Monday, December 6, 2010

Tax Policy is Backwards

Does anyone beside me find it incredibly disengenous that we are having an argument (dabate) in congress on how long we should keep the "Bush Tax Cuts"?

Please... someone tell me why these cuts are not permanent, thus requiring Congress to vote to actually Raise Taxes if they have the guts to try at some point in the future. It is ridiculous to argue how long a tax cut should last. The only "sunset" provision that should exist is on a tax hike, not a tax cut!

In fact, the best policy would be to have all fees and taxes subject to a sunset provision so that our elected officials would have to justify any reauthorization on each and every fee and tax. We seem to always think that an increase or new fee or tax will somehow be temporary... they never will be unless they have an automatic sunset provision.

For business and individuals to have the confidence to move forward with creating jobs and investing, we need an environment where we have a more predictable tax policy. Putting time limits on tax cuts does no such thing... it simply creates more uncertaintity.

I understand the point of the extension of unemployment benefits in this negotiation, but if you are going to push for a principled agreement, do not sunset cuts, make them permanent. This makes everyone accountable, especially when there is a desire to increase taxes...

No more phony "expiration" of cuts to get a tax increase without a vote.

1 comment:

John said...

The reason that they are expiring is because they were passed under reconciliation, because they were not "paid for" -- we have seen the result. The expiration is a safety valve when a cut is harmful instead of beneficial.

I agree with your point of view that taxes and fees should have a sunset provision, but so should cuts. Cuts can increase the deficit which for our government means it will be added to the debt (since we pretty much only pay interest on our debt, not principle, it becomes an added tax -- benefitting only the financiers).

However, all tax policy needs to be based on good, scientific principles (for example, almost all economists agree paying unemployment stimulates the economy, tax breaks for high income individuals, helps Wall Street and increasing personal wealth for a few -- I know of no business person who "creates" a job because they pay less taxes, they hire people if there is profit in doing so, e.g. money is flowing into their business for the goods/services they provide) and not ideology.

None of us like paying taxes, but we expect certain protections and benefits from the government. That should be the debate, and accountability -- What protections and benefits do we believe the government should be responsible for and then set tax policy to pay for those things and not the whims of special interests.

Certainty comes from knowing what your tax burden will be, not what the rate is -- management could model their business with the assumption that the cuts are going to expire, and if the Congress renews them, then they have a tiny bit more cash flow (< 3 points).