Monday, September 27, 2010

Congress Punts on Taxes

According to the Wall Street Journal Democratic members of congress have decided to wait until after the November elections to decide the fate of the Bush tax cuts. Unfortunately, the move raises uncertainty for small business owners, and taxpayers across the country. It will also create a huge battle over taxes at the end of this year.

    If returning lawmakers don't pass legislation by Dec. 31, the expiration date of the cuts, tax rates would rise not only on income, but also on estates, capital gains and dividends. Important corporate tax credits and relief from the Alternative Minimum Tax also are up for renewal.

    Democratic leaders and President Barack Obama made the proposal to extend the middle-class tax breaks a centerpiece of their midterm campaign strategy. They now face the possibility their members are vulnerable to Republican charges that they have failed to prevent taxes from rising for almost everyone.

    Congressmen from both parties said the toxic politics of taxes and the crush of issues to be resolved increased the likelihood all the Bush-era breaks, including those for higher earners, would be extended at least for a year or two. But Mr. Obama could still veto such a bill.

    For now, taxpayers confront a number of worrisome scenarios, including the possibility Congress might deadlock on the issue in the post-election "lame duck" session, resulting in across-the-board tax increases.

    With taxes a hot-button issue on the campaign trail, lawmakers threw in the towel Thursday until after the elections. Sen. Richard Durbin, the No. 2 Senate Democrat, said, "The reality is, we are not going to pass what needs to be passed to change this, either in the Senate or in the House, before the election."

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