‘Reasonable Chance’ to Temporarily Extend Bush Tax Cuts, Set to Expire in January, Hatch Says
President Barack Obama and Democratic leaders in Congress have talked about extending the cuts for middle class earners, but letting the cuts lapse for single people earning more than $200,000 and couples earning more than $250,000.
But three Democratic senators – Kent Conrad of North Dakota, Evan Bayh of Indiana and Ben Nelson of Nebraska – have said that increasing taxes on high- or low-income earners during a recession is a bad idea.
That still leaves 56 Democrats apparently siding with leadership, Hatch admitted. But, if a few more Democrats consider the economic impact of effectively raising taxes, he doubts the Democratic leadership would block a move to extend the cuts.
“I don’t think they will want to filibuster anything if we can get enough votes to kick this down the road,” Hatch said in a conference call Monday. “We have a reasonable chance to kick it down the road for at least a year.”
Hatch wants to make the cuts, passed in 2001 and 2003 permanent, but he realizes the numbers are not in the Senate to do that.
The tax cuts were enacted in 2001 and 2003 as one of President George W. Bush’s key campaign pledges. The cuts reduced the lowest marginal rates as well as the top ones and gave tax breaks for education, families with children and married couples. Capital gains taxes and dividend taxes were reduced, while the federal estate tax was gradually repealed, though only for this year.
According to the Tax Foundation, a taxpayer advocacy group, the impact of letting the cuts lapse completely would mean the standard deduction for married couples would no longer be double what it is for single filers.
Further, the 10 percent tax bracket will increase to 15 percent, according to the foundation. The child tax credit will be cut in half from $1,000 to $500. The capital gains rate would increase from 15 percent to 20 percent.
The 25 percent tax rate would increase to 28 percent, while the current 35 percent rate would increase to 39.6 percent. Meanwhile, the estate tax would be restored for high value estates.
The plan favored by the White House – only letting the tax cuts expire for earners making more than $200,000 – would only increase the 35 percent rate to 39.6 percent. But the Obama plan would also make several changes – without returning to 2001 tax levels, according to the Tax Foundation.
Long-term capital gains will revert to 2001 law (rate of 20 percent), but only for couples with more than $250,000. The estate tax will revert to 2009 levels instead of 2001 levels, and dividends will be taxed like long-term capital gains.
Under Obama’s plan, half the business income reported on individual returns would see major tax increases, according to the non-partisan Joint Committee on Taxation.
“The simple fact is this: On Jan. 1, Democrats will raise taxes,” Hatch said. “The question is on whose and for how long. By not extending critical tax relief enacting in 2001 and 2003, our nation is going to face the largest tax increase in history.”