If the Bush tax cuts expire at the end of 2010, a family of four with an income of $40,000 will have an after tax-income of $38,870. Whereas, with the tax-cuts and if the couple uses the available refundable credits, their income will be $41,513, according to an article on The Hill.com. That’s a difference of $2,643.
House Majority Leader Steny Hoyer (D-Md.) says the gridlock in the Senate has been a problem all year. He said that almost 400 bills passed by the House remain stuck in the Senate, including the Bush tax cuts.
The Bush tax-cuts allow tax breaks for both high and low income individuals, and families. Gridlock results because Republicans want the tax-cuts to continue for both income levels, while Democrats only want tax-cuts extended for low-income families. In addition, low-income people benefitted from temporary stimulus measures. These were more lucrative child tax-credits, expanded earned income credit and more credits for college expenses, and the Making Work Pay credit of $400 for singles and $800 for couples. All the credits also expire at the end of 2010.
The Bush tax cuts include a new 10 % tax bracket, a child credit that doubles and higher standard deductions. Yes, high-income people can afford to pay more in taxes, but losing the tax-cuts will have a greater shock to low-income people, because having less money will be more of a burden on them.
Nevertheless, the wealthy own businesses, and hire employees for the businesses. However, with the economy stalled, and the possibility of losing tax breaks the wealthy are saving their money and not expanding their businesses. Billions of dollars are in savings because of uncertainty; if the wealthy knew their tax rates were not going to increase, they could use this money to expand their businesses, and begin to hire again. Gridlock, though, puts everything on hold.
The gridlock problem may become worse, depending on the outcome of the 2010 midterm election, November 2. If the Republicans win the Senate races in Illinois, and West Virginia they will gain two seats in the Senate. These two states both seat new Senate members immediately, instead of January like other states. In this scenario, the Republicans will have two more Senate seats, and it will become more difficult for the Democrats to garner the 60 votes needed to extend the tax-cut for low-income people, but not for high-income people. In addition, it will be a lame-duck Senate session, and the liberals who lost their respective elections will have no reason to compromise.
The economy needs an infusion of cash. If the Bush tax-cuts continue for everyone that will account for the cash infusion, and as a result the whole country prospers.
The Hill: On the Money: thehill.com