Yay for “tax cuts” or “tax status quo”

Big news this week. Hell must have frozen over because there was finally something that both congressional Democrats and Republicans could agree to, a bill extending the tax cuts put into place by former President Bush. The very same ones he vowed to repeal on the campaign trail (don’t have a link for that one yet). The bill also included maintaining the tax rates for those evil evil top 1% of earners. I know… how dare they work hard to be successful and not share with the rest of us lazy people who don’t want to work hard, right?

I’m not going to advocate the need for increasing taxes in these difficult economic times. I think that would probably make things a lot worse. People would have a lot less money to spend and the economy would probably start to slow down again. However this bill simply does not make ANY sense. First off, the bill that was just signed is not a tax cut. No one’s taxes are going down, they are just staying at the rates established by President Bush. It should be more appropriately named the “Tax Status Quo Bill”. The main reason why I have difficulty with this bill is because of the 13 month extension of unemployment benefits. Again, being in a position where you are on unemployment must be very difficult and (like tax increases) I am not advocating an elimination of extensions of benefits. It too would probably make things worse. But these two things coupled together simply makes no sense to me!

It costs money for the government to pay people who are temporarily out of work. The government gets its money from taxation. So we are going to continue to pay more of our money to people who are out of work but not increase the revenue stream that we are using to pay them? WTF? In what universe does this add up? This is like me quitting my job on Monday morning then going out to buy a 50 inch plasma screen television that afternoon. I would be bankrupt by Friday with that kind of logic.

The only way I can see this working is if the unchanged tax rates spur further economic growth thus prompting more tax revenue to be taken in by the government via Art Laffer’s supply side economic theory (nerd alert, nerd alert… I apologize). Don’t look now, but if this works, you “tax and spend democrats” have just endorsed supply side economics and turned your backs on your “soak the rich” ways. You may have some explainin’ to do!

I however remain skeptical as President Bush’s tax rates have not really spurred much growth over the past couple of years and they have left my paycheck and wallet feeling kind of light.