Some members of Congress have been blocking measures to create jobs and help vulnerable families while urging the extension of costly tax breaks for the wealthiest Americans.
If Congress renews tax breaks for Americans with incomes above $200,000 (or $250,000 for a married couple), instead of allowing them to expire on schedule at the end of 2010, it would cost about $40 billion next year alone. Even worse, this extension would set the stage for a futher extension in the next Congress—which would cost nearly $1 trillion in lost revenue and added interest over the next ten years.
Let’s get our priorities straight. Instead of spending billions to give more tax breaks to the richest two percent of Americans, Congress needs to do more to strengthen the economy, help struggling families, and promote opportunity.
Unemployment for women who head families was at 13.4 percent in July and August. This is not only the highest unemployment rate for this particularly vulnerable group since the recession began—it’s the highest rate in over 25 years. Congress finally overcame repeated filibusters to approve some emergency measures: extended enhanced unemployment benefits through November to help workers unemployed for six months or more, and additional funding for states and localities for health care and education that should help stem further job losses and deeper cuts in public services. But Congress has yet to act on more substantial measures that would create jobs and provide emergency assistance to families including the Jobs for America Act, additional funding for child care, restored funding for child support enforcement, and an extension of the Temporary Assistance for Needy Families (TANF) Emergency Fund.
Some argue that tax breaks for the wealthy must be extended to avoid hurting small businesses. But allowing the top two income tax rates to return to pre-2001 levels would have no effect at all on 97 percent of taxpayers with any business income, let alone income from a small business. Real small business owners—those who operate a business, hire workers, and improve the quality of life in our communities, not wealthy investors who receive “passive’ income from partnerships or rental properties—need customers far more than they need tax breaks.
Extending tax cuts for low- and moderate-income people can boost the economy because hard-pressed families spend nearly every additional dollar to make ends meet—which, in turn, creates demand for goods and services and thus encourages businesses to hire more workers. However, the very wealthy save more of the money they get from tax cuts because they already have what they need (and much of what they want). For that reason, the Congressional Budget Office ranks tax cuts for the very wealthy as the least effective option for promoting economic growth.
Even if Congress allows the tax cuts that benefit only the richest two percent of Americans to expire, millionaires will do just fine. The top two tax rates will revert to the level of the 1990s—a time of robust job growth, widely shared prosperity, and shrinking federal deficits. And millionaires will get substantial tax benefits next year even if Congress extends only the tax cuts for middle- and lower-income households. Because reductions in tax rates for the lower tax brackets also benefit taxpayers with incomes above those levels, extending just the “middle-class” tax cuts will give millionaires an average income tax cut of over $6,300 in 2011. In dollar terms, that’s several times larger than the average tax break for households earning less than $100,000. That should be enough.