My position on the Bush-era tax cuts has not changed, even in light of this fiscal cliff deal.
They all should have been allowed to expire, which would have set us up nicely for real deficit reduction going forward without having to cut too deeply into programs most everyone seems to want, but so few of us seem to want to actually pay for. It would have probably hurt the economy in the short-term - just as these stupid political fights are any way - but it would have improved the country's fiscal health going forward in a big way.
Maybe the public and politicians will realize that we still have to deal with the big issues such as tax and entitlement reform, the kinds of things that will have a ton of people upset on both sides of the aisle. But it has to be done, and the sooner the better.
From the piece:
From a historical perspective, indeed, the overall impact of the compromise is to bestow another big and costly tax cut on the American populace.
How can that be so? Under the law of the land as it existed until last night, most of the tax cuts that George W. Bush introduced in 2001-2003 would have lapsed. Now, with the exception of the rise in the top rate of income tax, most of these giveaways have been extended in perpetuity, at a total cost to the Treasury that the Joint Committee on Taxation has estimated at about four trillion dollars over the coming decade.
Even by Washington standards, that’s quite a chunk of change. Rather than going to the federal government, it will be making its way into the pockets of pretty much everybody who pays taxes, even those rich folks who are supposedly being hit with a tax increase. A very useful analysis from the research and lobbying organization Citizens for Tax Justice tells the story. Taxpayers in the middle quintile of the income distribution will get an annual income tax cut of $880 relative to what would have happened if the expiration of the old law had been maintained. Taxpayers in the top one per cent, those poor benighted souls who will be forced to pay the higher top marginal rate, will still benefit from the Bush rate on the first $400,000 of their income; each will save $17,840 relative to a world in which the Bush tax cuts had been allowed to lapse.