Make Bush tax cuts permanent for all incomes

Tax compromise bill extends Bush tax cuts for two years

Updated: Saturday, January 1st, 2011 | By Robert Farley

In December, President Barack Obama agreed to a compromise with Senate Republicans that extended the Bush tax cuts that were set to expire on Jan. 1. The compromise extended the tax cuts for two years, for everyone.

As part of the deal, which overwhelmingly passed the House and Senate, Obama agreed to continue the current tax rates for high earners: couples that make more than $250,000 and individuals who make more than $200,000. Current tax rates were also continued for people who make less than that. The tax rates, passed during President George W. Bush's administration, had an end-of-the-year expiration date and were set to go up in 2011 unless they were extended.

Obama campaigned repeatedly on letting tax rates go up for high earners, so we rated that a Promise Broken. But in giving in on that promise, he got other things in return. Obama won another year of unemployment benefits for workers who qualified; some tax cuts that were part of the 2009 economic stimulus law were continued; and he won a one-year reduction of Social Security taxes that put 2 percent of pay back into workers' paychecks.

Obama said he still opposed the tax cuts for the wealthy, even though he agreed to the extension.

"I'm as opposed to the high-end tax cuts today as I've been for years," Obama said in a press conference on Dec. 7, 2010. "In the long run, we simply can't afford them. And when they expire in two years, I will fight to end them, just as I suspect the Republican Party may fight to end the middle-class tax cuts that I've championed and that they've opposed."

This issue is far from over. While Obama vowed to try again in the future to sunset the tax cuts for the wealthy, Republicans vowed they would seek to make the tax cuts permanent.

So the fate of this promise remains unresolved. But by extending the tax cuts for two years -- avoiding the looming expiration of the tax cuts and thwarting Obama's desire to let them expire for people making over $250,000 -- Republicans have bought themselves time to try to make the tax cuts permanent. And so we move this one to In the Works.

Sources:

The White House, Fact Sheet on the Framework Agreement on Middle Class Tax Cuts and Unemployment Insurance, Dec. 7, 2010

Thomas, HR 4583

The White House, Press Conference by the President, Dec. 7, 2010

U.S. Senate Finance Committee, S.A.4753: The Reid-McConnell Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act of 2010

Tax Policy Center, Tax Topics: Estate and Gift Taxes

Los Angeles Times, "House approves Obama's tax-cut deal," by Lisa Mascaro, Dec. 17, 2010