the country are putting fire and police departments in hock. Meanwhile, at the federal level the argument on taxes is between those who want to bankrupt the Treasury cutting huge checks to the rich, and those who want to bankrupt the Treasury cutting checks for chump change to the middle class.
We have completely lost our minds on this issue.