Tax Cut Deal Reached

Wow. Good news. From the Daily Caller:

President Obama and congressional Republicans have reached a tentative deal to extend the Bush tax cuts for all income levels and are presenting the proposal to congressional Democrats Monday afternoon, The Daily Caller has learned.

The deal will extend the current tax levels for two more years, preventing taxes from going up on any income levels, despite the wishes of many liberal Democrats — including Obama — that individuals making more than $200,000 a year and families with more than $250,000 a year in income see their rates go up.

In exchange, Republicans have agreed to extend unemployment insurance benefits for an additional 13 months

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December 6, 2010 | Filed Under Uncategorized | 2 Comments 

Comments

2 Responses to “Tax Cut Deal Reached”

  1. William on December 6th, 2010 11:23 pm

    I’m not an economist but I wondering how we are to lower our deficit by lowering taxes and continuing unemployment benefits? I thought we were going to lower spending with this new congress. Courageous leadership means making tough decisions. Seems we don”t have very much leadership from either side.

  2. Matt on December 6th, 2010 11:29 pm

    William: Extending unemployment benefits won’t help with the deficit or economy–I think it’s a compromise the GOP had to make for agreement to come on the extension of the tax cuts.

    The reason keeping the tax cuts helps the deficit is because tax revenues actually tend to go down when you increase taxes. One reason for this is that the wealthy move their wealth into tax shelters–which, also, unfortunately, is a less economically productive use of the money. So tax revenues go down and the economy is hurt as well.

    Keeping taxes lower prevents this effects, thus resulting in higher tax revenues ultimately and an economy that is more likely to grow. Although what I would do is cut taxes even more.

    Update: Here’s also a helpful point on unemployment benefits by Thomas Sowell: “Studies have shown what common sense should have told us without studies: The longer the unemployment benefits are available, the longer people stay unemployed.”

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