Yesterday, Robert Greenstein weighed in on the New York Times’ “Room for Debate” forum, which features commentary from policy experts on a variety of pressing issues. Yesterday’s topic was “16 Ways to Cut the Deficit,” and his recommendation was to let the high-income tax cuts enacted during the Bush Administration expire on schedule, while extending all tax cuts for middle- and low-income households. Here’s the commentary:
Congress should extend those tax cuts whose expiration would harm the weak economy by leading households to spend less, forcing businesses to lay off more workers as consumer demand falls. Since households that live paycheck to paycheck tend to spend a fair share of the tax cuts they receive, Congress should extend all tax cuts for middle- and low-income households — those enacted under President Obama as well as those signed by President George W. Bush.
Tax cuts for high-income households are another matter. These households save more of their tax cuts than other households, doing little to boost a weak economy. Congress, therefore, should let tax cuts for people making over $250,000 a year expire on schedule at the end of the year. It should use the money saved in 2011 for a one-year tax incentive for businesses that hire more workers — which would create about six times as many jobs as continuing the high-end tax cuts, the Congressional Budget Office says — and devote the savings to deficit reduction after that.
Congress should not do what some Congressional leaders advocate: making permanent all tax cuts enacted under President Bush regardless of how high up the income scale they go (people making over $1 million a year would get tax cuts averaging over $100,000), while letting all tax cuts for middle- and lower-income households enacted under President Obama expire, including tax reductions for working-poor families and the Making Work Pay tax credit, which is providing a tax cut to over 90 percent of working Americans (all except those on the upper end of the income scale). That partisan approach would represent both unsound short term economic policy and irresponsible long-term fiscal policy.