Debate over continuation of cuts
Most of the tax cuts were scheduled to expire December 31, 2010. Debate over what to do regarding the expiration became a regular issue in the 2004 and 2008 U.S. presidential elections, with Republican candidates generally wanting the cut rates made permanent and Democratic candidates generally advocating for a retention of the lower rates for middle-class incomes but a return to Clinton-era rates for high incomes. During his presidential election campaign, then candidate Obama stated that couples with incomes less than $250,000 would not be subjected to tax increases. This income level later became a focal point for debate over what defined the middle class.[28][not in citation given]
In August 2010, the Congressional Budget Office (CBO) estimated that extending the tax cuts for the 2011-2020 time period would add $3.3 trillion to the national debt, comprising $2.65 trillion in foregone tax revenue plus another $0.66 trillion for interest and debt service costs.[29]
The non-partisan Pew Charitable Trusts estimated in May 2010 that extending some or all of the tax cuts would have the following impact under these scenarios:
- Making the tax cuts permanent for all taxpayers, regardless of income, would increase the national debt $3.3 trillion over the next 10 years.
- Limiting the extension to individuals making less than $200,000 and married couples earning less than $250,000 would increase the debt about $2.2 trillion in the next decade.
- Extending the tax cuts for all taxpayers for only two years would cost $561 billion over the next 10 years.[30]
The non-partisan Congressional Research Service has estimated the 10-year revenue loss from extending the 2001 and 2003 tax cuts beyond 2010 at $2.9 trillion, with an additional $606 billion in debt service costs (interest), for a combined total of $3.5 trillion.[31]
In late July 2010, analysts at Deutsche Bank said letting the Bush tax cuts expire for those earning more than $250,000 would greatly slow economic recovery. However, Treasury Secretary Timothy Geithner said allowing the expiration would not cause such a slowing. The Obama administration proposed keeping tax cuts for couples making less than $250,000 per year.[32] Economist Mark Zandipredicted that making the Bush tax cuts permanent would be the second least stimulative of several policies considered. Making the tax cuts permanent would have a multiplier effect of 0.29 (compared to the highest multiplier of 1.73 for food stamps).[33]
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