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The Bush tax cuts are set to expire soon - what will this mean for the economy?
They saved the top fifth of American income earners $5,800/year in taxes and cost the federal government approximately $2 trillion in revenue from 2001 – 2010; they carry tremendous symbolic weight and could influence the weak economic recovery and the growing federal budget deficits; they are immensely complicated for both political parties. “They” are the infamous Bush tax cuts approved between 2001 – 2003 that were cheered by conservatives, reviled by liberals and grudgingly accepted by moderates, and that are now set to expire at the end of this year. The expiration of the tax cuts has set off the very beginnings of a heated political debate, made more intense by the looming Congressional midterm elections—Democrats, who were never fan of the tax cuts, are wary of supporting an expiration of any of them but are leaning toward ending tax cuts for the richest Americans; and while Republicans talk about the importance of cutting the deficits, they are staying true to their tax cutting philosophy. What will be the outcome of this volatile mix of politics and economics?
Scott Hodge, president of the Tax Foundation
Henry J. Aaron, senior fellow in economic studies at the Brookings Institution