WASHINGTON — As the White House geared up for a fight to end controversial tax cuts of the last administration, Treasury Secretary Timothy Geithner said Sunday that allowing the expiration of those cuts targeted at wealthy Americans was “the responsible thing to do” and would not deter economic growth.
The president’s plan would end tax cuts for only 2 percent or 3 percent of the highest-earning Americans, Geithner said, while sending an important message to the world about commitment to fiscal austerity.
“We think that’s the responsible thing to do,” Geithner said, speaking to Jake Tapper on ABC’s “This Week.” “We need to make sure we can show the world that we’re willing as a country now to start to make some progress bringing down our long-term deficits.”
But Republicans and even some Democrats are unsure about the wisdom of raising taxes at this point in the economic recovery. Among those affected by the increases would be business owners, bracing for the tax hit at exactly the moment when economic recovery depends heavily on whether or not they decide to create new jobs.
Enacted under President George W. Bush, the tax cuts will expire next year if Congress and President Barack Obama don’t act to extend them. Republicans and some Democrats favor continuing them all, at a cost of adding at least $2 trillion to the federal deficit over the next 10 years.
Obama has said he supports continuing only those for lower-income and middle-class workers, which would cost slightly less.
On Sunday, Geithner took the administration’s argument to both the ABC show and to NBC’s “Meet the Press.” He said the administration was pushing Congress to pass a series of tax measures to benefit small businesses and help them get credit so they can expand their operations. He said he expected the administration push for this would “absolutely” come before the midterm elections in November.
But critics disputed Geithner’s predictions.
“Businesses with narrow margins, they’re going to go under,” said Steve Forbes, a publishing magnate and two-time Republican presidential candidate, on CNN’s “State of the Union.” “Even entrepreneurs, people who are willing to buck the tide,” are “very hesitant because they don’t know what kind of costs they’re going to get hit with.”
Possible tax-rate increases
Changes in income- tax rates if cuts pushed through by President George W. Bush expire Dec. 31:
What happened in 2001: Six marginal tax-rate brackets — 10 percent, 15 percent, 25 percent, 28 percent, 33 percent and 35 percent — were created, based on income levels.
What will happen: If no extension is passed, the 10 percent bracket for incomes below $34,550 would disappear, and those taxpayers would move up to the 15 percent bracket. The other tax rates would increase to 28 percent, 31 percent, 36 percent and 39.6 percent for the highest earners making more than $379,650.
Sources: Cato Institute, Forbes
