Extending the Bush Tax Cuts: A Primer

You've probably heard by now that the debate's on about extending Bush's tax cuts to the wealthy.  Unsurprisingly, Republicans are (more or less) in favor and Democrats are (more or less) against the proposal.  I don't normally get too overtly political in these posts, but I've got to say on this one that extending the tax cuts doesn't make a lot of sense. 

But let's hear both sides of the argument:

As noted above, Democrats are mostly against the tax cuts.  Joe Lieberman isn't exactly a Democrat any longer and he's in favor of extending the Bush tax cuts according to a recent article in the NY Times:

"I don't think it makes sense to raise any federal taxes during the uncertain economy we are struggling through," Mr. Lieberman said in remarks prepared for delivery to the chamber of commerce in Middlesex, Conn. "The more money we leave in private hands, the quicker our economic recovery will be. And that means I will do everything I can to make sure Congress extends the so-called Bush tax cuts for another year, and takes action to prevent the estate tax from rising back to where it was."

This is the old trickle-down theory of economics.  If the wealthy have money, this will trickle down to the rest of the economy.  The trade-off, however, is a ballooning deficit, which is already a problem.  It takes money to save money and, without those taxes, it makes it much harder for the federal government to pay down debt and inject money into the economy to create jobs and other programs.  With a high deficit, it becomes harder to pay for important programs like Social Security or Medicare. 

The argument is this will cut down on hiring during a time when unemployment is rising.  This is possible, but the taxes aren't a significant amount for those in the top income bracket.  Walletpop puts the additional taxes at $50,000 for someone making a million dollars a year.  To you or me, $50,000 is an incredible figure, but not when measured against seven figures.  The average payout would be around $100,000. 

As reported in The Huffington Post, Obama said of the tax cuts:

"We can have a further conversation about how they want to spend an additional $700 billion dollars to give an average of $100,000 to millionaires. That, I think, is a bad idea. If you were going to spend that money there are a lot of better ways of spending it. But more to the point, these are the same folks who say they are concerned about the deficit -- why would we borrow money on policies that won't help the economy and help people who don't need help."

It's not a great surprise that extending tax cuts for the wealthy is not popular with the public.  In an era where struggling corporations are still giving huge bonuses to executives, this has somewhat of the same feeling.  With so many Americans struggling, "the rich get richer" is not the greatest mantra.  Certainly there are arguments for extending the tax cuts.  No issue will satisfy everyone, especially during a shaky economy.  This issue might be thematic as much as anything.  There's an increasing sense that the wealthy are taking care of themselves and not main street--and extending the cuts might not help that perception any.

What do you think?  Strongly for/strongly against?  Let's get political in the comments.