After months of debating, the President has announced that he plans to break one of his largest campaign promises and extend all of the Bush tax cuts, even those to the wealthiest taxpayers. Obama has agreed to a deal with Republicans to allow for the two-year extension in exchange for an unemployment insurance extension and a reduction in the payroll tax. More spending and less revenue, how will this affect the deficit? Well, it can’t help.
From Business Week.com:
Obama said he would accept lower rates on high earners’ income, dividends, capital gains and multi million-dollar estates for the next two years to break a stalemate over extending the Bush administration’s tax cuts for middle-class taxpayers before Congress adjourns. The current tax rates, enacted in 2001 and 2003, are set to increase Dec. 31.
Without the compromise, middle-income families would become “collateral damage for political warfare here in Washington,” Obama said in televised remarks yesterday. He said he still believes that the nation can’t afford to permanently extend the reduced top tax rates.
“This compromise is an essential step on the road to recovery,” said Obama, who criticized Republicans for insisting on permanent tax cuts for the wealthiest Americans “regardless of the cost of impact on the deficit.”
Obama spoke in Washington after a White House meeting with Democratic congressional leaders. They and the Republican leadership still have to sell the plan to their caucuses. Obama called it a “framework” for a deal.
In addition to preserving the status quo on Bush policies, the proposal creates more than $300 billion in new tax cuts for wage-earners, wealthy families, and corporations.