Keep The Cuts

Source: http://www.investors.com/NewsAndAnalysis/Article.aspx?id=519047

01/25/2010

Taxes: On the eve of President Obama's first State of the Union address, two Democratic congressmen are advising him to extend the Bush tax cuts instead of letting them expire. Now that's a stimulus.

We hear that the administration is considering taking a more populist tack as it sails the choppy political waters of 2010. Some of President Obama's plans reportedly include several tax tidbits for the "middle class," including a doubling of the child care tax credit for families below $85,000 in income, and $1.6 billion for child care and a cap on student loan payments.

Such transparent populism aside, if the recent bank-bashing is any sign, the ship of state is still being steered into the iceberg ahead.

This time, we sincerely hope the State of the Union will be distinguished by a cessation of Bush-bashing. We're glad to see two Democratic congressmen have said enough of this, and rather than bash Bush, urge the administration to copy him.

Reps. Bobby Bright, D-Ala., and Mike McMahon, D-N.Y., sent a "Dear Colleague" letter on Thursday asking their fellow congressmen to support extending the Bush tax cuts, passed in 2001 and 2003, at least for two years.

"Allowing these tax rates to expire during this recession runs the risk of curtailing economic expansion just when it begins to pick up and could lead to a 'double-dip' recession," says the letter.

We agree and suggest that keeping them might put jobs back into this jobless recovery. Businesses need certainty for long-term planning and risk-taking, not one-year, one-time tax credit gimmicks.

President Obama did propose during the 2008 campaign and in last year's budget plan extending the Bush tax cuts affecting the poor and middle class.

His plans also included, however, letting the top two tax rates of 33% and 35% rise to 36% and 39.6%, respectively, in 2011. The 15% rate on capital gains and dividends would also rise to 20%, for individuals with incomes above $200,000 and $250,000 for couples.

This would hit the class of entrepreneurs and professionals who are most productive in our society.

Apparently the administration is still worried more about the distribution of the golden eggs than the health of the goose. Letting the Bush tax cuts expire is a tax increase for everybody. Much of the burden will be borne by small businesses, which create most of the new jobs. No one has ever gotten a job from a poor person.

It is not surprising that in releasing the letter, Bright's office included this statement from the National Federation of Independent Businesses: "Small businesses are the engine of our economy, generating seven out of 10 new jobs and leading our economy out of past recessions. The NFIB thanks Rep. Bright for standing up for small-business owners, our job creators." So do we.

Scott Brown's stunning Senate victory in Massachusetts was driven by health care, but there was a strong undercurrent of a tax revolt as he reminded voters in an ad that a different Kennedy than Ted, his brother John, as president pushed his across-the-board tax cuts to get America moving again.

President Kennedy believed that the rising tide would raise all boats. Just a brief look at the economic successes of the mid-1960s shows that's true.

Other Democrats are hearing the patter of tea party footsteps. Rep. Henry Mitchell, D-Ariz., a second-term congressman who won reelection with just 53% of the vote in 2008, also wrote President Obama last week asking him to extend the lower capital gains, dividend and estate tax rates.

"Given the unique economic difficulties we face as a nation, this is the wrong time to raise these taxes. We need to retain these tax cuts that encourage investment that stimulates growth and job creation," Mitchell wrote.

There's rarely a good time to raise taxes. We like the Bright idea and would go even further. Let's make the Bush tax cuts permanent, and watch what America's businesses and workers do.