Should Bush Tax Cuts be Allowed to Expire?

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Washington is gearing up for another major political battle and this time it's over former President Bush's tax cuts.

Should tax cuts for wealthier Americans continue orr should they expire at the end of the year? It's a simple question, but depending on your political point of view has two very different answers.

Republicans and even some conservative Democrats say you don't grow an economy by taxing people more and so this is a no-brainer.

"The safest thing for America would be to have a provision passed this fall that said no tax increase of any kind in 2011," former House Speaker Newt Gingrich said.

"High income earners make up a very large share of consumer spending. If their tax rates rise now when the economy is weak and confidence is low -- they could pull back significantly and hurt the very fragile recovery," explained Mark Zandi, an economist with Moody's.

But the White House argued economic growth wouldn't be affected.

"Just letting those tax cuts that only go to 2 percent to 3 percent of Americans, the highest-earning Americans in the country expire, I do not believe it will have a negative effect on growth," U.S. Treasury Secretary Timothy Geithner said.

Democrats have said the tax increases are needed to bring in more money to get the projected $1.5 trillion budget deficit under control. In his weekly radio and Internet address, President Obama chastised House Minority Leader John Boehner, R-Ohio, over the issue.

"He would permanently keep in place the tax cuts for the very wealthiest Americans - the same tax cuts that have added hundreds of billions to our debt," Obama said.

If those tax rates go up, it would affect individuals who make more than $200,000 a year and families making more than $250,000 a year. Their taxes would go up around 5 percent. In addition, taxes on dividends, capital gains and estates would also go up.

The Obama administration says that at this point they are inclined to keep the income tax cuts for everybody else. Conservatives, however, said that's not enough.

"Washington, D.C. doesn't tax too little. Washington, D.C. spends too much. I don't know anybody back in Indiana who thinks they pay too little in taxes. And only in Washington, D.C. would anyone believe that raising taxes creates jobs," said Rep. Mike Pence, R-Ind., in the GOP's weekly radio and Internet address.

Even Christina Romer, the chairman of the president's Council of Economic Advisors, may be skeptical of letting the tax cuts expire. Romer wrote in a research article that the economy may "contract" rather than grow if the tax cuts were to expire.

Ben Bernanke, the chairman of the Federal Reserve, is also in favor of extending at least some of the tax cuts. All of this political wrangling comes with the midterm elections quickly approaching.

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Heather Sells

Heather Sells

CBN News Reporter

Heather Sells enjoys reporting on a variety of issues for CBN News. Some of her recent stories have focused on religious liberties, technology, AIDS, overseas missions, domestic trafficking, and politics.  Follow Heather on Twitter @SellsHeather and "like" her at Facebook.com/HeatherSellsCBNNews.