By Matthew Hoh |
Last week the Senate passed a tax plan that would extend the Bush-era tax cuts only for those making under $250,000 and rejected one that would extended the cuts for all Americans. Democrats voted 51-48 in support of extending the cuts, which will expire at the end of the year, only to middle- and low-income Americans. Republicans opposed the Democrats' plan on the grounds that it raises taxes.
President Barack Obama and Democrats have long called on the rich to "pay their fair share," meaning that the wealthiest Americans should not receive the tax breaks. The president wants to put more money in the pockets of middle- and lower-income Americans and avoid cutting entitlement programs, and insists that the rich can afford to pay a higher percentage of their income in taxes to help pay off the deficit. Obama accused Republicans of "holding hostage the middle-class tax cuts for 98 percent of Americans."
Republicans argue that allowing any of the tax cuts to expire is a tax increase, and that the fragile economy cannot support such a move. They say taxes already burden Americans too much, and a tax increase would hurt small business and prevent job creation. Republican House Speaker John Boehner said his party is the only one focusing on the "threat to our economy." The House is expected to vote on—and reject—the Senate plan some time this week. In addition to allowing the tax cuts to continue, Republicans want to further address the deficit by cutting additional spending.
Dean Baker Co-Director of the Center for Economic and Policy Research
William Gale Senior Fellow at the Brookings Institution