Will the Bush Tax Cuts Expire?
01/09/2012 12:45 pm EST
Tax expert Robert Green believes the debate surrounding the Bush tax cuts is bound to draw on until after the 2012 elections, and only then will long-awaited reform get passed.
What’s the status of tax reform? Let’s ask Robert Green. Robert, have we kicked this can far enough down the road yet?
Not far enough.
What’s going to happen?
Well, we can’t get over the Bush tax cuts. We were supposed to move on to tax reform, which would make the Bush tax cuts irrelevant; lowering the rates by closing loopholes, expanding and broadening the base, which could raise tax revenues.
Right, and help cut the deficit.
Right, but that’s not in the campaign playbook. Right now, they’re still focused on the Bush-tax-cut fight, which is good for the next election for each side.
Aren’t the tax cuts due to expire?
Yes, right after the next election, at the end of 2012.
What’s the implication of that?
Well, tax rates would rise on everyone, not only the rich, but the middle class. It’s about $3.8 trillion over ten years; that could help solve the deficit crisis.
The Democrats do not want a tax hike on the middle class. The Republicans do not want a tax hike on the rich, who they call “job creators.” That framework is front and center in the media.
The Tea Party on the Republican side and the Republican base cannot allow tax hikes. The Democrats insist on taxing the 1%—and Occupy Wall Street has brought the 99% versus 1% into the mainstream—and the Democrats feel you cannot cut tax rates on the rich and balance it on the backs of the poor and the middle class with entitlement reform.
Well certainly because we’ve seen, say, over the past decade, lower taxes did not create any type of jobs, so the job-creator argument is kind of fallacious.
Well, that’s the point. Personally, I don’t buy into that, but the media, pundits, people believe it.
And those that have a vested interest in keeping their mind.
That’s right, and taxes are a big part of elections, and these issues over the Bush tax cuts are helping each side win, so why should they cave on them before the election?
So we won’t see anything until after the 2012 elections?
Right, and that’s good for traders in the sense that they can keep the lower tax rates on futures: 60/40. If they’re not going to lower the rate significantly, you have to keep two rates. You have to keep the lower capital gains rate, which helps (investors and) traders.