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Two-Year Extension Provides Taxpayers Relief, but Not Cure, for Economic Uncertainty, Citizen Group Says
December 7, 2010
By Pete Sepp
(Alexandria, VA) – As details became clearer in the compromise reached between the President and Congressional leaders over extending the 2001/2003 taxpayer relief laws, Pete Sepp, Executive Vice President of the 362,000-member National Taxpayers Union (NTU) offered the following comments.
“The first thing that can be said about the tax-relief accord is, at least President Obama and Congressional leaders avoided a disaster – it’s not the best-looking product from both ends of Pennsylvania Avenue, but it could have been much uglier.
A two-year extension of all current income-tax rates will definitely help to keep small business and investor uncertainty from getting even worse. Preserving the moderate rates on capital gains and dividends is an especially urgent priority, not only to prevent a year-end market nosedive but to help economic growth climb back to its proper altitude. Enacting an Alternative Minimum Tax patch is likewise a confidence-builder for tens of millions of Americans who’ve been kept on the edge of their seats at the financial-planning table for too long. Nonetheless, any such confidence these provisions do inspire will begin to vanish months before their expiration approaches.
The return of the death tax, albeit at 35 percent instead of 55 percent, will still be an unwelcome surprise to more than a few family-owned firms, while extending unemployment benefits without cutting spending elsewhere may even compound future joblessness. A broad-based payroll tax holiday will likely be somewhat more effective than handing out more stimulus payments, and 100 percent business expensing has solid promise, though these policies will present economic uncertainty issues of their own when they expire in just one year.
Assuming this pact survives – and that’s not a given – it will be up to the next Congress to deliver more policies that will ensure a strong recovery. This includes serious spending restraint across the board, aggressive efforts to restructure entitlements, real progress on binding budget rules, and systemic pro-growth tax reform.
In short, the current Congress could do a lot worse, and the next Congress must do a lot better, on tax and fiscal policy. Both bodies have important work ahead of them.”
NTU is a nonpartisan, nonprofit citizen organization founded in 1969 to work for lower taxes, smaller government, and economic freedom at all levels. Note: additional analyses and commentaries on the 2001 and 2003 taxpayer relief laws are available at www.ntu.org or text “FIGHT” to 67292.