The House of Representatives passed a bill  that would extend the Bush tax cuts for individuals making less than $200,000 and married couples making less than $250,000, the plan that Democrats and President Obama have favored. The vote was 234 to 188 with votes on mostly party lines. 20 Democrats voted against the bill and 3 Republicans voted for it (the remainder, of course, voting along party lines). The next step is for the issue to be voted on in the Senate, and if a bill is passed, the two much be reconciled, and then signed by the President. While that may be unlikely, at least looking at it now, this is the first tangible action towards settling the issue of what to do with the Bush tax cuts.
It’s interesting to hear politicians talk about this vote because everyone tries to spin it in their favor. A month ago, Republicans were talking about fiscal responsibility and how we are spending beyond our means with a soaring deficit and national debt. Now, Republicans are focused on how this is a tax hike for “small businesses and families” earning more than $250,000. They’re not wrong, it’s just that the spotlight has moved.
On the flip side, we’ve passed all this stimulus and pushed all this liquidity around, it seems foolish to raise taxes on anyone, rich or poor. I don’t know how consumption changes as income increases (do people earning over $250,000 a year spend more? or do they invest more?) but an increase in taxes will certainly have a negative effect on consumption, it can’t possibly have a positive effect.
One thing is clear, if you “decouple” the tax debate between the middle class and the upper class at the $250,000 line, it becomes much harder to argue that those earning over $250,000 need a tax break. How are you going to convince Americans, the majority of which earn less than $200,000/$250,000, that we should also give high earners a tax break? It’d be suicide.
As I pay more and more attention to politics, it’s clear that it’s not any different than any other competitive sport. The difference is that the rules and the teams are constantly shifting. 🙂